Mwaniki Wahome
2 August 2008
Nairobi — The country's one-time chief coffee miller and marketer is teetering on the precipice, egged on by huge debts owed.
At the core of Kenya Planters' Co-operative Union (KPCU) financial problem is a Sh3.7 billion debt, a large part of which are dud assets accumulated over the years. Of this amount, only Sh104 million has been recovered from 10 clients in 20 months, according to former managing director Peter Kimani.
The latter amount represents 2 per cent of its debts. Not even the steady climb in global coffee prices seems to salvage the firm as the management and the board engage in an internecine conflict.
Of the total amount, only Sh733 million is deemed recoverable, as a large part of the debts are secured on deliveries and there are no supporting documents in some cases. According to documents seen by the Sunday Nation, Sh890 million is owed by dead people.
Some former clients have been delivering their clean or cherry coffee to competitors who will not help KPCU recover their money.
After World Bank pushed through the Coffee Act 2001, snatching marketing monopoly from the Coffee Board of Kenya who became a cash-strapped industry regulator, some farmers faced with an array of milling and marketing options decamped from KPCU. The decline in the industry in the past two-and-a-half decades has also taken a toll on the financial ability of farmers.
According to the debtors list tabled in Parliament by Co-operative Development minister Joseph Nyagah last week, some of the debtors are current and past Members of Parliament, prominent businessmen, farmers and co-operative societies. Two former ministers in the last government and a former MP owe KPCU as individuals or through their companies.
Some of the cases related to the debts have dragged on since 1993 and the resignation of some judges in 2004 did not help matters, as some files had to be reallocated other judges.
"The major challenge of the non-performing loans is that most of the debtors have no collateral and others have subdivided their farms or abandoned coffee farming altogether," a status brief given to Mr Nyagah says.
The major debtors include Kirima Kimwe Estate Ltd with Sh494 million, Nando Limited Sh381 million, Esther Wairimu Karori Sh110 million, Mbugua JK Sh121 million, Lucia Mutuku Kuria Sh155 million, Ngimu Farm Limited Sh135 million, Mungai Robert Kinuthia Sh187 million and Saina William Morogo Sh100 million.
Others are Mwangi Mbugua (Sh90 million), Dr Gatabaki SM (Sh51 million), Gatere Kahura Investments (Sh66 million), Wataku John Njoroge (Sh28 million), Magdelena W Miru (Sh75 million), Samwel Kimotho Miru (Sh20 million), Pascalina Miru (Sh48 million), Joseph Kariuki Miru (Sh18 million), Thomas Gakunga Miru (Sh18 million), JM Mugo Investment Company Limited (Sh30 million), Nyari House (Sh16 million), Mawara Coffee Estate Limited (Sh78 million), Peter Kamau Wakariithi (Sh12 million), Kereti Estate Limited (Sh59 million), Muhoho Kagondo Estate (Sh61 million), Kereti (Sh59 million).
Among the debtors that owe KPCU between Sh2 million and Sh10 million include Kinondo Holdings Limited, David W.G Murathe.
According to the company's accounts, the recoverable amount stands at Sh733 million. The debt owed by dead debtors is Sh890 million while their non-performing loan portfolio is 1.6 billion.
The bulk of the outstanding debts comprise interest charged by the Kenya Commercial Bank, which was source of funds for onward lending to the farmers and which KPCU is still servicing. KPCU is paying Sh6.8 million to the bank every month.
During last year's annual general meeting, KPCU board chairman Kimanthi Mutuerandu said a debt recovery unit would be established to speed up collection of the debts. During a press conference called to institute a mass managers' walkout last week, Mr Mutuerandu blame the continual coffee reforms which he said had created uncertainty.
"Coffee institutions like KPCU and Coffee Board of Kenya have found it difficult to collect debts from farmers because they can easily switch millers and marketing agents at will, thus evading payment of their debts," he said. He said other market players had failed to co-operate as required by the law in assisting KPCU recover the debts.
"Although it is easy to link governance issues with the current state of KPCU finances including non-recoverability of debts, it has been impossible for KPCU to compete effectively with new players while bogged down by some of these historical issues," Mr Mutuerandu said.
Last month, the Coffee Development Fund managing trustee George Ooko said a credit reference bureau would be established to reduce the number of defaulters in the sector.
"To reduce the overall indebtedness of the coffee farmer, we shall partner with Coffee Board of Kenya to set up a registry," he said. The strategy, he added, would involve lobbying the marketing agencies from giving cherry and parchment advances in an attempt to bring all the financiers under one umbrella.
However, according to a forensic investigations and systems review done in May 2007 by KPMG, parchment advances were paid to farmers who had not delivered coffee, leading to non-recoverability of the advances. The probe also found out that some of the advances were diverted to uses other than stated.
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