Kenya: Patrick Njoroge, corruption-fighter

Patrick Njoroge, governor of the Central Bank of Kenya, is reflecting on the topic of weight. But it is not the balancing of fiscal levers or the appropriate spreads for Kenya’s $7.2 billion in foreign reserves that is concerning him. No, for this recent arrival – he took over the CBK last June after 20 years at the IMF – the subject is more personal: his own girth, or lack of it. Euromoney has asked if Njoroge is enjoying his new role. A tall, trim man who looks more mid-40s than his actual mid-50s, Njoroge consults the My Fitness Pal app on his smartphone. On June 8 last year, he explains, a week after being nominated for the CBK role by president Uhuru Kenyatta, Njoroge weighed 180.4 pounds, around 82kg. By July 17, barely three weeks into his term, he weighed just 170.2 pounds, or 77kg. “And I wasn’t doing any exercise,” this enthusiastic jogger insists. As he describes it, things were grim and getting grimmer. “When I got the offer, I couldn’t even go back to Washington to wind up my affairs,” he says. “This place was burning, inflation was surging, the exchange rate was dropping like a stone, there were pressures on the current account. It was a mess and somebody needed to deal with it. It was triage situation, an emergency room. “When I come in in the morning, I am concerned about various things,” he says. “But I’m also concerned that I do not want to make a mistake because the stakes are very high. This requires a lot of work. “The point is there is a lot of stress. And when I get stressed, I lose weight. So, you ask, do I enjoy it?” Six months on, the answer would seem to be yes, just. Another tap on his phone confirms it. “Yesterday, I was 171 pounds. “But it’s enjoyable. Why is it enjoyable? Not because I enjoy pain; it’s because I can see the prospects. If we get things right, this economy will just rocket. We have a substantial unique responsibility fixing the financial sector. If that happens, the sky’s the limit.” Optimism Njoroge’s optimism about an under-achieving country ravaged by chronic corruption brings to mind that old aphorism about Brazil, India and Russia that they are countries of the future… and always will be. Njoroge knows the line, but shakes his head. “No, that does not apply to Kenya,” he says, citing a GDP forecast for 2016 projecting a stabilised Kenya as an emerging East African powerhouse growing at 5.5% to 6.0%. This estimate is “very conservative,” Njoroge says, but points out that it is substantially higher than what his former employer, the IMF, predicts for the wider sub-Saharan African economy, which it downgraded in October from 4.5% growth to 3.75%. The IMF, which recently had a team in Kenya, is tipping the country to grow at 6% in 2016. The government gets a tick for economic management, he says. Macroeconomic stability has returned, and policy direction has been encouraging. “They just need to execute it now,” he says. “We cannot rest on our laurels, we cannot be complacent.” An athletics obsessive, he cites Kenya’s recent record at the Olympic Games as a warning. “We are the best runners in the world,” Njoroge says. “I mean it’s in my passport, right? I’m Kenyan, I’m a marathon runner right? But what happened to us in the marathon?” Favoured to win both the men and women’s events at the London Olympics in 2012, Kenyans disappointingly only managed silver in both. “We get complacent and we lose the race,” he says. “One day we are the most dynamic, and then, boom, others will be more nimble, maybe innovate faster. They will just accelerate and leave us in the dust.” Njoroge’s appointment as the ninth governor – and eighth Kenyan – since independence was something of a watershed. An economics graduate of the University of Nairobi, Njoroge and his family had virtually no profile among Kenyans. His career was outside the bank and, as he proudly points out to Euromoney, “I didn’t have any political connections whatsoever.” He grew up in a village on Nairobi’s outskirts, one of eight children in an academic family. His father was a career civil servant in the education ministry and his mother a primary school teacher. In the late 1980s, Njoroge won a scholarship to study for a PhD in economics at Yale University, where he was lectured by the Nobel economics laureate James Tobin, a noted advocate of decisive government intervention in the economy. After Yale, Njoroge returned to Kenya and served two years as an economist at the finance ministry, helping stabilize an economy reeling from the Goldenberg export scandal, which had ravaged the