Economy

Sh6.3bn paid to non-existent fertiliser firm

firm

Farmers load subsidised fertiliser onto trucks at the National Cereals and Produce Board depot in Eldoret. PHOTO | JARED NYATAYA | NMG

jameskariuki-img

Summary

  • Auditor-General Edward Ouko said the money, wired out to the collapsed Ken-Ren Chemical and Fertiliser in recent years, include Sh5.4 billion for principal repayment and Sh887 million covered interest.
  • Kenya has been paying the money to a phantom firm to avoid negative credit rating that could injure its reputation and lock it out of international debt markets.
  • An adverse opinion refers to misrepresentation and misstatement in book-keeping meaning a true picture of the accounts was not presented.
  • The payment comes as Kenya targets to start manufacturing fertiliser in 2020 once it has an active oil production industry.

Taxpayers coughed up Sh6.3 billion for a non-existent fertiliser plant mooted in the 1970s, a State audit report shows.

Auditor-General Edward Ouko said the money, wired out to the collapsed Ken-Ren Chemical and Fertiliser in recent years, include Sh5.4 billion for principal repayment and Sh887 million covered interest.

Kenya has been paying the money to a phantom firm to avoid negative credit rating that could injure its reputation and lock it out of international debt markets.

“It is a matter of concern that a total of Sh6.3 billion was incurred on a project which did not take off and against which no value for money was achieved,” Mr Ouko states in adverse opinion on the public for year to June 2016.   

An adverse opinion refers to misrepresentation and misstatement in book-keeping meaning a true picture of the accounts was not presented. The payment comes as Kenya targets to start manufacturing fertiliser in 2020 once it has an active oil production industry. Kenya is seeking to develop oil reserves found in recent years.

Ammonia for fertilisers can be produced from hydrocarbon feedstocks, such as natural gas and oil.

The debt obligation arose from an agreement that Kenya signed more than 40 years ago with a collapsed American firm, N-Ren, to guarantee the construction of a fertiliser plant at a cost of $42.8 million (Sh4.28 billion).

The government and N-Ren Ltd entered a joint venture to form a company registered as Ken-Ren Chemical and Fertilisers Company Limited which was to manufacture fertiliser for domestic consumption and export markets.

Ken-Ren on advice of N-Ren then entered into several financing and equipment procurement contracts with various Australian and Belgium banks and suppliers, with Kenya as the guarantor.  Mr Ouko says the debt was paid to Australian and Belgium governemnts.