Unending twists and turns in KPCU revival effort

By John Oyuke

When police recently intercepted a lorry loaded with scrap metal leaving Kenya Planters’ Cooperative Union (KPCU) premises in Nairobi, the incident not only exposed massive looting but also the deep hole the once proud organisation has fallen into.

The metal that was vandalised from the firm registered in 1937 to provide farm inputs and extension services to farmers, came from the machines the Cooperative Development and Marketing minister, Joseph Nyagah, has been urging farmers to buy as part of the revival of the once powerful coffee farmers’ union.

Among other assets that have been reported looted include 12 computers from the Dandora plant believed to contain crucial information. There are also reports that more than 100,000 gunny bags worth about Sh1.3 million have disappeared from the stores.

The union was placed under receivership by Kenya Commercial Bank (KCB) after it failed to meet obligations to creditors and suppliers. The debt was about Sh700 million when it was put under receivership in October 2009.

Heavy indebtedness

According to Nyagah, crisis at KPCU was precipitated by factors, which include gross mismanagement, failure to respond to effects of liberalisation, taking undue advantage of dual registration to evade accountability and heavy indebtedness.

He said at the time when it was being put under receivership, the lead creditor KCB was owed about Sh634 million, a sum which was not being serviced regularly, forcing the bank to step in to recover its debts.

Another major cause of the KPCU’s problems is traced to its dual registration — which a recent study by the European Union recommended to be changed to allow it to concentrate on milling and warehousing, and register other subsidiary companies with separate accounts to streamline management.

Kenya Planters Co-operative Union had dual registration as both a co-operative organisation and a limited company.

As a co-operative movement, it represented coffee farmers who are clustered into seven regions and elect the board of directors. It is also registered as a private limited company, limiting how far the government could interfere with its running.

dual registration

The Government has repeatedly tried to restructure the miller to safeguard coffee farmers’ interests but it has not been possible as the KPCU board deftly played the cards of its legal entity, whichever way it suited it.

Nyagah alluded to this dual registration while speaking in Parliament in December 2009, saying, the problem the ministry has had with KPCU is that when it is convenient to the directors, it becomes a co-operative society union or a company.

"In the last two years, efforts by the ministry and the Government to restructure it have been frustrated by directors who go to court claiming that theirs is a company. It is that impunity by the directors of having dual registration of this company that makes it difficult for us to move in," he told MPs.

"When you step in with an inquiry, as a Government, after we have spent a lot of money to save it, they refuse and hide in the High Court under the pretext that they are not a co-operative. That is what we have been trying to solve and that is why I keep thanking the Kenya Commercial Bank for having helped me," he said.

Nyagah who was responding a question from Igembe North MP Ntoitha M"Mithiaru observed that the miller at one time handled about 130,000 tonnes of coffee while when KCB took it to receivership it was handling about 3,000 to 4,000 tonners a year.

A Parliamentary committee recently recommended that Nyagah and Agriculture PS Romano Kiome be held responsible for the troubles at KPCU and also recommended that the Government approves a Sh1.2 billion bailout package for the union to enable the organisation to kick start its operations.

It said the package would also enable the miller implement a business plan that would focus on revival of the coffee industry and better earnings for farmers.

The committee claimed that millions of shillings had disappeared including illegal disposal or theft of the assets along with the running down of milling facilities and blamed laxity by the ministry, the Coffee Board of Kenya, KCB, and the KPCU itself for the plight facing the 750,000 members of the giant miller.

The committee on Agriculture, Livestock and Cooperatives also recommended that KCB be forced to pay for the losses incurred after receivers — Deloitte and TouchÈ — failed to turnaround the co-operative as was the agreement of the receivership.

Nyagah has, however, said the miller does not need a Sh1.2 billion bailout package as proposed by the  committee.

He said KPCU plans to sell and invest Sh3 billion worth of assets in order to clear a mounting debt of Sh656 million owed to KCB.

"We don’t need the government to pay our bills because we have assets to sell that can generate the money owed," he revealed.

"Coffee farmers have also discussed what we can do with our headquarters at Wakulima House which is empty and underutilised," he said last month.

He announced that farmers have also proposed to make a 54-acre plot in Dandora, Nairobi, into "a mega housing estate under the KPCU Housing Limited and KPCU Investments Company Ltd.