CMA suspends CMC Motors from trading at Nairobi bourse

By Morris Aron

The Capital Markets Authority Friday suspended CMC Holdings from trading at the Nairobi Stock Exchange for a period of seven days.

The development came as CMA rushed to save face after being accused of not taking action as boardroom wrangles at the listed firm spilled on to the streets. The regulator moved to avert panic selling of the shares that could have seen the share price dip to below allowable single day movements.

In a directive to the Nairobi Stock Exchange, the CMA chief executive Stella Kilonzo said in a statement that the seven-day suspension period is expected to ensure that investor confidence in the capital markets is sustained, to give the CMC Holdings’ directors an opportunity to resolve the outstanding issues, and facilitate investigations by CMA of allegations relating to CMC Holdings’ conduct of its affairs within the ambit of CMA.

"As part of its mandate of protecting the interests of shareholders in CMC Holdings Limited, the Capital Markets Authority has suspended the trading of the listed CMC Holdings Ltd shares at the Nairobi Stock Exchange for a period of seven trading days with effect from today," said the statement.

The directive comes two days after the boardroom wrangles at CMC Holdings spiraled out of control. The current Chief Executive, William Lay, fired the first salvo, saying two directors had been fleecing CMC Holdings of millions of shillings and stashing the loot in a foreign account in UK’s island of Jersey.

One account, which the company has managed to unearth through an internal audit, has a balance of over Sh240 million.

According to Lay, the ousted chairman Peter Muthoka was accused of having a conflict of interest, and receiving irregular payments totalling close to Sh2 billion over the past five years. Lay said that an audit of the company’s operations showed that the ousted Muthoka used his company — Andy Freight Forwarders — to offer logistics services to CMC Motors, and then went ahead to overcharge the company.

According to the CMC management, it was wrong for Muthoka to serve as chairman and handle the firm’s supply chain. Andy Forwarders is one of the biggest buyers of the CMC’s heavy commercial trucks, including Iveco and Nissan Diesel (UD) brands, which it uses for its logistics business.

Lay accused Andy Forwarders of inflating freight costs to CMC by between 10 and 30 per cent – reducing the motor dealer’s competitiveness in Kenya’s price-sensitive market. Over the last 12 months, CMC paid Sh1.1 billion to Andy Freight for logistics services.

CMC ousted Muthoka last week, and replaced him with Joel Kibe. Meanwhile, Andy Forwarders has denied the allegations, and said it may take legal action against CMC. Muthoka has also dismissed the allegations as "utterly inaccurate and not based on fact".