African Press International (API)

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Kenya: THE REAL REASONS BEHIND NZOIA COMPANY’S IMMINENT COLLAPSE

Posted by African Press International on September 30, 2013

  • By GODFREY WAMALWA, API,KENYA
The trouble ridden and financially strapped Nzoia Sugar Company in Bungoma County is threatened with possible collapse following what analysts now say is incompetent institutional management, archaic managerial practices and corruption among other vices currently facing the sugar miller.

Investigations reveal that in addition to the colossal losses which the Company has suffered in recent years the Managing Director and other top managers have through corruption and other dubious means swindled the Company of Kshs. 1.2 billion between the years of 2011 / 2012 by harvesting the Company’s sugarcane from its nucleus farm and pocket the proceeds.

But the above 1.2 billion may only be a tip of the iceberg given the fact that since the discovery of the theft of Company sugarcane no audit of any kind has been undertaken and it is now emerging that the cane from the over 3,700 hectares at Nzoia Nucleus farm may have been benefiting top management and well-connected employees hence the Company’s ever growing debt.

Experts in the sugarcane sector are worried that if the Nzoia situation is not reversed this Company which is the largest single large-scale farming enterprise in Bungoma County will come down with the economy of the whole County given the large tracts of land lying under sugarcane in addition to the abused nucleus estate the largest of such an estate in Sub-Saharan Africa.

A report compiled by a task force which includes immediate former directors of the Company that has been forwarded to the Agriculture Secretary and whose copy has been seen by your favourite and popular API speaks volumes about inept management styles by the current CEO of the Company Saul Wasilwa whom the report says and a quote “has demonstrated archaic, corrupt and incompetent institutional management leadership practices that should be considered as totally and unacceptable in this modern erra”.

The document quotes heavily from the factual findings of the Company’s own forensic audit report undertaken by PKF consultants on its behalf in September 2012 whereby the consultants revealed that from the year 2007 -2011 the Company’s own records show that a total of 5089 stacks or 254,445 metric tones of harvest cane valued at Kshs. 76,541,000/= were stolen by Nzoia Sugar Company’s employees from the nucleus estate of the Company. Much of the blame for this theft stops at the MD’s desk as he allowed architects of the fraud to collude with junior officers in the creation of a fertile environment to defraud the Company.

Further more, in the report it is revealed “Impeccable sources indicate that the CEO Saul Wasilwa undertook and was involved in concerted corruption peddling efforts to influence some Board members who interfered with the delay of the conclusion of the report by PKF until the life span of the whole Board came to an end. It is for this reason that some of the directors as responsible citizens of the land have appealed to the Cabinet Secretary of Agriculture to insist that Nzoia CEO comes clean of this corruption that saw the dismantling of their own report under suspicious circumstances”.

In the comprehensive 385 page forensic PKF audit report it is revealed a deal of Kshs. 12 million was negotiated under doubtful circumstances and in order for the consultants to pre-maturely end the report although it has now emerged that the CEO with some of his own associates raised Kshs. 10 million to influence key members of the relevant committee of the Board who are said to have manipulated the stringent disciplinary and legal recommendation in the forensic report to ensure that nothing was discussed in the open.

The same memoranda reveals documentary evidence which indicates that the CEO has been colluding with some of his top managers to sell commercial sugarcane to other millers without knowledge and express permission from the Board. In this regard three illegal contracts indicate that the Company may have lost billions of shillings through mismanagement, fraudulent accounting of the Company’s resources at the behest of Wasilwa. It is revealed in the document that 57,000 tones of commercial tones valued at Kshs. 216,600,000 were sold to Mumias, West Kenya and Butail Sugar Companies during the annual maintenance of the factory September/October 2011. Ironically Nzoia Sugar Company is currently faced with acute shortage or cane.

Two other contracts dated February 2012 to July 2012 saw 65,000 metric tones of sugarcane sold by Nzoia Sugar Company to Butail Sugar Company at Kshs. 247,000,000/= through illegal contracts that were never approved. In ant shell under the tenure of Saul Wasilwa as the MD of Nzoia Sugar, Company has experienced colossal loses from the nucleus estate as indicated above and the theft of Sugarcane from Out Grower Farmers particularly the case of 7750 stacks or 42625 metric tones of harvested cane from 5650 individual Out Grower Farmers contracted to the Company . The sugarcane valued at Kshs. 161,975,000/=.

Moreover according to the memoranda there was accumulative loss of approximately 1.2 billion arising from non recovery and fraudulent accountability of investment inputs supplied to sugarcane farmers by the Nzoia Sugar Company. In this regard loss of revenue of unspecified amount that have accrued from the interest which is charged to the Out Grower Farmers but it is deliberately not accounted for in the Company books.

