Kenya’s pioneer business process outsourcing (BPO) firm KenCall is facing liquidation for failing to pay creditors — putting more than 600 jobs on the line.
Insight Management Consultants, a human resource (HR) services firm, has moved to court seeking orders to wind up KenCall over a Sh6 million debt that has not been paid since last year.
“We have instructions from our client to proceed with the winding-up petition to recover the said sums, including interest,” Jaoko Alexander, a partner at Nchoe, Jaoko & Co. Advocates told the Business Daily.
KenCall, he said, had not paid Insight Management despite several demand letters.
The winding-up petition shows that KenCall, a company associated with its founder and long-serving chief executive Nicholas Nesbitt, is in deep financial trouble and finding difficulty paying debts.
Insight Management’s winding up petition, which was filed on November 5 at the High Court in Nairobi, is set for hearing on December 19.
Mr Jaoko said other interested parties, including creditors, could join the case in due course. He declined to disclose the circumstances under which KenCall incurred the Sh6 million debt.
Besides HR consultancy, Insight also offers BPO services, making it a direct competitor to KenCall and opening the possibility that the two firms had a subcontracting agreement.
Insight’s BPO services include accounting, book keeping and contact centre services, which it says are provided for a fee. Mr Nesbitt, who has since left the firm for employment as the chief executive of US technology giant IBM, did not respond to our queries.
The winding-up petition is expected to force KenCall to pay its debts or face liquidation, potentially rendering hundreds of workers jobless.
KenCall says on its website that it has over 600 full-time employees, most of them university graduates.
“Our goal is to get paid otherwise we will lift the corporate veil and go after the directors,” Mr Jaoko said.
KenCall’s troubles are being seen as reflecting the challenges Kenyan BPO firms are facing in the wake of increased competition from transnational rivals and a steep decline in demand for outsourcing in the local market.
“There is little business in the BPO sector, which is in general distress with the exception of a few companies,” said Gilda Odera, the former CEO of Skyweb Technlogies, a BPO.
BPOs’ sales pitch has been that they can help companies cut costs by taking over a combination of their functions such as customer care, accounting and marketing.
This has the additional benefit of allowing firms to focus on their core business.
KenCall’s financial troubles coincided with the exit of Mr Nesbitt who quit in April last year and took up an appointment as a director of Commercial Bank of Africa (CBA), a privately owned bank.
IBM appointed Mr Nesbitt as the head of its East Africa operations four months later.
Sources familiar with the IBM appointment told Business Daily that Mr Nesbitt was forced to sell his stake in KenCall prior to joining the American multinational.
He previously owned a major stake in the BPO alongside his brother Eric Nesbitt.
Nick’s exit came after KenCall suffered a reputation crisis over its alleged contracting by the Independent Electoral and Boundaries Commission (IEBC) and President Uhuru Kenyatta’s campaign team during last year’s General Election.
Opposition Cord coalition accused KenCall of conflict of interest but the Supreme Court, which upheld Mr Kenyatta’s election, rejected the evidence.
KenCall’s troubles signal the rising dominance of multinationals that are leveraging on bigger financial, technical and financial muscles to edge out local outsourcing firms.
Accenture, IBM, Payment Solutions, SPANCO, Tata, and Tech Mahindra are some of the foreign firms that have won outsourcing contracts from the Kenya government and local multinationals worth millions of shillings.
The Kenya Revenue Authority’s (KRA) online tax system iTax, for instance, is being run by Tata Consultancy Services, a division of the Indian conglomerate Tata.
The entry of outsourcing heavyweights in large public tenders has forced local firms to rely heavily on foreign contracts, most of which are short-term.
Corporate Kenya is yet to adopt outsourcing on a large scale, with some of the largest firms including Safaricom opting to set up their in-house call centres to support customer care and marketing activities.
Fear of data leakages has also inhibited the growth of outsourcing, especially among banks and other financial services companies to whom customer confidentiality is critical.