Pressure on Kakuzi as more European firms cut orders

The fallout from human rights abuse claims against Kakuzi #ticker:KUKZ escalated this week after two more large European supermarket chains, Sainsbury’s and Lidl, suspended supplies by the Murang’a-based agricultural firm.

UK’s Sainsbury’s and Germany’s discount grocer Lidl confirmed in emailed responses to the Business Daily that they had suspended any dealings with Kakuzi pending investigations into the allegations.

“Sainsbury’s will not accept further produce from Kakuzi until we are satisfied that the robust action plan in place addresses the issues that have been raised,” Sainsbury’s Corporate and Financial Communications Manager, Sophie Praill, said in an e-mailed comment to Business Daily.

Separately, Lidl said it had frozen orders for supplies by Kakuzi until the claims of rights abuses are investigated.

“We have temporarily suspended supply from this business whilst an investigation takes place,” said Lidl.

“At Lidl GB, we operate with a fundamental respect for the rights of the people we interact with, whether they be our own direct employees, contract workers or people employed throughout our supply chains, and are firmly opposed to all forms of labour exploitation,” Lidl added in its statement.

The actions by Sainsbury’s and Lidl came barely a week after Britain’s largest supermarket, Tesco, temporarily dropped Kakuzi as its supplier of avocados pending investigations.

“Any form of human rights abuse in our supply chain is unacceptable. We have been working closely with the Ethical Trading Initiative (ETI), alongside other ETI members, to investigate this issue and ensure measures have been taken to protect workers,” Tesco said.

Kakuzi said it was engaging the affected retailers and was optimistic of addressing all concerns raised.

“Regarding the issue of suspended trading with a UK supermarket, we are specifically engaging with the Ethical Trading Initiative, with a view to addressing all the concerns. This is to be done through a mutually agreed process,” said Kakuzi.

A prolonged suspension of orders by the retailers could have an adverse impact on Kakuzi’s operations—factoring their wide footprint.

As of March 9, 2019, there were 1,428 Sainsbury’s grocery stores in the UK, 820 of which were convenience stores. Lidl operates in 32 countries worldwide and offers food and non-food products in around 11,200 stores in 29 countries.

Tesco on the other hand operates over 3,961 grocery stores in the UK and Ireland, including franchise stores.

The Nairobi Securities Exchange(NSE) listed Kakuzi has been sued in the UK for alleged human rights abuses on its vast Kenyan plantations, exposing the company to the risk of hefty fines and reparations to the victims.

Through its Kent-based parent Camellia Plc, the company has been sued over allegations of assault and sexual misconduct allegedly conducted by employees. The UK-listed company Camellia owns 50.7 percent of Kakuzi.

Law firm Leigh Day said that 79 Kenyans had launched a legal claim in the High Court in London against Camellia for alleged human rights abuses by security guards employed by Kakuzi, its Kenyan subsidiary.

Camellia employs 78,000 people worldwide and says it is the largest avocado producer in Kenya, which according to the International Trade Centre is Africa’s biggest avocado exporter. Camellia’s operations in Africa include Kakuzi, Eastern Produce Kenya, Eastern Produce Malawi, Eastern Produce Cape (South Africa) and Eastern Produce Tanzania.

The allegations, dating from 2009 to January this year, include rapes, attacks on local villagers and a man being beaten to death, Leigh Day said.

Kakuzi, however, has rejected the claims made by Leigh Day, saying it did not “condone any criminal activities or behaviour by any of its employees”.

“In the case of the tragic death of the young man highlighted in the article the matter was reported to the relevant authorities and investigations are ongoing. Kakuzi has settled with the deceased’s legal representatives as appointed by the Kenyan courts on the civil matter,” Kakuzi said earlier in a statement. The company said it had urged the Office of the Director of Public Prosecutions (ODPP) to investigate the allegations and “take actions in accordance with the law”.

The firm’s profit after tax for the half year to June this year jumped 11.1 percent to Sh272.8 million compared to Sh245.5 million for the same period last year.