State now lines up rescue plan for debt-ridden KPCU

The government is planning to bail out the Kenya Planters Co-operative Union (KPCU) following its placement under receivership by KCB Bank over a Sh700 million debt.

“We are going to adopt an Uchumi approach to turn around KPCU now that it is under receivership after previous efforts to restructure failed,” said Mr Joseph Nyagah, the Minister for Co-operative Development and Marketing.

In 2006, the government came to the rescue of retail chain Uchumi Supermarkets after it was placed under receivership by the KCB and PTA banks

The action on KPCU follows a protracted battle between the government, which has been trying to restructure it to safeguard coffee farmers’ interest and KPCU board and management which have resisted such efforts, saying it was a private limited company.

Part of KPCU’S woes come from its dual registration as both a co-operative organisation and a limited company.

As a co-operative movement, it represents 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 can interfere with its running.

The government has repeatedly tried to restructure the once giant coffee miller but it has not been possible as the board has deftly played the cards of its legal entity, whichever way it suited it.

“Every time we want to move in and restructure the miller for the benefit of farmers, the directors have always flashed the private company card hence limiting our efforts,” said Mr Nyagah.

The giant miller, which was a near monopoly in coffee processing— handling over 80 per cent of coffee farmers —is now a shadow of its former self, doing a mere 14 per cent.

KCB’s action follows failure by the KPCU management to remit a monthly payment of Sh7.8 million.

The government’s preference for the now successful Uchumi rescue programme is informed by the steady progress being made by Uchumi supermarkets in repaying its loan to both KCB bank and the PTA bank.

The latter is a regional bank that at the same time replenishes Uchumi store shelves.

Uchumi failure was blamed on a rapid expansion strategy that quickly used up financial resources to pay for brick and mortar branches, denying the store chain liquid cash to stock its new shelves.

When KCB and PTA bank as debenture creditors moved in and placed the Kenyan owned quoted store under receivership, the government, which is the main shareholder through the Ministry of Industry cobbled up a rescue plan which included pumping in fresh cash amounting to Sh800 million to allow the store to stock.