Mugo Mungai at the Milimani Law Courts in Nairobi on September 29, 2016. PHOTO | PAUL WAWERU | NATION MEDIA GROUP
Once upon a time, and aged only 36, Mugo Mungai had a bank — not
one, but two. But when he appeared in court recently, Mr Mungai never
attracted any attention.
Had that been in the 80s —
when he used to sponsor major golf events or when taking the
tail-between-the-legs-donations to State House — he would have been top
news.
Mr Mungai is the man who
built Nairobi’s Pioneer Estate, a project that he thought would be the
flagship of his Pioneer Building Society and Capital Finance Limited.
The
two institutions owned prime properties in the city: Capital House in
the city centre, 259 maisonettes in Pioneer Estate, and 50 half-acre
plots in the up-market Gigiri, near Unep and the US Embassy.
He also had a building in Thika town — today occupied by Ecobank — and a one-storey building in Nakuru, now occupied by KCB.
All
these, and his two institutions, were taken away from him on the
morning of November 13, 1986 and, as he told the court, his “were solid
institutions with no financial problems.” He was then 44.
RICHEST KENYANS
Had
his properties not been taken, he also told the court, they could be
valued at Sh7 billion, making him one of the richest Kenyans today. But
he is not; he is merely scraping around for hard-to-come consultancies,
and accounting jobs.
We met at
his spartan office at the United Kenya Club which is empty of any
decorations. At 74, age is catching up with him. We sit next to a window
overlooking the newly paved car park.
“There is good lighting here,” he tells me.
As
soon as you enter his office, you first notice the basic furniture: The
small-space sofa, a desk, table, chairs, and file cabinets containing a
few lever-arch files — nothing to write home about.
For
a man who in 1978 got a licence to operate a building society, giving
loans and mortgages to his customers, he ought to have retired into
opulence.
FEAR INSTILLED
On
this day, Mr Mungai is immaculately dressed in a suit and matching tie.
He is reticent too and hardly speaks to the media, the result of fear
instilled into him by the Moi regime.
He
speaks softly in impeccable English thanks to the years he spent at
Thurrock Technical College and Woltham Forest in the UK, training as an
accountant and as a certified public secretary in the 1960s.
As he speaks, he clasps his hands. At 74, he has seen it all.
“I
was destroyed,” he tells me, repeating what he had told the court. “At
first, I thought I knew important people. But when I went down, they all
disappeared.”
For 30 years,
he tried to get back the banks and the properties that he had lost. He
knocked on many doors and, as he was losing hope, a friend advised him
to see President Moi.
“I went
to Kabarak one morning in 2000 to see President Moi,” he recalls. “Moi
knew me. I used to go to State House often to take donations to him,
just like everybody else in those days.
"We
talked diplomatically and I told him I needed his help. He promised me
that he would sort out the matter and I gave him some written facts on
my banks and properties.”
SEE AGAIN
One year later, Mr Mungai would return to the Office of the President to see President Moi again. “Hiyo nakumbuka,” Mr Mungai quotes the former president as telling him.
But
after a month, he received a letter from Richard Leakey, then the head
of Civil Service and secretary to the Cabinet, telling Mr Mungai to sort
out his matter with the official receiver. “This matter should not be
dealt here,” Dr Leakey said in a letter.
“I
was shattered,” recalls Mr Mungai. He never tired from seeking audience
with Mr Moi and he was invited to State House again in May 2002. Mr
Mungai felt that President Moi was now willing to help him. They talked.
“Mr Moi left his office and
escorted me up to the public car park. I got the impression that he
would indeed help me recover my properties. But I was wrong. Seven
months later, I saw him on television handing over power to Mwai
Kibaki.”
The end had come.
Born
in Kanyariri in Kabete, Mr Mungai had first trained in shorthand and
worked as a stenographer. His first job in 1959 was as a secretary to
Kimani Ngumba, who was then a schools supervisor at Christian Churches
Educational Association, a body formed by the Anglican Church in 1958 to
coordinate its educational activities in the country.
Mr
Ngumba would later rise to become Nairobi mayor and in February 1983,
he had registered his own bank — Rural Urban Credit Finance Ltd — with
an office at Westland’s Waumini House.
'NO OTHER'
“Before
I registered Pioneer Building Society in 1978, my only competitor was
East African Building Society. There was no other operating at that
time,” he says as a matter of fact.
The
East African Building Society had been founded by Kenyan billionaire
Lalit Pandit (now late) in 1959 under the Building Societies Act of
1956.
When Mr Mungai decided
to set up his financial institution, the Kenyan banking sector was then
dominated by foreign-owned banks. In 1978, he had apparently sought a
Sh150,000 loan from a bank and had taken his title deed.
“Five
months later,” he tells me, he had not received the money. “I was
flabbergasted. I withdrew the title and decided that I have to start a
local bank if this is the kind of frustrations people are going
through.”
The desire took him
to the Government Printer, where he bought copies of the Banking Act,
the Hire Purchase Act and the Building Societies Act. “The capital for
setting up a proper bank was too much. I settled for a building
society,” he says.
All this
time, he had not shared his dream with anybody. At 36, his age-mates
were roisterers and revellers. “I had realised that people liked
drinking a lot. I didn’t have that time,” he says.
When
he went to the registrar of building societies he was shocked that they
didn’t even have forms for registration. Building societies were not
popular and Nairobi was only housing a population of 800,000 people with
housing needs well served by the national government and the City
Council.
