How Kenneth Matiba's entry into politics killed his business empire

Unlike other politicos who became rich after entering politics, Kenneth Matiba was wealthy before he ran for the Mbiri seat in 1978.

His political campaigns were epic: long convoys of vehicles that stretched for kilometres coupled with unending freebies of merchandise and food at his Embassy home in Murang’a.

Unlike his opponent, Dr Julius Gikonyo Kiano, Mr Matiba had made a name within Mbiri Constituency (now Kiharu) as an generous contributor to harambee projects in the’ 70s.

By the time he entered politics at the age of 46, Matiba owned the prestigious Alliance Group of Hotels, Alliance Jadini Hotel, Alliance Safari Beach, Alliance Africana Sea Lodge, and Alliance Naro Moru Lodge. He also owned the Hillcrest Group of Schools and was a major horticultural exporter.

Matiba built his business empire through trial and error, and sheer tenacity. But eventually he was unable to balance  business and politics, and when the end came, thanks to  his failing health and huge debts, not even his managers could save his business empire.

BIG-TIME BUSINESS

Matiba’s entry into the hotel business came thanks to his  appointment as the chairman of the Kenya Tourism Development Corporation (KTDC) when he was the permanent secretary for commerce.

 He bought Brunner’s Hotel in Nairobi, a run-down structure was adjacent to the modern-day 680 Hotel. 

Together with his business partner, George Robinson, he started developing properties and selling them, marking his entry into big-time business.

They   then bought Jadini Hotel,  a derelict structure that was not even attracting tourists. When  Mr Robinson died, Matiba flew to London to meet his wife, but she was not interested in a  property in Kenya. With Mr Matiba was his accountant friend, Stephen Smith – a son of his father’s teacher, James Stephen Smith, at Alliance High School. It was his association with Alliance that saw the birth of Alliance Investment Ltd, in which Mr Matiba and Mr Smith were the shareholders.

HEADACHE

“Jadini was a real headache…the management there acted as if they were the real owners of the hotel,” Matiba recalled in his book, Aiming High.

Matiba fired the entire lot and employed professionals as he and Mr Smith started renovating Jadini. It was finally opened by President Jomo Kenyatta.

Matiba then  invested  in  Naro Moru River Lodge and Africana Sea Lodge – the flagship of his empire.

“Then, in 1974, we thought of a secondary school and bought land in Karen, where we established  Hillcrest Secondary School. We then got involved in Hillcrest Preparatory School,” wrote Matiba.

Soon, he had invested in various companies, among them Carbacid Investments Ltd, Carbacid (Co2) Ltd, Alliance Investments Ltd, Alliance Developments Ltd, Alliance nominees Ltd, Alliance Hotels Ltd, Kenya Nurseries Ltd, Orchids Kenya Ltd, Flowers of Kenya Ltd, and Wangu Investments Ltd.He also had considerable shares at East African Breweries.

BEER DISTRIBUTION

It was  Mr Matiba who helped his former boss at Home Affairs, Daniel arap Moi, set up a beer distribution firm,  Rift Valley Distributors.

At Carbacid, Mr Matiba  became one of the majority shareholders, together with Maina Wanjigi –  the father of businessman Jimi Wanjigi. 

His entry into politics did not interfere with his business, which he  left in the hands of his business ally,  Smith.

But things started going south after Matiba left government two days to the 1989 Jamhuri Day celebrations, and the Moi regime started terrorising him and his family.

Following the death of Cabinet Minister Robert Ouko, Mr Matiba was summoned to Nyayo House for interrogation. And after a trip to Rwanda, to visit his friend, President Juvenal Habyarimana, his passport was seized. As a result, he missed his son Raymond’s graduation at Cornell University. His wife Edith, who was sickly,  made the trip instead.

DRIED UP

Bookings by parastatal and government for seminars in his hotels dried up – even though Mr Matiba had announced  that he had quit politics.

“I had kept a low profile and refused to engage in politics, yet I was being harassed. I had to make public my feeling,” he said about his decision to call a press conference on May 3, 1990, advocating for a multiparty system of government  and calling for a public rally at Nairobi’s Kamukunji grounds.

Matiba’s return to politics  marked the end of his business. After he was detained and suffered a stroke, Mr Matiba was unable to run his empire, which was left in the hands Smith and the group general manager of the hotels, Mr Chris Modigell.

While Matiba’s children were also employed in the family business, the young Mr Raymond Matiba could not match the highly experienced Mr Smith – nor could his eldest sister, Susan.  Mr Matiba had also put a lot of trust in his auditor, Mr David Kababeri, who appeared to gain more power over the empire as Mr Matiba ailed.

VIOLENCE

With the tourism sector hit by violence in the Coast region after the 1992 multi-party elections, the hotel chains started feeling the heat over debts  as client  numbers dwindled.  Mr Matiba had spent a fortune  running a presidential campaign and when he failed to capture the seat, he started a downward spiral in politics, opting to make only technical appearances in Parliament.

Then the line between his business and opposition politics got blurred, and soon,  Smith opted out.

By then Mr Matiba had also invested in People weekly newspaper – a bold attempt to take on the Kanu regime. But while the newspaper thrived, the banks started demanding their money.

An attempt by Barclays Bank to put Mr his  hotels under receivership was politicised by his Ford-Asili followers, who asked his supporters to quit the bank. Mr Matiba also chased away four receivers sent by the bank to take over his hotels over a debt that had grown to  almost Sh1 billion from the original Sh300 million.

COURT ORDER

Not even the Police Commissioner, Philemon Abong’o, would dare throw Mr Matiba out  of the hotels – even with a court order. Part of this followed the realisation that Mr Matiba had suffered long enough.

Mr Matiba then fired Mr Modegell, his manager for 25 years, for allegedly siding with Barclays. He accused the banks of charging high interest rates, saying they were intent on bringing down local entrepreneurs. His  case of prompted discussions in Parliament later on taming interest rates.

 In 2004, Barclays sent receivers to take over the Hillcrest Group of Schools over a Sh540 million debt; they were sold in 2011. He also lost his controlling stake at Carbacid, a carbon dioxide manufacturer, after selling shares worth over Sh400 million.

While his family still held 22.61 per cent stake in Carbacid, his removal  after hostile boardroom manoeuvres against him was rare, since it was a first where an investor with substantial shareholding was denied representation.

BOARD SEATS

After the poll, Carbacid Chairman Maina Wanjigi declared: “The resolution is that Mr Matiba is not elected.” He ruled out the possibility of inviting Mr Matiba’s son, Raymond, and the politician’s aide, Mr David Kabeberi, to take up two of the four vacant seats on the board after they were proposed by the family’s Alliance nominees during an extraordinary meeting.

While Mr Matiba dismissed the meeting as illegal, 15 voters representing just 64,000 shares voted for his  re-election  (he  was retiring on rotation) while 13 voters representing a shareholding of 6,797,533 of the 6,861,633  carried the day.

Later, the business empire got entangled in a legal tussle with a vulture fund  seeking close to Sh1 billion for “helping” the Alliance Group of companies reach a loan servicing agreement with Barclays as well as  managing the group’s other liabilities.

This demand by a Kenyan-Canadian investor, Hanif Sheikh, who helped save some of the Matiba family properties from imminent auction, was one of the last straws for the Matiba empire.