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Denmark cuts aid to KAM after 'fraud' in Sh39 million project

Business
 The Kenya Association of Manufacturers (KAM) head office in Westlands, Nairobi. [Jenipher Wachie, Standard]

Denmark has suspended direct aid to the Kenya Association of Manufacturers (KAM) amid concern over corruption at the lobby group.

The Danish government said it will no longer support KAM after irregularities were established in relation to a multimillion Denmark-backed project being implemented by KAM in Kenya was established.

The Danish Ministry of Foreign Affairs said it had supported KAM through its own lobby Danish Industry to the tune of Sh39.1 million (DKK 1,900,748) through 2020-2021.

However, it said the 2020 and 2021 local project audits of KAM were falsified as discovered by its auditor during an annual audit.

"The falsified accounts were supposedly audited by Ernest & Young Kenya, who have confirmed that they have not audited the account," said the Danish Government in a statement seen by The Standard dated June 6, this year.

The Confederation of Danish Industry or DI is Denmark's largest business and employers' organisation.

DI's members are 18,000 private enterprises in the manufacturing and services industry, from virtually all sub-sectors.

 Danish Ambassador to Kenya Ole Thonke during a past interview in Gigiri, Nairobi. [David Gichuru, Standard]

Following the discovery, the Danish government said KAM initiated a forensic audit using an independent unnamed local audit firm which "confirmed the irregularities."

"The forensic audit report indicated fraud of approximately DKK 145,000 (Sh2.98 million) committed by a former member of the administration," it said without divulging additional details.

"All funds unaccounted for will be returned by KAM to DI. The fraud has also been reported to the police."

The Danish Government further said KAM will undergo a new audit regarding allocated funds for the period of 2020, 2021 and 2022.

"The audit will be performed by DI's auditor. The partnership has been suspended, and KAM has been informed not to use SPA funds until further notice," it said.

It said KAM has agreed to "strengthen financial management procedures and controls" after the scam was exposed.

"A follow-up report will be forwarded when there are further developments in the case," it added.

The Standard could not immediately reach the Danish Government or KAM for additional details by press time.

KAM is one of the most influential business lobbies in the country and draws support from leading businesses across various sectors of the economy.

 The Danish Ministry of Foreign Affairs supported KAM through Danish Industry to the tune of Sh39.1 million through 2020-2021. [iStockphoto]

"We are the representative body of manufacturing and value-add industries in Kenya," says KAM on its website.

"Established in 1959, we have evolved into a dynamic, vibrant, credible and respected business association that unites industrialists and offers a common voice for businesses."

KAM says on its website it received Sh104.3 million last year in grant income from unnamed donors.

This was less Sh3 million than the Sh107.4 million received a year earlier (2021) from the unnamed donors, it says on the website.

The lobby lists its key roles including representing member interests to influence government on policy and legislation such as tax regime and budget process as well as networking and market linkages.

"In addition to increasing its membership base, KAM's other sustainability strategy has been to maintain current donor partners while seeking engagement with new ones to support projects that benefit our members, through funding," it says on its website.

"This is achieved through the promotion of trade and investment, upholding standards, encouraging the formulation, enactment and administration of sound policies that facilitate a competitive business environment."

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