Mega Corruption and Real Estate in Kenya

Corruption and Real Estate in Kenya

In the last few weeks, Kenya has been gripped by numerous cases of mind-boggling corruption scandals. It started about a year ago with the shocking revelation that KES 1.9 Billion of NYS funds had simply disappeared into thin air. That was NYS Corruption Scandal Season 1.

One year later, we are hearing of an even bigger blockbuster Season 2 where KES 9 Billion is said to have disappeared. Last year, the Ministry of Health was also not left behind with reports indicating that KES 5 Billion disappeared without a trace. This scam was so well orchestrated that it is unclear whether the money disappeared in the first place. Whichever way you look at it, the truth is somewhere in between.

I could bore you to bits with accounts after accounts of corruption cases in the Jubilee government. From the unbelievable Euro Bond scam to outright theft of public money at the counties, Kenya is a country reeling under the insidious weight of mega corruption scandals.

Have you ever asked yourself where all this money goes? A billion shillings is a lot of money. To put this into perspective, the Madaraka Express could only make KES 1 billion in profits after one year of operation. The amounts involved are so huge that it’s hard to hide it or bank it all at once without raising eyebrows.

I have a possible guess as to where the ill-gotten wealth is disappearing into – the Kenya real estate industry.

The real estate market in Kenya has been abuzz with activity. Tall buildings are coming up everywhere in Nairobi. Residential gated communities are being built throughout the country. The rate and speed at which these construction projects are coming up defy logic. Kenya is not a rich country. We are still largely dependent on agriculture, tourism and the sheer ingenuity of Kenya’s human resource.

So, where is all this money coming from? There is only one entity in Kenya with the ability to fork out the crazy billions that are being invested in the real estate sector – the Kenya government.

My guess is that corruption money is being ‘cleaned’ via the real estate industry. This is why rumours abound of individuals buying highrise buildings in Nairobi at billions of shillings.

My projections are that we are set to see another boom in the property market in Kenya in 2019. The figures being bandied involving billions of stolen taxpayers money are going to fuel another boom in the real estate industry.

The insane real estate prices in Kenya, especially in Nairobi, have not been fueled by the normal forces of supply and demand. Rather, these forces have been abnormally influenced by money in the hands of thieves; money they have not worked for. And because these thieves are eager to ‘clean’ what they claim is their money, they have no time to haggle over prices.

CNN in 2012 spotlighted the Kenyan real estate industry in a feature that viewed the country’s property boom as the ‘world’s most improbable’. The article noted then that the Kenyan property market was being fueled by sackloads of cash from Somali pirates.

That was in 2012 when property owners who had no intentions of selling would change their mind after hearing how much the potential buyers were willing to pay for their property. If you had a property valued at KES 10 Million and a buyer offers to buy it at KES 30 Million, that would be a very tempting proposition indeed.

It is my contention that the boom in the real estate industry has not been that of a normal progression of a rapidly developing nation. The reality is that Kenya has borrowed heavily in the last few years to fund mega infrastructure projects. While most of these projects are yet to be completed, the impact of those that have been such as the SGR has been unimpressive. This was not totally unexpected as pundits have all along doubted whether paying $5.6 M per kilometer for the track alone was a prudent decision.

If the recent mega corruption scandals in Kenya are anything to go by, and if my hypothesis is correct, we are set for another property boom in Kenya; and the real estate prices will keep escalating until such a time when corruption in the country has been dealt with once and for all.