More than 400 to lose jobs as contractor stares at closing shop

More than 400 employees of a Mombasa-based contractor risk losing their jobs after one of the firm’s biggest clients defaulted on payments of an estimated Sh1 billion.

Mr.Elsek- Elsek Erdinc. [PHOTO:FILE/STANDARD]

Elsek and Elsek Construction has written to employees informing them of the impending closure of business following non-payment by Presbyterian University of East Africa for a campus project delivered in 2010.

Salary payments in recent months have been difficult to come by, Osman Elsek – the managing director of the contractor told The Standard on Saturday, and that there were no more resources to keep the 422 workers on the job.
“I am folding up and going back home,” Elsek said in a notification sent to media. Initially, the development of the university’s campus cost Sh600 million in funds the contractor borrowed from two local banks – according to court documents.

Now, the two lenders have sent auctioneers to the contractor after losing patience over loan repayments that were not forthcoming. But six years after the project was handed over to PUEA, just about Sh31.8 million has been paid including Sh750,000 the contractor contributed in a fundraiser.

Interest at court rates since a judicial ruling was made directing the university to settle the debt owed to the contractor raised the total to just over Sh900 million. The two parties reached an agreement on how the payments will be made in a decree filed in court, before the university went back on the deal that was hoped to break the deadlock.

PUEA paid Sh1.5 million in a single installment and claimed it did not have sufficient funds to clear the outstanding debts. The contractor sent in auctioneers who seized four vehicles including a college bus and three small cars. Elsek had also sought to attach the premises which he had built but he says, the institution had charged the property with another bank. The university, owned by the Presbyterian Church, successfully challenged the attachment of assets in court.

And in a ruling delivered earlier this month, a Judge directed the contractor to release the assets and that Elsek moves back to site to construct the second phase of the campus. But a new challenge arose relating to failure by the university to get building approvals for the project. Moving back to site was a prerequisite for the university to carry on with the settlement of the debt. Elsek has since delivered building materials at the site in Kikuyu, in the hope of receiving the outstanding debts.