UNPOPULAR DECISION
“Nobody
registers those things,” Mr Mungai was told about his unpopular
decision. He was told, “Go and tear up the sample registration form and
bring it back.”
He returned to
his Uniafric House office on Koinange Street, filled out the forms and
on November 3, 1978 he had a licence to operate a building society. On
March 13, 1980, he got another licence under the Banking Act to operate
Capital Finance Limited.
Shortly
after qualifying as an accountant in London in June 1970, Mr Mungai had
visited the Shell headquarters in London. His visit coincided with that
of Ian Ross, the Shell president who had just visited Kenya.
“He
said, 'Bring him in', and I was hired after he tried to impress me with
his Kiswahili. I was employed in London and posted to Kenya.”
Mr
Mungai was the assistant finance manager in charge of Kenya, Uganda,
Ethiopia, Malawi and Mauritius. But after two years, he left to become
the Kenya Meat Commission (KMC) Company secretary. That was in 1972.
“My
experience at KMC was terrible,” he recalls. “I had been trained in
ethics and integrity and here I was at the heart of a corrupt system.”
He quit in protest.
Although
he was later hired by Brooke Bond and sent to Mombasa, he left in 1975
to be “close to my ailing mother,” he tells me. “She passed on the
Christmas Day of 1975 and I have never celebrated Christmas ever since.”
ASSOCIATED REGISTRARS
That
January, he registered his accounting and audit firm, Mungai and
Associates, and later on Associated Registrars Limited. That is before
he sought a licence to open a bank.
It
was in these offices he returned with a certificate and across from his
Uniafric office, a contractor was putting final touches on a building.
“I
went there and told the Asian owner that I wanted to [rent] the ground
floor. He said, ‘No, not unless you take the entire four storeys’. I
said I will take it.”
He then
walked with a fundi to the nearby Barclays Market Branch and showed him
the kind of counters he wanted. “I then fixed a bright illuminated
signage: Pioneer Building Society.”
On the door, he wrote: “Loans”, and customers flocked there.
Interest
rates in the banking sector were by then regulated but building
societies and financial institutions were allowed to attract deposits
away from the banks and also charge higher interest rates.
Mr
Mungai became an overnight success. Banks started to set up their own
financial institutions and circumvent restrictions under the Banking
Act. His was the first to open banking services in Eastleigh, Nairobi,
then considered risky.
OPENED BRANCH
In Nakuru, he opened a branch and one day he was called by the manager because the queues were snaking to the pavements.
“I
drove there and decided to look for a plot. I got one at Sh600,000 and
we started building. After only one floor we stopped to move our branch
there.” The building, today, still has one floor and houses a KCB
branch.
“In total, I had eight branches countrywide,” he told the court. “We succeeded beyond anyone’s thought.”
As
usual copycats followed: Equity Building Society, Family Finance,
Nationwide Finance, Rural Urban Credit, Jimba Credit and many others.
The
market was becoming complex and he approached a city tycoon, Paul
Njiriri, who sold him some six acres in Nairobi’s Outer Ring Road to
build the signature Pioneer Estate.
“I wanted to be different,” he says. “I had a lot of stamina then.” He finished Phase 1 in 1984 and embarked on Phase 2.
In
Uganda, Yoweri Museveni had, on January 29, 1986, seized power after
toppling Gen Tito Okello. Mr Mungai had thought that he could open a
branch in Uganda and went to Kampala.
“I didn’t know that I was a marked man and after returning, I was arrested by the CID and interrogated about my visit.
“You went to buy guns?” one of them asked me.
WRONG YEAR
It
was the wrong year. In 1986, the crackdown on Mwakenya had started and
Mr Moi had become paranoid following the attempted coup of 1982.
A
few months after Mr Mungai's Uganda visit, and on the morning of
November 13, 1986, the Registrar of Building Societies, Joseph
King’arui, wrote a one-page memo to close down first Pioneer Building
Society and later on Capital Finance Limited.
He
told the court in an affidavit: “The Registrar of Building Societies
ambushed me and purported to take over PBS. He claimed to have
investigated PBS and was of the opinion that it should be dissolved.
By
then, he told the court, he had fixed deposits at various banks of Sh30
million and miscellaneous investments worth Sh145 million. His advances
and loans totalled Sh160 million.
'UNDER SIEGE'
He
told the court that he opted to leave and for a reason: “Many
indigenous banks were under siege and attack from the ruling political
establishment at that time. Thus, given the menacing nature of the visit
by (Registrar of Building Societies representatives) Messrs William
Ikapel and A.S. Garama and the mere shock and audacity of the invasion
and the prevailing political environment I was unable to question the
takeover and under duress I surrendered.”
Mr Mungai has filed this story in his court papers hoping that he might find justice.
“We were not insolvent. Not at all. We had a lot of assets. If I had made any mistake, why wasn’t I charged in court?.
I
ask him why he never went to court: “My fear was that I could be
killed. People were disappearing those days,” he tells me as he escorts
me back to the ground floor.
Our talk had lasted four hours.
Mr
Mungai's quest to get back what Lloyd Masika valuers tell the court are
assets worth Sh7.3 billion is going to be an interesting case.
He has won round one, demanding a forensic audit, and is now asking the court to determine whether his rights were violated.
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