Supplier to be quizzed over National Cereals and Produce Board debt

Erad Supplies and General Contracts Limited offices in Muthangari, Nairobi. [Photo: Evans Habil/Standard]

By Isaiah Lucheli

Kenya: Directors of a firm seeking to auction NCPB assets will today face a parliamentary team investigating the controversial Sh500 million debt that threatens to wipe out the strategic national grain reserve.

Officials of Erad Supplies, a contracted grain supplier, will be questioned about the genesis of the contentious Sh500 million court award against the National Cereals and Produce Board (NCPB).

Members of Parliament’s Public Investment Committee (PIC) will ask Mr Jacob Juma, a director of the firm, hard questions, ranging from bribery allegations and claims of official patronage.

Juma was however in confident mood when interviewed at the weekend: “We are not out to cripple the board. What we are seeking is to recover our money as businessmen and if selling the NCPB’s silos and land is the only way to get back our money so be it.”

MPs will press the firm’s representatives for the circumstances under which they secured the compensation yet they never supplied any grain to NCPB.

The other directors are Major (Rtd) John Waluke, who once unsuccessfully contested the Sirisia parliamentary seat, and Grace Wakhungu, a sister of former Vice President Moody Awori.

Juma is expected to address claims that he bribed the arbitrator in order to influence the award against heavily indebted NCPB that were raised before PIC last week.

It was claimed at the PIC hearing that former Deputy Chief Justice Nancy Barasa, who acted for Erad, had threatened a lawyer representing NCPB.

The allegations were made in a letter tabled before the committee that claimed Erad Suppliers had powerful patrons in government.

Agriculture Principal Secretary (PS) Romano Kiome read out contents of the letter allegedly written by one Brian Yongo, who wanted Juma investigated for securing favours by dropping names of powerful figures.

It named Treasury PS Joseph Kinyua, Cabinet Secretary Francis Kimemia and Inspector General of Police David Kimaiyo as among Juma’s close friends.

MPs however asked authorities to investigate the authenticity and credibility of the letter that linked powerful people in government to the saga.

Sh778 million award

The freezing of accounts and the order to attach property over breach of contract followed numerous suits and counter suits that have been heard three times by the Appeal Court, twice by the High Court and once by an arbitrator.

It all started in August 2004 when Erad was awarded a Sh778 million tender to supply 40,000 metric tons of maize at Sh19, 465 per metric ton on condition that it provided a performance bond of 10 per cent of the quantity.

But Treasury terminated the contract for imports and the funds were channeled to purchase maize locally.

In an interview with The Standard at Erad’s offices in Muthangari, Juma conceded that the company had not supplied any maize to the board.

He however blamed Treasury and the former ministries of Special Programmes and Agriculture for the NCPB woes.

Juma explained that they had sued the board for breach of contract. He said they had purchased maize in South Africa and stored it there as they awaited a letter of credit from the government before shipment but the letter was never issued.

“The government breached the contract when it failed to issue Erad with a letter of credit and went ahead to terminate the contract despite the company having issued a performance bond of Sh73 million and purchased the maize,” he said.

On corruption allegations, Juma explained that the former DJC had acted for the company briefly adding that the bribery allegations were not true.

He termed the claims as some of the lies government officials were peddling to cover up for their mistakes.

Breached contract

“The arbitrator that the NCPB and Erad settled on was agreed mutually among the parties in line with the terms of the contract between the two organisations. After the contract was breached, which state officers acknowledge was wrong, we went for arbitration as required,” said Juma.

Juma explained that after the government breached the contract Erad wrote to NCPB warning that they risked being sued to which the government asked Erad solve the matter through arbitration which was done and the amount of Sh4,100 per metric ton was agreed upon.

“We demanded for storage charges because we had purchased the maize and it was being stored in South Africa and when the government failed to provide a letter of credit we were unable to ship the maize which led to us losing our money,” he said.

The director explained that if the board’s assets are sold the Permanent Secretaries (PSs) of the then ministries of Finance, Agriculture and Special Programmes should be held accountable.

“If the assets of the board are sold for us to recover the money it would be extremely catastrophic. A country without food security is a time bomb. The government should come to the rescue of the board because the PSs flouted the law,” he said.

He added that the matter would have been resolved amicably had the Agriculture PS Romano Kiome accepted attempts by Erad to hold discussions with the company on the way forward over the dispute but he declined.

18 judges

He claimed there was a plot by government officials to frustrate Erad and explained that one of the companies which won the contract was given a letter of credit but never delivered whereas Erad was denied.

Juma explained that the matter had been heard by 18 judges of the High Court, Court of Appeal and Supreme Court and all the judges had ruled in favour of the company.

The staggering debt of Sh500 million can be traced way back to 2004/2005 drought that hit the country.

At the time, the ravaging hunger was declared a national disaster as the country had a shortage of over six million bags of maize. The ministry of Agriculture then instructed NCPB to purchase 2 million bags of maize for famine relief and strategic grain reserve.