EU Parliament seeks tighter rules after graft allegations in Kenyan project

Flags are seen behind the logo of the European Investment Bank pictured in the city of Luxembourg, Luxembourg, March 25, 2017. [Reuters]

The European Parliament has called on the European Investment Bank (EIB), one of the world's largest public lenders to tighten its accountability practices after an alleged corruption scandal in Kenya in a project backed by the lender.

A report led by Member of the European Parliament David Cormand in the EU bloc's Parliament's Committee of Budgets signals the bank needs to seriously ratchet up its standards on transparency, accountability and sustainability following the Kenya scandal.

The Standard could not immediately reach EIB and Mr Cormand for additional details. But in the Amendment document before the European Parliament seen by The Standard, the EU legislators called for the European lender to tighten its anticorruption framework to avoid a repeat of the Kenya incident.

The alleged bribe in question in Kenya was paid to government officials by the EIB-backed Spencon, a former East African engineering and construction company focusing on public works and infrastructure projects.

In 2006, the EIB entered into a subscription commitment to invest alongside other investors in the Emerging Capital Partners (ECP) Africa Fund II, a protected cell company, formed and existing under the laws of Mauritius.

The Fund was a private equity seeking to support private African firms.

It was managed by ECP Manager LP, a limited partnership formed and existing under the laws of the US State of Delaware. The EIB invested on behalf of the European Development Fund.

The Fund invested in Spencon in 2006 and 2007 and terminated its operations in December 2021. "Is concerned about the EIB's involvement in a project of the now bankrupt Kenyan construction company Spencon, which shows that EIB funds have been used to pay out bribes to local officials or to pay for illegal activities, including a EUR 80,000 (Sh12.5 million) cash payment to engineers for on-site inspections of a sewage treatment plant; regrets that the EIB rapidly closed the case in 2020 and only reopened it in 2022 following pressure from civil society organisations," says the amendment seen by The Standard.

"Regrets that the European Anti-Fraud Office did not pursue the case; highlights that the Spencon case underlines the need for the EIB to strengthen its anticorruption framework, even though bribes are common practice in countries where EIB Global operates."

Spencon had operations in Kenya, Uganda, Zambia, Tanzania and Mozambique before it collapsed under the weight of debts and mismanagement.

This is not the first time that EIB's dealings with Spencon have come under focus.

In April 2020, the EIB service handling investigation work finalised a report showing available evidence would suggest that Spencon management representatives engaged "in illicit activities and possible embezzlement of company funds."

The EIB service handling investigation work "noted that these facts were under criminal investigation by the Kenyan Department for Criminal Investigation."

More global lenders have tightened their anticorruption stance for the execution of their funded projects.