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Billion Shilling Fraud Schemes At Haco Forces South African Investors, Tiger Brands To Break Deal With Chris Kirubi

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The Board of Directors of Tiger Brands has announced its decision to dispose of the company’s 51% stake in its Kenyan business, Haco Tiger Brands (E.A.) Limited (“Haco”), which it acquired in 2008.
According to Tiger Brands’ CEO Lawrence Mac Dougall, the company took the decision to sell its interest in Haco after a detailed review of the business was conducted, along with its partner, Dr Chris Kirubi. “The review evaluated the Haco
business in the context of its mutual alignment with Tiger Brands’ long term strategic focus and core competencies. In addition to products manufactured and marketed by Haco under its own brands, the majority of Haco’s business lies in the manufacturing and distribution of products under licence. This is not aligned with our current operating model which is premised on full ownership of leading FMCG
brands.”

This has culminated in Dr Kirubi, who holds the balance of the 49% of the business,
making an offer to Tiger Brands to purchase its 51% shareholding at a price that
was considered fair and reasonable. Tiger Brands accepted the offer. “We thank Dr Kirubi for his invaluable insight and contribution to Haco over the past 9 years and are confident in Haco’s prospects under his leadership,” says Mac
Dougall.

Dr Kirubi commented on the partnership with Tiger Brands and the quality of engagement with the leadership team. “The partnership with Tiger Brands has been professional and constructive over the years and I am pleased with how we have managed this transaction. I have always been passionate about Haco’s success and I remain fully committed and dedicated to its growth and progress. My Board and I, together with our dedicated staff, look forward to driving the next chapter of
Haco’s growth and innovation as Haco seeks to meet the needs of the growing and discerning market in Africa and beyond.”

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The agreement relating to the disposal of the shares is subject to a number of suspensive conditions, including receipt of the necessary regulatory approvals in Kenya.

Top executives of Haco Tiger Brands, a Kenyan subsidiary of South Africa’s Tiger Brands overstated the firm’s performance to show they were excellent performers deserving great rewards. The tricks that the Kenyan team used to earn more included;

Managers pre-invoiced sales and moved stock to third party warehouses to make it appear as if they had reached their performance targets. They altered financial statements to look impressive. The team also falsified operating profits by more than Sh879 million. As a result of the manipulation: The managers were praised for sterling performance and consequently earned huge bonuses.

Discovery of the falsified accounts and the need to rectify the position reduced the group’s earnings for the half-year results for the period ending March 2015. There are several ways in which companies can falsify accounts and various reasons why they do so.

The first one is where a company’s management, at times in collaboration with its auditors, inflate revenues or artificially decrease expenses. These alterations paint a healthy image of the company, which in turn keeps investors happy and could also be used to justify hefty increases in salaries and bonuses for top managers.

Profit alterations also work in the reverse. Accountants deflate a company’s income or exaggerate the expenses, making a company come off as performing poorly than it actually is.

Tiger was previously bullish about the Haco partnership, but has over the past two years soured on the investment, starting with the discovery of what Tiger said was an R106 million (Sh845 million) fraud at the company in 2015. The accounting fraud that came in the form of pulling forward sales and falsification of stocks, cost the multinational R50 million (Sh400 million) at group level as the subsidiary sunk into an undisclosed loss in the year ended September 2015.

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Tiger shared that loss with Mr Kirubi, pulling its after-tax profit down to R942 million (Sh7.5 billion) from R1.8 billion (Sh14.3 billion) the year before.
Haco immediately fired executives associated with the financial scam, putting Mr Kirubi who had rooted for Kenyans to retain top management roles at Haco in a tight spot.

The executives were accused of overstocking major distributors to create the impression that they had met their performance targets. The consistent fraud scheme is believed to be the reason behind termination of the deal even though Kirubi is floating the lie that he bought back the shares. Kirubi mismanagement is attributed to the fall of big companies as Uchumi,KENATCO and has been described as a scheming businessman. The South African partners opted out before the entire house could be brought down with fire which has been his trademark in key companies he has run.


