Cereals board faces auction threat over Sh500m debt

By Isaiah Lucheli

Nairobi, Kenya:  Agriculture Secretary Felix Koskei warned that grain farmers could be asked to store their next harvest at home after a suit seeking to attach the national stores was filed Monday. 

A small private company moved to court in Nairobi yesterday seeking the seizure and auction of the country’s strategic grain reserve facilities worth billions of shillings.

In a case that could have far-reaching heir homes to avert a food shortage crisis if the silos were auctioned. “We will ask farmers to preserve the maize in their homes and so there will be no crisis,” said Koskei.

But a senior officer who has worked at the Ministry of Agriculture for 20 years differed with the minister’s position over the matter.

“The board has storage facilities which the farmers do not have because most of the maize kept by farmers goes to waste due poor storage and destruction by pests,” he said.

The board also provides farmers with driers to get the correct moisture content before the maize is stored in the silos.

Initially Erad, which did not supply even a single grain of maize to the board, had been granted a decree allowing it to sell moveable assets of the state corporation to recover their money but are now seeking to sell immovable assets.

In a sworn affidavit, the managing director of Erad, Grace Sarapay Wakhungu, submitted that Erad had received Sh297,386,505 from the auction of moveable assets leaving a balance of Sh255,290,877 which had accrued interest at the rate of 12 per cent from December 18, 2012. Their outstanding claim is Sh264,864,285.

She claims that Keysian Auctioneers were denied access to other godowns by NCPB.

The suit against NCPB is the latest setback for the parastatal, which was slapped with a huge court award in a breach of contract suit filed by Erad.

The move to attach permanent assets comes barely a week after the Court of Appeal threw out an application by NCPB, which had sought to halt a High Court order granting Erad the go-ahead to sell the corporation’s assets.

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

According to documents produced in court, Erad was awarded a supply contract in August 24, 2004 to supply 40,000 bags of maize within four weeks. But the firm 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 the amount it would have made as profit if it had supplied the maize.

Court plea

Erad obtained a court order to freeze NCPB’s bank accounts and recently sold vehicles and furniture at a public auction in industrial area in an attempt to recover the Sh500 million. In the latest court plea, Erad is seeking an order prohibiting NCPB from transferring any property pending the notification of sale of the property by public auction.

Most of the properties are in the North Rift, which is the country’s grain basket where 17 grain storage facilities are earmarked for auction, while in Nairobi two facilities have been identified whereas a single asset each is targeted in Nakuru and Kisumu.

Should the silos and stores be sold, the country will face a crisis of unprecedented proportions because NCPB was also expected to supply top dressing fertiliser to farmers this week.

The board uses giant silos, depots and stores worth billions of shillings to store maize, which is bought from farmers across the country.

Over the years, NCPB has not only played the role of price regulator to protect farmers from exploitation but also provides storage for about 3 million bags of maize for the county’s food security.

The board has stores in arid and semi-arid areas in northern and eastern parts of the country used by the government as holding points for food distribution in the event of drought-related emergencies.