Daniel arap Moi presidency and the central bank. In 1995, Njoroge joined the IMF, where he worked for 20 years, starting out as an economist and leaving, last year, as senior adviser to deputy managing director Mitsuhiro Furusawa and arguably the most senior African at the fund. Transparency The deeply religious Njoroge has eschewed the perks of the governorship – the limousines, the official house in Nairobi’s leafy Muthaiga district – for a modest VW Passat from the CBK fleet and near-monastic house sharing with fellow members of the Roman Catholic Opus Dei organization. His press adviser quietly points out that Njoroge donates “a decent share” of his salary to charity. Njoroge says his selection process was “100% transparent, so far as I’m aware.” He goes further by claiming that the transparency of his appointment – an open interview, the subsequent vetting by parliament, the presentation of vetted candidates to the president – was the first time an African central banker had been appointed in such a manner. “It’s not like I had it in my plan that one day I would come back and do X or Y, or build my retirement home by the sea or whatever else. I lived one day at a time, my planning horizon was a year.” While in Washington, there were regular visits back home to see family but, as per IMF home-country rules, Kenya was not part of his brief in Washington. “I maintained contact with the country, and obviously Kenya has always been home and has done so much for me. I kept up like any person in the diaspora would, but I wasn’t trying to second guess what everyone else was doing here. “I had a lot of other countries to worry myself about professionally, countries that were in deeper crisis, in Europe, the US, those were major financial crises. “I never felt like one day I had to go back and fix Kenya. I never felt that. I was always open to coming back. I could have continued my career at the IMF and retired to anywhere in the world – New Zealand seems to be a great place for people to go. And then this job came along.” Uhuru Kenyatta-350 Uhuru Kenyatta, president of Kenya Njoroge says he was not headhunted or handpicked, he simply applied from Washington. He had no history with any of the political decisionmakers. “It became clear that the time of the [previous] governor was coming to an end… And I said to myself: ‘Oh you know, I have unique experience’. Looking at all of them [the other prospective candidates], none of them had had the experience that I have. I mean I’ve been working with two thirds of the central banks of the world, so it wasn’t just experience working with just one bank.” Once he threw his hat into the ring, then came the profile. “I found it curious that some people said of me: ‘You’ve never really worked in the financial system’, when I had worked in around 200 – and helped fix a good number of them.” He was then criticized for not being ‘political enough,’ that he lacked political connections, which he sees as a virtue. He says he did not know Kenyatta and had only met him in Washington when Kenyatta had visited the IMF as minister of finance in the late 2000s. “He was very amiable… but it’s not like there was any deal cut in a smoke-filled room.” Lifestyle choices Then came the vetting. Six months later, Kenyans are still talking about Njoroge’s appearance before Kenya’s parliament. No matter that at the time Kenya’s economy was struggling, it seems that Njoroge’s candidacy balanced more on his marital status than his impressive CV. In a God-fearing society where the average marrying age is 26, local lawmakers were puzzled as to how a then 54 year-old Kenyan man could be single. One member of parliament insisted his interrogation of Njoroge and his personal life was valid because he, the MP, knew a fellow parliamentarian whose sister was single. Njoroge was calm. “I am single by choice and I am comfortable that way,” he told MPs. “There is nothing sinister with that. I am sure this committee has done its due diligence on what sort of a person I am.” Njoroge then patiently explained how the central bank is structured, revealing a decided lack of understanding among MPs. Then they quizzed Njoroge, who had lived outside Kenya for much of his career, as to why he had no assets in Kenya. “Yes,” he agreed, “I don’t have a single asset here in Kenya and this is where I am at this point. But it doesn’t mean that this is how it will be for ever, and I subscribe to being very deliberate about that. This is my economic model and it may be, years after retirement, I would want to invest in other things. That