Companies

Safaricom sacks 58 employees for engaging in fraud

scom house

Safaricom House, Nairobi. The telco sacked 58 employees suspected of involvement in fraudulent activities in the year ended March. PHOTO | FILE

Telecoms operator Safaricom sacked 58 employees suspected of involvement in fraudulent activities in the year ended March, two more than the 56 it sent home the previous year.

The number of employees suspected of crime rose despite the drop by two thirds in the total number of financial crimes committed by employees during the same period.

Safaricom, which is Kenya’s most profitable company, said it investigated 29 fraud cases in the year under review down from 89 the previous year and forwarded four to the police for public prosecution. The cases covered various types of frauds, including asset misappropriation, fraudulent expense claims and corruption cases.

“Disciplinary action was taken against all staff involved in misconduct and some cases were forwarded to the law enforcement authorities, leading to prosecution,” the telecoms firm said in its annual report.

This means that for every fraudulent incident the company fired two people compared to the previous year when the ratio was less than one firing for each fraudulent activity.

The new trend points to rising collusion among employees to commit crime in a tighter working environment that needs networking to commit a crime.

Safaricom, which is East Africa’s largest company by asset base, also gave disciplinary warnings to 13 employees.

The telecoms giant last year cemented its anti-corruption stand with the termination of a multi-million dollar tender it had awarded the Lebanese company Mobinets SAL, citing bribery of its staff in the allocation of the contract.

Mobinets had been contracted to supply, install and maintain a system to manage network planning, configuration tools, inventory and work flow but lost it after it was accused of colluding with Safaricom employees to win the tender.

READ: Safaricom cancels tender in staff bribery claim

ALSO READ: Lebanese firm sues to stop Safaricom cancelling deal

Safaricom requires all its employees to undergo ethics training at least once a year, focusing on anti-corruption and bribery initiatives. The company has in the past three years consistently reported employee fraud and actions taken, with last year’s dismissals taking the total to 169 employees in three years, 39 of which were forwarded to the police for criminal prosecution.

Other institutions such as KCB have followed suit with consistent reporting of fraud and actions taken against employees involved. KCB last year reported that it had sacked about 90 employees suspected of engaging fraudulent activities in the 2013-2014 financial year.

Early this year, CIC Insurance reported that it had dismissed eight managers suspected of involvement in fraudulent activities.

READ: CIC sacks eight managers over fraud claims

Corporate silence

Safaricom and KCB are, however, the only companies that have incorporated fraud reporting in their financial statements. Most companies have preferred to remain silent on economic crimes fearing the damage that such reports may cause their brands especially those operating in sensitive areas such as financial services.

The Kenya Bankers Association (KBA) had announced plans to create a database for fraudulent bank employees but this is yet to happen. The creation of such a database would, however, come with legal landmines for the companies whose former employees are declared innocent by the courts of law.

Last year, international audit firm Ernst and Young rated Kenya’s private sector among the most corrupt in the world. The survey conducted in 59 countries ranked Kenya behind Egypt, Nigeria and Namibia as economies where private sector corruption is most pervasive and distorting of tender award processes.

More than a quarter or 27 per cent of the chief executives, financial controllers and internal auditors surveyed in Kenya cited high levels of fraud in their companies — only lower than 44 per cent in Egypt, 30 per cent in Nigeria and 28 per cent in Namibia.

EY in its survey did not determine the amount of money paid out in bribes or lost in fraud, arguing that it was futile to ask because of rampant understating.

It is, however, estimated that companies lose between seven and eight per cent of their revenues to corruption, translating to loss of millions of jobs every year.

Asset misappropriation and accounting fraud were identified as the vices that afflict companies the most.

In May this year Haco Tiger Brands fired its managing director for falsifying accounts but opted not to press any legal charges, arguing that there was nothing criminal about their action but rather procedural mistakes. The management was said to have cooked their books in efforts to show they had achieved their targets, earning them a bonus.

READ: Haco Tiger Brands MD accused of profit manipulation

Companies that have in the recent past battled with accusations of cooking their books include sugar miller Mumias, Dubai Bank Kenya and family-owned retail chain Tuskys Supermarkets, painting a gloomy picture of the state of corporate governance in Kenya.

Surveys have found that corrupt practices are mainly driven by middle-level managers, especially men aged between 35 and 45. This means that if they survive and rise to top management level they do not have authority to tackle the practices.