New debt crisis stalls Kenya Meat Commission operations
The Kenya Meat Commission abbatoir in Athi River. KMC has sought Parliament’s intervention last year to access Sh557 million from the government. FILE
What you need to know:
KMC had not settled invoices worth Sh220m from suppliers since October last year, according to its managing commissioner Ibarahim Issak.
The parastatal declared a profit of Sh51 million for the 2011/2 year, which was handed over to the Treasury and now wants an injection of Sh200 million from the exchequer.
The Kenya Meat Commission risks being wound up after the management admitted inability to pay suppliers, presenting the first challenge to Cabinet Secretary for Agriculture, Livestock and Fisheries Felix Kosgei.
KMC managing commissioner Ibrahim Issak told the Business Daily that the parastatal had not settled invoices worth Sh220 million from suppliers since October last year.
“I sympathise with our suppliers. But we have nothing to offer them,” said Dr Issak, blaming lack of allocations from the government for the cash flow problems.
The parastatal declared a profit of Sh51 million for the 2011/2 year, which was handed over to the Treasury and now wants an injection of Sh200 million from the exchequer.
The threat of liquidation looms large with one supplier, Gideon Morintat, threatening to file a winding up petition any time from tomorrow should KMC not come up with the modalities of paying more than Sh2.2 million it owes him.
“I have tried to talk to the commission and even the permanent secretary, but nothing has been forthcoming. I have now instructed my lawyer to carry on with legal proceedings against the commission,” said Morintat.
Correspondence seen by the Business Daily shows that Mr Morintat supplied 20 beef steers against an LPO in February to the Athi River depot. He was to be paid Sh887,686, equivalent to 40 per cent of the contract sum upon slaughter. The balance was to be paid 30 days later, but KMC has not paid him yet.
His first demand letter went unanswered while the follow up notice expires on Wednesday, leaving him at liberty to institute winding up proceedings.
During a tour of the KMC factory on Monday, Mr Kosgei was confronted by suppliers who were demanding payment. He said the management would come up with a plan to pay the suppliers within one month.
At the heart of the plans is an aggressive collection of more than Sh250 million owed to parastatals.
“We have called a meeting with the management committee to prepare a brief on options for payment on Wednesday next week,” Mr Kosgei told the Business Daily on phone later.
He said arrangements had been made with a local bank to pay suppliers, projecting that KMC would be profitable by the end of the year. “We are on top of things. The issues will be sorted out in the next two to three weeks,” he said.
During his recent vetting by the Appointments Committee of Parliament, Mr Kosgei had said KMC was not living up to its mandate because of mismanagement.
“That is one of the areas I will address within my first 100 days in office,” he said. He is among the 16 Cabinet secretaries sworn in.
Dr Issak attributed KMC’s financial straight-jacket to low government funding, banks loans and a stock uptake program during the 2011 drought ordered by former president Mwai Kibaki to cushion farmers from losses.
The government lent the corporation Sh500 million to buy livestock from farmers in drought-stricken areas. Dr Issak said the parastatal was still servicing the loan despite having made no money from the programme as most of the weak and emaciated livestock died while in holding grounds.
“We are operating at very low efficiency although we have the capacity to produce more,” said Mr Haji in an interview at the Athi River plant.
KMC was revived with a capital injection of Sh600 million from the government in 2003 and was in 2006 given another Sh5 billion to revamp operations. It now slaughters only 50 animals a day against a capacity of 300 because of lack of capital to purchase stock and frustration of suppliers.
Its employees, however, are not affected because they are paid directly by the ministry.
KMC serves a fraction of local market and exports meat to the Middle East, generating sales of about Sh35 million in a month. The government in the 2012/2013 budget allocated Sh8.6 billion to the ministry of livestock (now a department in the ministry of agriculture, livestock and fisheries).
The 2013/14 budget estimates indicates that the ministry will get Sh38.9 billion. Last month, the Inter-African Bureau for Animal Resources (Ibar) asked the ministry to reserve Sh12.9 billion to the department.
Last year, KMC sought Parliament’s intervention to access the Sh557 million reserved for construction of modern satellite abattoirs under the economic stimulus programme.
The Treasury had recalled the money in the last fiscal year. Livestock contributes Sh320 billion ($3.7 billion) per year to the national agricultural output.
