Firm gets nod to sell cereals board assets

By ISAIAH LUCHELI and MOSES NYAMORI

Kenya: Two million bags of maize held in the strategic national grain reserve are at new risk after a court dismissed pleas to unfreeze bank accounts of the National Cereals and Produce Board.

Yesterday’s Appeal Court ruling grants Erad Suppliers, a contracted grain supplier, the go-ahead to start auctioning the assets of NCPB while maintaining the accounts freeze to ensure the latter pays the Sh500 million owed.

The freezing of accounts and the order to attach property over breach of contract followed numerous suits and counter suits that have been heard three times by the Appeal Court, twice by the High Court and once by an arbitrator.

And the impact of the cash freeze could extend to the country’s grain production this year after it was revealed that it had led to the suspension of all supplies of subsidized fertilizers to farmers for the current season.

This is on top of the fact that NCPB says it has no money to procure pesticides to fumigate stores that hold the entire two million bags of maize in its reserves.

Parliament will on Tuesday sit to consider the full impact of the court ruling with the Agriculture Secretary expected to appear before the relevant House committee.

Yesterday, cereals producers in Rift Valley, the country’s grain basket said they have been anxiously waiting for calcium ammonium nitrate (CAN) fertilizer for top dressing with hopes that the board would start distributing the farm input this week.

“Timely application of fertilizer is very crucial in crop production. It is unfortunate that the government has failed farmers to provide for farming activities in this calendar year,” said Kenya Farmers Association (KFA) Director Kipkorir arap Menjo.

NCPB Managing director Prof Gideon Misoi had assured the farmers that they would receive subsidized fertilizer for top dressing early this week during a farmers’ meeting held in Eldoret.

Assets for auction

The board’s spokesman Evans Wasike confirmed that the freezing of the accounts would greatly delay the supply of the fertilizer to farmers and the purchase of harvested maize from the farmers.

House Agriculture committee chairman Ayub Savula asked Parliament to take the matter seriously because the country was facing a serious humanitarian crisis if NCPB was crippled.

“We will not only have a serious food shortage in the country this year and next season but we also have to save NCPB from losing its assets,” he said.

Following the appellate judges ruling, Erad Suppliers can now proceed to make an application in the high court and get orders to auction the NCPB movable assets to recover its money for maize that was never supplied to the board.

According to documents produced in court, Erad was awarded the contract in August 24, 2004 and was expected to supply within four weeks but failed to beat the deadline and moved to court after the board sought another supplier.

During the arbitration, Erad was awarded Sh4,165 ($49) per metric tonne instead of Sh765 ($9) which it had claimed as amount it would have made as profit if it had supplied the maize.

The assets being targeted for auction include motor vehicles and driers and other movable assets in Nairobi and the corporation’s offices countrywide.

The debt came about after the trustees of the country’s strategic grain reserve, who include the permanent secretaries for Special Programmes, Agriculture and Treasury sought for the purchase of relief maize in 2004.

Yesterday, appellate Judges Wanjiru Karanja, GBM Kariuki and James Odek dismissed the application by cereals to set aside the judgment and quash the decree that had been issued in favour of the suppliers by the High Court.

The judges faulted the submission by the board’s counsel arguing that an application to set aside the judgment and the decree could not suffice and serve as a notice for an order dismissing an application seeking stay of execution of the decree.

In December judges Onyango Otieno, Wanjiru Karanja and David Maraga also dismissed a notice of motion by the board, which had sought a stay of proceedings at the High Court, which had sanctioned the selling of the assets pending the hearing and determination of the appeal. Erad, which is associated with businessman Jacob Juma, got a warrant to attach and sell moveable assets belonging to the board within seven days arising from a breached contract but the board filed another case seeking the stay of execution of the decree.

The board has been seeking courts intervention to stop the auctioneers from attaching or disposing of vehicles and other movables.

Erad suppliers was awarded the money after a sole arbitrator found that NCPB was in breach of an agreement in which Erad was contracted to supply 40,000 metric tonnes of white maize in 2004.

The board is said to have failed to issue letters of credit to Erad that would have enabled to import the maize as indicated in the contract.

According to arbitrator Evans Thiga, NCPB breached the contract by deciding to amend the agreement. He added that throughout the evidence, he was unable to find any breach of contract by Erad.