Sh305m pyrethrum plant lying idle 17 years after it was installed

Auditor General Nancy Gathungu has raised concerns over the poor management and utilisation of Sh5.5 billion assets belonging to the Pyrethrum Processing Company of Kenya.

Ms Gathungu, in a report released earlier this week, indicated that the state corporation is likely to lose a Sh305 million pyrethrin extraction plant procured 17 years ago but lies idle.

“The extraction plant purchased and installed in 2006 at a cost of Sh305,872,000 has never been commissioned. Technological changes and wear and tear are bound to adversely affect the idle machine and may result in the loss of funds invested in the asset,” said Gathungu.

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The machine, which can crush up to 50 tonnes of pyrethrum per day, was bought in anticipation of an increase in flower deliveries to the factory but the sector collapsed after farmers uprooted the crop.

It was until 2018 that pyrethrum-growing counties embarked on reviving the sector by providing free seedlings to farmers, but the production has remained low.

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In 2020, the company announced plans to procure another lesser-capacity machine valued at Sh70 million due to low production.

The report further reveals that the Pyrethrum Processing Company of Kenya (PPCK) does not have legal ownership documents for its parcels of land worth over Sh350 million.

“Examination of records revealed unsatisfactory matters, including 18 parcels of land valued at Sh354,340,000 which are not registered in the company’s name,” said Ms Gathungu.

The Auditor General has also raised issue with the utilisation of the parcels by other parties without proper documentation on the leases.

“35-acre Mawingu farm in Nyandarua is leased out to the Agricultural Food Authority (AFA). Documents indicating the terms of the lease were not provided for audit verification,” she said.

Ms Gathungu also raised queries over the management of the company’s Sh640 million rental houses and offices which are in a bad state despite occupation by paying tenants.

“The company has rental houses and offices valued at Sh640,747,000; however, physical verification revealed that the properties are in dilapidated condition,” she said.

Tenants occupying the houses pay a fraction of the rent similar private houses in the same neighborhoods charge.

The Auditor General has also raised concerns about the accuracy of Sh222.9 million payments made to farmers before the delivery of flowers and whether the amount would actually be recovered.

Ms Gathungu said that although the management attributed the increase to advances paid to farmers before delivering their products, it lacks a documented credit policy to manage the debts.

“The company is also owed Sh118.3 million by debtors, including rent arrears of Sh29.1 million that have been outstanding for more than a year with no effort to recover them,” the report read.

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She disclosed that the firm has a debt of Sh1.3 billion, exposing it to litigation and increased cost of penalties and interest.

“This includes long outstanding unremitted PAYE deductions of Sh155,727,146 and other salary clearances of Sh13.2 million. Unremitted PAYE continues attracting interest and penalties," she said.

Ms Gathungu faulted the company for non-compliance with the National Cohesion and Integration Act, 2008 which stipulates that no public entity shall have more than one-third of its staff hailing from the same
ethnic community. 

“A review of the company employees’ ethnic composition revealed that a single ethnic community had a 38 percent representation, hence breach of the law,” she added.