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Long-awaited milk processor for Murang’a lands, but is it worth Sh250m?

By Daniel Psirmoi and Boniface Gikandi | Published Sat, March 18th 2017 at 11:23, Updated March 18th 2017 at 11:37 GMT +3
MCAs James Kariuki and Catherine Mugo inspect milk processing equipment at a shipping yard in Mombasa. [PHOTO:BONIFACE GIKANDI/STANDARD]

After years of anxiety and finger pointing, the Murang’a County Government has finally received a multi-million shilling milk processing equipment it ordered and paid for close to three years ago.

But as the equipment for the Murang’a County Creameries (MCC) arrived at the Port of Mombasa late last month, new questions have emerged over exactly how much the county paid for them, even as the ownership and qualifications of the firm that won the tender to supply them continues raising eyebrows.

Information obtained from the county government shows that the contract for the supply of the milk processing equipment was awarded on September 1, 2014 with delivery expected in six months.

Huge differences

It was, however, not until three weeks ago, on February 21, that the containers were officially opened for verification by the Kenya Revenue Authority (KRA) at the Port of Mombasa.

When the containers finally arrived, they were received with the pomp that has come to be associated with county projects, with more than 45 Murang’a MCAs and Governor Mwangi Wa Iria flying to Mombasa to confirm arrival.

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However, the arrival did little to assuage a section of the county’s leadership, led by Senator Kembi Gitura and Maragua MP Peter Kamande, who have called for thorough investigations into the delayed project.

But an upbeat Wa Iria is happy that the milk plant is already here, saying it will help raise milk prices for farmers from the current Sh35 per litre. A former managing director at the New Kenya Co-operative Creameries (New KCC), Wa Iria says the plant has a capacity to process 20,000 litres of milk per hour and will be fed by 35 milk coolers installed in milk producing wards. The wards, he said, currently produce 150,000 litres of milk per day.

Still, questions surrounding the award of the tender just won’t go away. Documents signed by Murang’a County Secretary Patrick Mukuria show that the tender was awarded to Red Brick Enterprises Ltd on September 1, 2014. The contract sum allocated was Sh250,824,393.

But in the import declaration form lodged with the Kenya Revenue Authority (KRA), the company submitted that the total value of the unassembled pasteurisation line, UHT processing and packaging line, yoghurt and filling plant and a power generator to be imported from China was to cost $914,600 (about Sh93.2 million) at the current exchange rate.

The county government had indicated in its Letter of Credit (LC) report when seeking Sh177,554,058 on November 16, 2015 from Chase Bank that the equipment was ready for shipment. Asked about the huge differences in the tender documents and the KRA figures, the governor said he did not trust papers purported to originate from KRA as his office had not been asked to substantiate the information.

“The public should not believe lies being peddled by those out to sabotage the project,” said Iria.

It has also emerged that county government awarded the Sh250 million milk plant contract to Red Brick Enterprises Ltd when the company had not been registered by the Registrar of Companies.

Documents in our possession show that Red Brick Enterprises Ltd was awarded the mega contract almost a month before it became a corporate body. Other documents show the firm was registered 21 days after it landed the lucrative contract.

But Mr Mukuria, the Murang’a County Secretary, said Red Brick Enterprises Ltd was awarded the contract after it met all conditions.

“The county government has been dealing with registered service providers,” he said.

It is also not clear how two banks released letters of credit (LCs) for payment of the tender. The first one by Chase Bank for Sh177 million apparently expired and was replaced by a another with a lower sum of Sh174 million from Kenya Commercial Bank (KCB). Why did KCB give a new LC yet another had already been issued by another bank? Why the Sh3 million difference?

Meanwhile, documents from the Registrar of Companies show that Tabroy Holdings Ltd, a company which shares directors with Redbricks, conducted the technical feasibility study, including the costing, of the project. In essence, the directors of Tabroy Holdings have a major stake in Red Brick Enterprises Ltd. Benard Kinegeni Maingi and his wife Hellen  Kaburia are listed as directors of Tabroy Holdings holding 500 and 300 shares respectively.

Conflict of interest

Ms Kaburia is a signatory in the accounts of Red Bricks Enterprises Ltd and has been given the power of attorney by director Virginia Kathomi Mukunga, who is also Maingi’s sister.

The other director is a Mr John Felix Munene Kimathi Gakunu, a co-worker with Kaburia at Waumini House in Nairobi. Interestingly, Maingi also sat on the committee which prepared the Letter of Credit report on November 16, 2015 for Sh177,564,058.

Speaking to The Standard on Saturday, Maingi maintained that Murang’a county residents will get value for their money for the project, noting that the Sh250 million, includes building works that cost Sh64 million. Among the equipment purchased with the Sh91.4 million according to Maingi, include a 15,000 litre per hour pasteurisation plant and 5,000 litre per hour yoghurt plant respectively.

The amount also catered for other utilities, such as boilers and chillers and also included custom duties and clearing. So far only, Sh122 million has been paid, Sh84million for equipment’s and 38 million for buildings to house the processor.

Maingi says no procurement laws were breached in the tender, insisting that the company that clinched the deal only changed its name from Red Brick Enterprises to Red Brick Enterprises Ltd.

“My wife and I are no longer part of the company, we are not directors. I only lend them some money and my wife at one time had to be part of them to cater for our interest,” he said. “There was no conflict of interest for me in the matter because after doing the feasibility study, my contract with the county came to an end. The company later brought me on board to act as I have the technical know-how on what the contract entails. There is nothing wrong with that.” Mukuria said the project’s credibility was also being soiled by infighting within the contractor’s business allegedly fuelled by a sacked manager.