Kenya Meat Commission close to second collapse

By Daniel Nzia and Benson Kathuri

The Kenya Meat Commission is on the verge of a total shutdown, just three years after it was officially re-opened by President Kibaki in a colourful ceremony.

Only a quick infusion of millions of taxpayer shillings will save the State-owned meat factory, based in Athi River. The Financial Journal (FJ) has established that the commissioning of the factory was done, despite studies that showed its business model was not financially viable.

Supplies of livestock are dwindling even as the management hopes the Government will pump in more money to keep afloat what now appears to have been a political project, rather than a well-grounded business.

The Athi River based factory is not only facing a serious management crisis, but is also so debt-ridden, that it is struggling to pay its workers and livestock suppliers, most of whom have stopped deliveries, turning instead to KMC’s well-heeled rivals. Loopholes in management have also created a situation that could encourage corrupt practices.

The KMC board of directors is to renew the contract of the Managing Commissioner Vincent Ngurare, but has instead appointed the Company Secretary Julius Musyoki in an acting capacity. Last week, Ngurare confirmed to the FJ that the company is broke, and cannot meet its financial obligations unless another Government bailout is provided urgently, before creditors set in and attach property.

Some 105 employees who were retrenched late last year are also demanding Sh7 million in severance pay, without which they are threatening to take the management to court.

A former Managing Commissioner, James Kimonye is also demanding a similar package from the company, after a court ruled that he was sacked irregularly, and should be compensated.

The Government that had funded KMC operations since it was re-opened amidst song and dance, even though debtors, most of them Government agencies that include the Department of Defence and Public Universities, failed to pay their debts.

Reduced revenue

"It is true that we have been paying farmers and livestock traders their dues after every fortnight, but as a result of reduced revenue flow, this trend has changed to about three weeks or so," Ngurare told FJ in his office at Athi River.

"Most of our leading customers are government institutions like the Department of Defence and public universities whose debts run into millions of shillings in unpaid for supplies".

However, independent sources said the farmers have not been paid for the last two months, leading to an acute shortage of livestock for slaughter, a situation that now threatens to paralyse operations. They are now demanding Sh30 million before they can resume deliveries.

When FJ visited the factory last week, there was no livestock in the holding bay, while workers idled around waiting for word from the management.

During that period, Ngurare, a former board member, picked to act as the managing commissioner for a year, was fighting to have the board extend his term beyond the February 28 deadline, although he eventually gave in, and was to hand over the office yesterday.

Workers who spoke to FJ in confidence said they were now pining their hopes on the Sh500 million bailout promised by the Government to buy cattle from the drought-stricken areas, mainly in Northern Kenya.

"Should the Government fail to remit this money, we might have no other alternative but to close down, because we are currently slaughtering twice or thrice a week and the number of animals involved is very small," said a source at the factory. Though Ngurare said the company is slaughtering between 100 and 150 cattle per day — for a facility with a capacity of 1000 — sources confirmed that slaughtering had now been rescheduled to only when animals were available. Last week, the factory slaughtered on Thursday, but FJ was unable to establish the number.

Worst crisis

Ngurare, however, confirmed that the factory is facing its worst crisis since President Kibaki re-opened it on June 26, 2006 after it collapsed 10 years previously, due to theft and mismanagement.

According to Ngurare, revenue flow is not matching expenditure, despite the desperate measures taken last year, that saw 105 employees sacked. However, he is still hoping that the Government will release the first tranche of Sh50 million this week.

Strangely enough, the money will be used to buy livestock across the country for slaughter, before the canned beef is taken back to affected communities to supplement famine relief efforts coordinated by the Special Programmes Ministry.

The little rain that fell across the country in January, raised hopes that the livestock could withstand the drought until the regular rainy season later this month, as long as the bailout happened quickly.

There are reports within Government that KMC’s giant abattoir in Athi River is earmarked for privatisation, which might explain why the Government has stopped further funding.

Back in 2006, the Cabinet passed a resolution that the company should be sold once the books were cleaned up, and it was up and running, but there are now fears that interested parties are hoping for the parastatal’s to collapse for them to buy it on the cheap.

In February last year, Dujis MP, Adan Dualle promised to move a Private Member’s Motion in Parliament to compel the Government to privatise KMC, saying it had failed farmers.

Privatisation

"We shall push to ensure that the larger pastoralists community have a say and bigger stake once the privatisation is effected," he said, although he is yet to do so after a year in Parliament.

Last year, Ngurare also admitted during an interview with FJ that the company was facing an uphill task, especially breaking into some key markets like Europe and the Middle East, but added that it was doing its best to succeed. "The European Union (EU) countries have not been easy to penetrate, because they have imposed non-tariff barriers, including disease control requirements," he said.

Currently, KMC, cannot export meat to the EU, because it falls short of the standards necessary for the beef to be certified as disease free. However, our sources revealed that corruption, mismanagement and political interference, mainly in employment, have hastened KMC’s near collapse.

A former manager said politicians forced the board to overstaff the firm to a level where the wage bill became unsustainable, forcing the same board to downsize barely a year later.

He said that at one time, there were 12 drivers employed to drive six delivery vans, while 36 employees were employed to run the KMC depot at Ladhies Road in Nairobi, a station that could be run by a team of 10.

wage bill

"At one time mid last year, the monthly wage bill stood at Sh11 million, while turnover was Sh30 million.

The machinery was consuming Sh6 million in electricity, leaving very little to buy the raw materials," said the former employee who declined to be named.

He said the board, headed by a former educationist Sammy Kyungu, had also failed to implement a strategy that included purchase of modern, energy efficient equipment. Kyungu’s term expired in December last year, and Livestock minister Mohamed Kuti is yet to appoint a replacement.

The board was also expected to diversify product range and introduce value added products that would compete favourably in the local and export markets.

However, that never happened, and the company was stuck in the supply of red meat that put it in direct competition with smaller but more efficient privately run abattoirs.

The company was also unable to compete for livestock in the open market due to poor prices and delayed payments for deliveries.