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Kenya West is a trained investigative independent journalist and a socio-political commentator on matters Kenya and Africa. Send me tips to [[email protected]]

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Urithi Adopts A Unique Model To Deliver Affordable Housing In Kenya

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Urithi Housing Cooperative Society Chairman Samuel Maina handing over the keys to the new owners of one of the houses during the handing over ceremony of Springs View gated community estate in Gatuanyaga Location of Thika East in Kiambu County.

Since President Uhuru Kenyatta unveiled his Big Four Agenda during his inauguration to serve his second term in office, the different sectors that anchor his legacy have been making all necessary alignments to fit into the presidential vision which can only be achieved through collaboration between public and private sector players.

One of the pillars of President Kenyatta’s legacy is affordable housing, with a target of 500,000 new housing units per year.

Opinions and commentaries have been penned but what has stood out is the many experts who have made a strong case that the projected numbers can only be achieved if stakeholders would embrace the socio-economic model of housing provision.

Legend supports this narrative yet fact is that it is not exclusively dependent on this model but that this will largely drive the realization of this pillar. So what is the socio-economic model of housing, how does it work and does any of the current players in property business operate on this model?

The model is entirely dependent on members, whose contributions are key and vital in initiating and executing any project that seeks to provide housing, be it public or private. Upon payment of a pre-determined deposit or down payment, the balance of the cost is spread out and paid over a period of between 12 and 48 months.

Samwel Maina, the Chairman of Urithi Housing Society, the only player that operates on this model, says monthly subscriptions vary from one member to the other depending on their economic ability.

“For the project timelines to be achieved, also entirely depends on the speed of members to make their contributions. However, slow remittance by some members has contributed to delays being experienced as most times the society has to move with the speed of the slowest member in payment,” he says.

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“Speed is determined by how fast you get money from members. But due to the uncertainty and unpredictable nature of contributions and cash flows we adjust accordingly.”

The pricing does not change over time “simply because the model mitigates on cost of labor, land and materials. Hence making it affordable without changing the initial price.”

Being an off plan project, there are critical steps, approvals and mandatory procedures that must be undertaken. Market sounding is the first of the many steps and acts a notice of the intention to undertake the project.

Then follows mobilization which entails recruiting members and other stakeholders, which process is followed by pursuit of statutory and other approvals by various government bodies, both national and county level.

Once the necessary approvals have been granted, the groundbreaking marks the beginning of construction work, whose completion is entirely dependent on members’ fidelity to make subscriptions.

“There are incidents where a member pays their subscriptions in full and expect that they would get their units but the principle here is that we pool together to own together.

“The explanation is very simple. While you may have paid yours in full, the model works in such a way that those who pay upfront help kick-start the project and sustain it by making the first commitment which is key to property ownership and the subsequent subscriptions take us through to the tail end,” adds Mr. Maina.

Urithi has over the past six years, completed and handed over thousands of housing units in Springviews in Thika, Plainsview in Juja, Gem1 in Witeithie and Lanet Homes (Nakuru and Juja).

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They intend to complete and hand over all housing projects currently under construction in the next 12 months. They include Utange – Mombasa, Gem2 and Rongai Homes which are set for completion in the next quarter for handing over to the members, while investors in the Osteen Terrace Gardens will be delivered by the last quarter of 2019.

“The OTG project is the first-of-its-kind to enable us achieve affordable housing for our members and we are using the socio-economic model. This particular project [OTG] is very timely and it will hugely compliment the government’s efforts in attaining the big 4 agenda – the housing component, by engaging other stakeholders like us,” adds the Urithi boss.

President Uhuru Kenyatta’s Big Four Agenda focuses on expanding the manufacturing sector, Universal Health Care, Food security and Affordable housing.

Under the affordable housing pillar, the government through the National Housing Corporation and collaboration with private sector players, intends to construct 500,000 units annually by using innovative construction methods and low cost building and construction materials.

“The government will achieve its dream fast if they partner with the saccos and cooperatives. Cooperatives and Saccos have structures, a wide geographical reach and most importantly members,” avers Mr. Maina, who believes affordable housing is a major milestone towards achieving the other three pillars of President Kenyatta’s legacy plan.


