It beats logic for a cash-strained entity to continue stockpiling idle equipment that only locks up more cash that would have been used on other more pressing needs.
Last year, Kenya Power was compelled to charge the loss of value from the non-moving inventory to its income statement.
The ongoing audit by the State should strive to get to the bottom of the procurement scandal at Kenya Power and those found culpable of misconduct punished.
The financial rot at Kenya Power is gradually being laid bare following an ongoing audit of the utility firm’s operations.
An inventory has, for example, revealed that Kenya Power holds about Sh9.8 billion in deadstock, including items such as cables, meters, and transformers that have been sitting in the warehouses for more than five years.
This is shocking especially for a firm that is facing a deepening liquidity crunch on piling debt. It beats logic for a cash-strained entity to continue stockpiling idle equipment that only locks up more cash that would have been used on other more pressing needs.
Having too much dead stock is harmful to a business in several ways. Besides locking capital, it leaves a firm with unnecessary storage costs and security risks that cumulatively eat into the income statement.
It is worth pointing out that last year, Kenya Power was compelled to charge the loss of value from the non-moving inventory to its income statement and this partly contributed to the company posting a historic Sh7 billion loss for the 2020 financial year.
It is therefore disturbing that procurement teams at Kenya Power chose to turn a blind eye to these facts and went on a spending spree for ‘unwanted items’.
This could point to weak procurement and planning systems or blatant acts of fraud by some unscrupulous individuals who may have cut deals with suppliers to siphon cash from the utility firm.
It begs the question why would one continue piling up costly equipment that the company had no use for.
The ongoing audit by the State should strive to get to the bottom of the procurement scandal at Kenya Power and those found culpable of misconduct punished.
The management should in the meantime suspend any new purchases of equipment and focus on utilising or disposing of the existing stocks to generate revenue and stop incurring further unnecessary storage costs.
As a long-term measure, the procurement and inventory systems of the utility firm should be reviewed to ensure efficiency in planning and expenditure. Kenya Power is an important entity that should not be left in the hands of cartels.
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