Economy

Sh306m State pyrethrum plant idle 15 years since purchase

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The Pyrethrum Regulatory Authority. FILE PHOTO | NMG

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Summary

  • The State-owned Pyrethrum Processing Company of Kenya (PPCK) is on the spot after a Sh305.8 million processing plant it purchased 15 years ago remained idle.
  • Auditor-General Nancy Gathungu says Pyrethrum Processing Company of Kenya purchased and installed an extraction plant worth Sh305,872,000 in 2006 but which has never been commissioned.
  • She warned that technological changes and wear and tear are bound to affect the idle machines adversely and may result in the loss of taxpayers’ funds.

The State-owned Pyrethrum Processing Company of Kenya (PPCK) is on the spot after a Sh305.8 million processing plant it purchased 15 years ago remained idle.

Auditor-General Nancy Gathungu says Pyrethrum Processing Company of Kenya purchased and installed an extraction plant worth Sh305,872,000 in 2006 but which has never been commissioned.

She warned that technological changes and wear and tear are bound to affect the idle machines adversely and may result in the loss of taxpayers’ funds.

“Although the management has explained that the machine was purchased in anticipation of an increase in flower deliveries and that the plant will be commissioned in future once the industry is revived, no evidence has been presented for audit to show the steps taken to revive the industry,” Ms Gathungu said in a report tabled in Parliament.

Consequently, Ms Gathungu said she was unable to confirm whether Kenyans got value for money on the purchase.

Ms Gathungu further raised the red flag over the financial performance of the company after posting a Sh225.9 million loss in the year to June 2019.

The company’s statement of financial position reflects total current assets of Sh376,039,000 against total current liabilities of Sh857,385,000 resulting in a negative working capital of Sh481,346,000 as at June 30, 2019.

“The company is, therefore, technically insolvent and its continued existence is dependent upon the financial support of the government and its creditors.

“This material uncertainty that casts doubts on the company’s ability to continue as a going concern has, however, not been disclosed in the financial statements by the management,” Ms Gathungu said.

The auditor also questioned the legal status of the broke company which uses three different names in its operations.

Ms Gathungu said the company uses the name Pyrethrum Processing Company of Kenya in the financial statements, Pyrethrum Regulatory Authority in bank statements and Pyrethrum & Other Industrial Crops Company in the payment vouchers.

The auditor said according to paragraph 3 of the transition provisions of the Agriculture Food Authority Act, 2013, the regulatory part of the defunct Pyrethrum Regulatory Authority would be Pyrethrum & Other Industrial Crops Company under the Agriculture Food Authority.

The Agriculture Food Authority Act, 2013, require that the commercial function transforms into a company to be registered under the Companies Act.

“It is not clear how the management chose to operate under the name Pyrethrum Processing Company of Kenya which was registered in August, 1963 instead of registering the company under the Companies Act, 2015 as required under the new legislative framework,” Ms Gathungu said in a disclaimer opinion of the company’s books of accounts.