How Much Do You Know About Goldenberg Scandal?

The Goldenberg scandal was a political scandal where the Kenyan government was found to have subsidized exports of gold far beyond standard arrangements during the 1990s, by paying the company Goldenberg International 35% more (in Kenyan shillings) than their foreign currency earnings.
Although it notionally appears that the scheme was intended to earn hard currency for the country, it is estimated to have cost Kenya the equivalent of more than 10% of the country's annual Gross Domestic Product, and it is possible that no or minimal amounts of gold were actually exported. The scandal appears to have involved political corruption at the highest levels of the government of Daniel Arap Moi. Officials in the current government of Mwai Kibaki have also been implicated.

Background:Similar to most countries, Kenya encourages international trade by granting tax-free status to commercial enterprises involved in the export of goods and sometimes subsidizes these exports. The Goldenberg scandal was based on the fact that exporters who deposited U.S. dollar earnings with the Kenya central bank received in exchange the equivalent in Kenyan shillings plus 20 percent.
However, gold mining represented a tiny portion of Kenya's GDP, with only one operational gold mine (at Kakamega). Goldenberg International therefore developed a scheme of smuggling gold into Kenya from Congo, so that it could legally export it more than the export price from the government.

Details:The chief architect beyond the scheme was a relative of the Kenyan businessman Kamlesh Pattni. However, it was Pattni who established Goldenberg International to implement the scheme. The very large sums involved (600 million dollars) indicate that the senior government officials were at least complicit. Almost all the politicians in the Moi government and a considerable percentage of the current Kibaki government have been accused. The judicial system also appears to have been deeply involved, with twenty three of Kenya's senior judges resigning after evidence indicated their involvement.

The scheme began in 1991, almost immediately after the Kenya government introduced measures to reform the economy and increase international trade and investment, and seems to have stopped in 1993 when it was exposed by a whistleblower, David Munyakei. As a result of this, Munyakei was fired from his position at the Central Bank of Kenya, and spent the next decade of his life poor and largely unemployed. He died in August 2006, leaving three daughters and his wife. There have been two investigations on the scam, one under the Moi government and the other under the current government. The gold was likely imported from Democratic Republic of the Congo, and therefore probably helped finance the war that raged (1997-2002) in that country.

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