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Airtel Kenya And Telkom Make Official Their Merger To Face Off Safaricom’s Dominance

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Telkom Kenya Limited and Airtel Networks Kenya Limited, today announced the signing of a binding agreement that will see the shareholders of the two companies enter into an agreement to merge their respective Mobile, Enterprise and Carrier Services businesses in Kenya to operate under a joint venture company to be named Airtel-Telkom.

Telkom Kenya Limited’s real estate portfolio and specific government services will not form part of the combined entity. The final shareholding will be determined at the closing of the transaction. Telkom Kenya has the option of holding up to 49 per cent of that shareholding.

The merged company will be chaired by Telkom Kenya Limited CEO, Mr. Mugo Kibati while Airtel Networks Kenya Chief Executive, Mr. Prasanta Sarma, will be appointed Chief Executive Officer.
The finalisation and closure of the transaction is subject to approval by the relevant authorities.
Airtel Networks Kenya Limited (Airtel Kenya) and Telkom Kenya Limited (Telkom Kenya) will see no immediate changes to their operations which will continue as usual.

Similarly, there will also be no change to the current respective leadership and management, legal, organisational and staffing structures. Additionally, both brands: ‘Airtel’ and ‘Telkom’, as well as their respective products and solutions, will continue to co-exist. Similarly, service delivery to the respective companies’ customers as well as engagement with all business partners of both companies will continue to operate as usual.

As per the agreement, both the partners will combine their operations in Kenya and establish an entity with enhanced scale and efficiency, larger distribution network and strategic brand presence, thereby enhancing the range and quality of products and service offerings in the market, and greater choice and convenience to the consumer.

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The combined entity will see sustained investments in networks to further accelerate roll out of future technologies. The Enterprise and Carrier Services businesses will get a boost with a larger fibre footprint and increased number of enterprise customers – including both large corporations and SMEs who would have access to a diverse portfolio of world-class solutions.

Commenting on the agreement, National Treasury Cabinet Secretary, Mr. Henry Rotich said:
“This move is well aligned with the government’s agenda to optimise the value of the assets that it holds in trust, on behalf of Kenyans, while cementing the country’s position not only as a regional business hub but also as an international investment magnet.”

ICT Cabinet Secretary, Mr. Joe Mucheru commented: “ICTs remain a vital link to achieving Kenya’s economic goals and our national development agenda, particularly with respect to service delivery. Such mergers have had positive impact on the development of the sector and service levels to consumers in other markets. Similarly, we look forward to this merger leading to the introduction of new technologies and telecommunication products which will, in turn, support the growth of other business sectors of our economy, thereby spurring national production to meet the growing demand locally and beyond.”


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RBA Gives Cytonn Investment The Nod To Manage Retirement Benefit Schemes Funds

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Investments Manager at Cytonn Maurice Oduor.

Cytonn Asset Managers Ltd (CAML) says it has been registered and authorised by the Retirement Benefits Authority (RBA) to manage retirement benefit schemes funds.

The Capital Markets Authority (CMA) also licensed CAML in March 2018. The Cytonn arm said it will “further grow its regulated products portfolio to include fund management services for retirement benefits schemes” following the nods.

“Despite the retirement benefits assets under management growing to about Sh1.2 trillion as of June 2018, only 15 per cent of Kenyans belong to a registered pension scheme and there is a vast opportunity to increase this,” said Cytonn Asset Managers principal officer Maurice Oduor.

“With this licence, we look forward to adding value to the retirement benefits industry by reaching more Kenyans and enabling them to save for their retirement and securing their future.”

According to Zamara, a pension fund administrator, pension funds only earned 9% p.a in the last year. The entry of Cytonn into the pensions industry brings high yielding products earning upto 18% p.a into the industry.

Cytonn Asset Managers earlier acquired Seriani Asset Managers Ltd.


Kenya Insights allows guest blogging, if you want to be published on Kenya’s most authoritative and accurate blog, have an expose, news, story angles, human interest stories, drop us an email on [email protected] or via Telegram
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