should not mean I have any financial inabilities. It comes with the profession,” he said, insisting that “it’s not that I don’t have faith in the economy. I do.” Kenya’s robust media was furious, and Njoroge’s parliamentary grilling became the touch paper for a spirited debate among Kenyans about the quality of their public officials. Nairobi’s Daily Nation newspaper fumed that in dwelling on Njoroge’s “lifestyle choices,” lawmakers had wasted an opportunity to set an economic agenda. “While worrying about the lack of title deeds in the proposed governor’s name, MPs probably did not notice how clear and independent-minded (Njoroge) was on crucial issues and how easily he articulated positions contrary to those taken by the government and MPs,” the newspaper wrote. Looking back, Njoroge smiles at the fuss. “In terms of technical ability, the technical questions, let’s just say I would have been very surprised if I was asked a question that stumped me. So from that perspective I was very comfortable. I mean I’ve spent 25 years worrying about these things, and then you ask me a question that floors me?” He laughs. He says he felt most exposed over political matters, which he says he has had less experience of in his career. The personal stuff floored him, but it did not show. “I was a bit embarrassed,” he admits, “I tend to be very private, and nobody enjoys having their private life paraded in public over TV and radio. On the other hand, there is nothing to hide, so if you have a problem with that, there it is. What you see is what you get, and I think that’s how the people responded.” For a person who claims to possess no political skills, his handling of the vetting process was a masterstroke, if an unwitting one. “It became even more amusing when people started to offer me a wife, this sort of thing. I explained who I am, what makes me tick, in the end they need to know this.” Njoroge’s tight IMF connections could help if things turn bad in Nairobi. Kenya can reportedly access a special IMF $700 billion-strong fund if need be. Although his appointment has been well-received by Kenyans, Njoroge’s governorship is beginning to grate on some Kenyan bankers, who note a tendency to lecture and, they say, dabble outside his mandate. Njoroge makes no apology for his style. “The bankers, the financial sector, they cannot be stuck in the 20th century, or even worse the 19th century, so they need to innovate. There are some things in the financial sector that need to change… and it’s our job to midwife the thing.” “It’s not the job of a central bank governor to tell bankers how to run their banks, but to compel them to run them prudently within the law,” grumbles one senior banker. Njoroge disagrees: “It’s my job to tell them that they need to innovate even more, lower their cost, produce products that are relevant to the people… So when they say: ‘We have a new product’, I say: ‘Who do you have in mind?’ My biggest question is how are you dealing with entrepreneurs and small and medium-sized enterprises?” Imperial Bank Since coming to the chair, he has set down a decisive marker, seizing control of struggling mid-sized Imperial Bank on grounds of “irregular lending”, while forcing the smaller Dubai Kenya Bank into receivership. At Imperial, Njoroge also called in Washington-based forensic auditor FTI Consulting, best known for its work on the Bernie Madoff scandal and the Lehman Brothers wash-up. As the Imperial case continues to ripple around the system, Njoroge’s own colleagues have not escaped censure. “This in a sense shows there may be some blind spots in the way we operate,” Njoroge said, after moving on Imperial. “We will do our own in-house introspection and see why did we miss this. There is no doubt in my mind that if indeed there was something [wrong] there will be consequences. “We are very much wedded to market-based solutions,” he tells Euromoney. “We are not going to deviate from market discipline.” After his moves on Imperial, Njoroge says, “now it’s clear that when a problem takes place in any area, whatever, we have made it very clear how we will approach those things, and it will be credible.” More moves may come. Njoroge says he would like to see consolidation in Kenya’s banking sector, where 45 banks vie for business in a market where perhaps 15 would be sufficient. Finance minister Henry Rotich also has consolidation on his mind, telling Euromoney he intends to introduce legislation to raise capital thresholds that smaller banks would be unlikely to meet. Njoroge is pushing for a moratorium on new bank start-ups.