Africa Eye By BBC Unearths The Reason Behind Spencon’s Bankruptcy

A documentary by the BBC’s award-winning Africa Eye team reported on concerns of alleged fraud, bribery, and other highly questionable business practices by two British managers appointed by a European Investment Bank (EIB)-backed private equity fund to run its investee Kenyan firm Spencon.

Spencon, once the largest infrastructure development company in East Africa, is now bankrupt. What has remained of Spencon is a shell of its former self. What happened to the once vibrant company? Who brought spencon to its knees? Who should be held answerable?

The EIB’s investment in Spencon is through ECP Africa Fund II (“ECP Africa”), an investment vehicle managed by the US private equity firm Emerging Capital Partners (ECP). The EIB has so far invested €39.2 million in ECP Africa

The Africa Eye documentary reports that the two managers in question allegedly:

Made highly questionable cash payment for official documents which one leading UK lawyer, who was instrumental in drafting UK anti-bribery legislation, believes need investigating under the UK’s bribery act.

Hired a convicted criminal who, according to the Receiver in Uganda, sold company assets at grossly undervalued prices and also, with the managers’ knowledge, paid the proceeds into his bank account.

The administrators, PWC, say 1.6 million dollars have not been accounted for by the former executive directors. Ugandan Police says they are working with Interpol to question the managers.

Refused to pay Kenyan staff during the final months of the company even while the managers continued to draw their salaries (each is reported to have earned over $20,000 a month).

Used company funds and equipment to build a golf practice area for their use at a time when the company was facing insolvency. The managers do not deny this but state that the golf practice area gave an impression of a thriving company.

The reported allegations are based on interviews with former staff and thousands of leaked Spencon emails, messages, and documents.

The managers vehemently deny any wrongdoing. Emerging Capital Partners denies any wrongdoing and has responded to each of the allegations in their reply.

The European Investment Bank was warned by whistleblowers in 2015 of the alleged corruption and mismanagement by Spencon’s ECP Africa-appointed managers.

Although the EIB staff initiated an investigation, including a visit to Kenya to interview ex-Spencon staff, the EIB has remained silent as to the outcome. No action was taken to save Spencon.

“The EIB appears to have sat on its hands”, says Antonio Tricarico from Re: Common, an Italian NGO member of Counter Balance.

“The public needs to know why. There are real concerns that the contracts that the EIB signed with private equity firms have severely constrained the bank’s ability to protect public money disbursed in support of EU development policies.”

Today, Counter Balance is calling for the European Parliament to conduct an urgent inquiry into the EIB’s handling of ECP Africa’s investment in Spencon.

“It is vital that the EIB is held accountable”, comments Sol. “A thorough, independent investigation is essential. The public needs to be reassured that the EU’s development financing was not used to destroy jobs in the region through unethical business practices and mismanagement. This case is of significant importance, especially at a time when the EIB is revising its Anti-Fraud policy but does not plan to change it to put its commitment of a ‘zero tolerance towards fraud and corruption’ into practice”

READ: Con Investors Use Dubious Means To Want To Take Over Spencon