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Corporate

Karuturi financial storm leaves many jobless

Karuturi Flower Company’s woes might have started from one office, but the harsh financial times have spread to households of hundreds of Naivasha traders who eked a living out of the flower pickers and packers.

With no salary for months, most Karuturi workers have cut back on spending, leaving traders staring at dead stock and losses. The flower exporter’s huge debts have left sponsored students and a football club staring at a bleak future.

The worst hit are the traders whose tills were full when the flower exporter was doing brisk business.

“We used to register substantial sales a day when Karuturi workers were getting their dues on time but the story is no longer rosy. Some traders have closed down their stalls after months of slackened sales,” said Juliet Kanyi, a second-hand clothes seller.

Ms Kanyi was a regular trader at an informal market located outside the flower company’s premises who remembers the days they made good money.

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“On a good day, one would pocket between Sh10,000 and Sh12,000 in sales.”

But those were the years before Karuturi hit rock bottom.

In its more than 28 years of existence, the company was touted as a world-leading cut flower producer. Then known as Sher Agencies, it was a company on the rise.

In 1986, Sher had more than 4,000 workers. The company exported 600 million roses a year. A former employee and chief shop steward, Peter “Ford” Otieno, said the company had the highest number of employees and offered good pay compared to other flower farms.

“We were well remunerated with bonuses for extra hours worked. The employees had a reason to work hard.”

Production was good. An acre under the cultivation of roses used to produce 16,000 plants. “Each plant produced between 18 and 20 stems annually. Each acre used to bring more than Sh7 million a month, with 200 acres under cultivation,” said Mr Otieno.

With a huge production and steady market, business was at its peak, with the company leaving other upcoming flower farms struggling in its wake.

“Sher was one of the best managed farms in the country before it changed hands in 2008,” said Mr Otieno.

By then, the company cultivated more than 200 acres, but the number has reduced to less than 120 acres after the firm surrendered some acreage of land to a rival flower company.

But six years after changing its name to Karuturi, the flower exporter is reeling under huge debts and disgruntled employees who have gone months without pay.

The company’s fortunes took a turn in 2012 when the management failed to remit dues owed to suppliers. With essential supplies dwindling, production went down.

It is now under receivership, run by managers appointed by CfC Stanbic Bank. Its debts run into billions of shillings. It owes CfC Stanbic Bank and other creditors at least Sh400 million while the Kenya Revenue Authority is demanding Sh962 million in alleged tax evasion after the firm was found guilty of transfer mispricing.

The financial storm has spread through Naivasha, hitting the economy hard. Workers at the company have to operate on a shoe-string budget, sealing the fate of many small-scale traders who relied on the huge workforce for business.

“We have been assured of our pay, but we are yet to receive any cash,” one worker said.

Food kiosks owners near the flower company, who wholly depended on the hundreds of workers, are feeling the heat of the dwindling riches.

A butchery operator, Wilson Kimani says his sales have fallen to as low as 40 kilogrammes a day from 120 kilogrammes. “For eight months we have struggled to stay afloat, largely depending on workers from other smaller flower growing companies,” he said.

His meat business is slowly picking up, but his sales are nothing to write home about, he says.

The difficult financial times for Karuturi are also mirrored in a hospital that months ago was one of the best health facilities in Naivasha, but has now closed its doors.

Dr David Omega who was in charge of the hospital said they use to attend to an average of 150 patients a day. He says the hospital had the best facilities in the area only rivalled by the government-run Naivasha sub-county Hospital.

“We used to attend to patients from all corners of the vast district at subsidised rates. We had modern X-ray machines and could even conduct operations and do admissions,” he said.

After the financial crisis, the 45 medical workers were laid off before the hospital officially closed down. The beneficiaries of the hospital have now been forced to seek medical services elsewhere.

Dr Omega recalls the “goodies” that the flower company gave to its employees, including good healthcare. “At the time, there was little to complain about and that was reflected by the motivated workforce,” he said.

Dr Omega, who doubled as the chairman of the one-time famous Karuturi Football Club, talks of the once vibrant club which sent shivers down the spine of many opponents.

With experienced players like Harambee Stars custodian Noah Ayuko, Jacob Omondi and the youthful David Owino, who has since decamped to Gor Mahia where he is a household name, the team was a darling of many.

“We used to have a team that would complete for top honours as seen by the many years we survived in top flight football,” Dr Omega said. “Before I left the company, I used my personal resources to bankroll the team.”

Struggling

With Karuturi’s financial troubles, the team started struggling. It was relegated, forcing established players to decamp in search of greener pastures. What remains is a shell of once famous football team.

Karuturi was also sponsoring bright students. It was not immediately clear what happened to those who beneficiaries of the company’s education initiative.

Teachers at the Karuturi primary and secondary schools also went months without pay leading to poor national examinations results.

The Nakuru County Chamber of Commerce chairman Njuguna Kamau admits the company’s declining fortunes has impacted negatively in almost all the economic sectors.

“From where I sit, I can comfortably attest that the mismanagement that led to the near collapse of the company affected businesses across the board. The wave of decline cannot be overstated,” he told the Business Daily. Although the company is slowly gaining ground, it would take “a little bit of time” to get to where it used to be, Mr Kamau said.

“The receiver managers are doing a sterling job but a lot more needs to be done,” he said.

Mr Kamau said the company’s flower production has risen to almost a million stems per day up from 50,000 stems.

The dilapidated greenhouses have also been repaired. The company had maintained essential services like irrigation, a spraying department and the welfare department, with the move helping the troubled company stay afloat.

When contacted by the Business Daily, a manager at the firm said media coverage was “impacting negatively on the gains they had made.”

Mr Kamau said when the company was struggling, more than 16,000 people both in the formal and informal sector were affected.

For Naivasha traders, many are pondering on their next move. For the more than 2,300 employees, their fate hangs in the balance.

“We are upbeat about the new management and we hope they are going to turn things around,” said a worker.

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