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Harambee Sacco sinks into Sh145m annual loss

A front view of Harambee Plaza in Nairobi. FILE PHOTO | NMG
A front view of Harambee Plaza in Nairobi. FILE PHOTO | NMG 

Troubled Harambee Sacco’s management is expected to face intense shareholder scrutiny after it reported that a steep rise in costs pushed it into loss-making in 2017.

The queries are expected to specifically arise from the fact the sacco, Kenya’s third largest deposit-taking savings society, announced a cumulative Sh247.4 million dividend payout despite making a Sh145 million loss.

Harambee, which is expected to hold its annual general meeting next Wednesday, April 25, reported a Sh125 million after-tax profit the previous year.

The performance belies the fact that the giant sacco’s deficit before tax rose to Sh1.39 billion in 2017 compared to Sh197.2 million surplus before taxation in 2016.

The sacco’s interest income rose 20.99 per cent to Sh1.88 billion, while its loan book grew 7.68 per cent or Sh104.4 million last year to stand at Sh14.6 billion in the period under review.

Harambee’s membership stood at about 92,000 at the end of 2017, most of them current and former civil servants.

The Sacco Societies Regulatory Authority (Sasra), the sector regulator, warned in its report for the period ending December 31, 2016 that many deposit-taking saccos were paying out most of their surpluses (as dividends on shares or interests on deposits), rather than retaining the same to build capital.

The report raised concern that most saccos may be using whatever cash is available to pay out dividends — even in the face of apparent insolvency — to lure new membership rather than invest in the business.

Liquidity crisis

Harambee has several times found itself in the cross-hairs of the saccos regulator.

In 2012, a Sasra inspection found that the sacco was in an acute liquidity crisis having failed to meet nearly all prudential parameters.

The sacco had negative core capital and had material variances between the outstanding loan portfolio reports and provisions for loan losses.

Early this month trouble was once again brewing at Harambee after some suspended members moved to the Cooperative Tribunal accusing directors of planning to block their participation in board elections to challenge the incumbents. The nine suspended delegates sought a reversal of the suspension on grounds that it was meant to stop them from vying for elective posts at the annual general meeting.

The society’s management, however, denied the allegations, arguing that the delegates were suspended for, among others, storming the acting chief executive officer’s office and causing disturbances.

But the suspended members insisted they only visited the office of the CEO on January 10 to seek clarification over an alleged loss of Sh2.9 million cheques.

They said they were particularly targeting the sacco secretary Charles Konzolo and treasurer Meshack Odero Nyangute, who signed the lost cheques.

“The sole intent of the respondent to suspend the applicants for purported transgressions alleged to have been committed more than two months ago smacks of malice, bad faith, spite, contempt and is mere charade meant to shield the two impugned officials (Mr Konzolo and Mr Nyangute) from facing competition in the yet to be announced AGM,” the suspended members said in their application.

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