There is also evidence of rampant and unabated corrupt practices in Nzoia Sugar Company which is contained in the Company’s Chief Internal Auditor’s Report whereby it was established that during Mr. Saul Wasilwa’s first tenure as Managing Director Nzoia Sugar Company incurred cumulative losses of more than Kshs. 1.2 billion shillings due to lack of effective internal controls. All in all in this key area of management Wasilwa and a few of his cronies have continuously enriched themselves at the detriment of the sugarcane farmer while the Kenyan tax payer also stands to bear the burden of this mismanagement because the Company’s debt has increased when as a matter of fact it should have declined.

The corruption, kick backs, and fraud has seen Wasilwa and some of his top managers becoming overnight millionaire with property running into hundreds of millions; for instance Wasilwa constructed an ultra modern residential building in Syokimau area Embakasi at the cost of 80 million, the house is expensively furnished with equipments that are remote-controlled. He recently completed another modern family residential house in Musikoma area of Bungoma town at the cost of 48 million. He has constructed a modern residential house in Nakuru at the cost of 45 million and purchased expensive salon cars including Mercedes cars for himself and his wife. There is no question that as Wasilwa continues to lead a lavish life style, beyond his means, poor sugarcane farmers continue to wallow in poverty due to delayed sugarcane delivery payments. Observers opine that, Wasilwa’s earnings can hardly be equated to the multi million shilling empire he has built from the looted millions from Nzoia Sugar Company.

The litany of cases of mismanagement are more or less a catalogue of misdeeds in a management environment which could only pass for a theatre of the absurd because, the Nzoia CEO acts as if he is above the law with little or no regard to established rules and procedures governing Public Companies and other Institutions. His callous approach to the Public Management of Company affairs has encouraged and given way to some of his Top Managers who seem to have taken a cue from him by taking illegal and or questionable decisions so long as such decisions are in their favour.

In the key area of employment, Senior Management staff have employed their own spouses and fast tracked their promotions through the ranks : a standing example is the Company’s Human Resources Manager, Patrick Murambi who employed his wife as a clerk in the harvesting section of the Agriculture Department and within a period less than one year he promoted her to the grade of Supervisor through favouritism at the expense more competent and deserving employees.

The Industrial Relations Manager Mr. Bramwel Simiyu Mbirira influenced his wife’s employment as a Supervisor in the Finance Department. The Company’s Senior Personnel Officer Brian Keya has his wife employed as a Stores Manager while the CEO Mr. Saul Wasilwa and other Managers have also employed their girl friends, and relatives through nepotism and favouritism. All these misdeeds by Wasilwa and his top management team have been committed in the full view of the Branch Secretary of the Sugar cane plantation and allied workers union Macdonald Tabalia Wamocho and the National Chairman of the same who have allegedly been bribed and compromised by Wasilwa and his team.

The memoranda also reviews misappropriation of funds at the personal direction of Saul Wasilwa the MD in what the report describes as false financial reporting of the closing and opening Bank Cash balances. For example, says the report, on June 30th 2011, the actual Bank closing balance was Kshs 844,898,943.00 and not Kshs 672,098,057.00 as reported in the books of accounts. As a matter of fact, the figure was deliberately manipulated by Wasilwa after the Departure of Engineer Julius Nyarotso as Board Chairman and following the immediate appointment of Lawrence Sifuna as Nzoia Sugar Company Chairman. It is instructive to note that typical of the Wasilwa management style, the difference of Kshs 172,800,886.00 was literally swindled as it was not accounted for.

The ever unending intrigues at Nzoia reveals the report in the memoranda, saw the matter of the unaccounted for balance being brought up for investigation to the Chairman of Risk and Boards Audit Committee who chose to do or say nothing and indeed nothing has been heard of the said funds which Wasilwa and his close associates seem to have shared out with Chairman Sifuna.

One of the most widely publicized irregularities at Nzoia Sugar Company is blatant abuse of the Company’s Tendering procedures by the Company’s Top Management Team and particularly the MD who it is said holds a firm grip on members of the Tender Committee who are usually under strict instructions from Mr. Wasilwa to manipulate Tenders and ensure that they are awarded to Companies and Individuals of his choice. The above situation witnessed the award of a Tender for the Supply of a Water Bottling plant to Brief Case Supplier in China even after Wasilwa and Chairman Lawrence Sifuna were bribed by the Brief Case Company’s local agent.

Farmers, Suppliers and other law-abiding citizens of Bungoma County were treated to a circus of some sorts by Lawrence Sifuna following the public revelation of a reported bribery saga in which the local agent of the Brief Case Water Bottling Plant made sensational claims implicating Sifuna in a corrupt deal and despite the fact that Sifuna vehemently denied ever being bribed, his accuser went the whole way to avail documentary evidence to the members of the Media. It was indeed drama when one journalist pointed this out to Sifuna, the Chairman reacted angrily to the allegations warning the reporter not to bother himself with matters that did not concern him. The authors of the memoranda are warning that Nzoia Sugar Company is sliding down slope and is threatening the very survival of the Company let alone destroying the economy of Bungoma County.

END

 

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