How KPCU became the abode of thieves, charlatans

There is no farmers’ institution that has been the abode of thieves and charlatans than Kenya Planters Co-operative Union (KPCU). If in doubt, ask any coffee farmer about these mountebanks.

The last time I was at their headquarters in Nairobi, five years ago, thieves had stolen one of Africa’s biggest coffee mills, towering over three floors, cut it as scrap metal and vanished with it.

So far, nobody has been charged with that theft and nobody is following the matter — which was reported to Kamukunji Police Station.

Actually, nobody claims to have witnessed the vandalisation of the multimillion shilling mill.

That is how the coffee management still treats the coffee farmers: with contempt, disdain, and a what-can-you-do attitude.

When I heard President Uhuru Kenyatta order Trade minister Peter Munya last week to restructure KPCU, I just wondered whether the son of Jomo knows the depth of the rot in that organisation.

RESTRUCTURE PLAN

Does he know that coffee cartels are still sabotaging the Prof Joseph Kieyah coffee task force — and does he know that some senior officials in the Agriculture ministry listen more to these cartels than to the farmers?

Does he know! — or he is fed with cock-and-bull stories on the coffee sector? Whoever will be asked to restructure KPCU must have a thick skin to start with.

This is because some mandarins sold some of its properties, pushed it to receivership, purported to save it — and bought shares through the backdoor.

In essence the shareholding of KPCU has been compromised, diluted, and would equal the mess in Mboi-i-Kamiti Farmers in Kiambu. If not worse.

Minister Munya will be walking into this abyss — and I don’t envy him.

MOI ERA

The KPCU was once a solid multibillion shilling farmers’ empire until President Daniel Moi and his henchmen decided to raid its coffers.

Moi had interfered with the body early after the 1988 exit of Henry Kinyua, regarded as one of the best coffee managers to date.

Actually, to soil Mr Kinyua’s name and find an excuse to wade in, President Moi had ordered a probe into KPCU in 1990 and this report was shelved with no action.

Records show that once in 1992, the then Company Secretary Samuel Chepkonga and Managing Director J.M. Nyaga took a Sh150 million loan from Coffee Board of Kenya for the organisation “at the request of the government”, according to the minutes.

This money was not to pay farmers but was used by Kanu to finance its lobby groups during the 1992 campaigns. Such groups included Youth for Kanu 92 and Operation Moi wins. It was also used to buy defectors.

The irony is that it was the poor coffee farmers who would pay for it later. That story is known by all those who have been managers at KPCU.

ROGUE BOARD

In those days, farmers’ coffee and money would pass through Coffee Board, then a regulator and marketer, which would deduct any advance taken by KPCU, and that is how farmers would be swindled.

Actually, Coffee Board was a rogue body. And for many years, the managers there had honed carpetbagger skills by selling farmers’ coffee and withholding payments.

In turn, KPCU would borrow money from banks and loan to co-operative societies and plantation farmers, sinking deeper into debts and offering farmers’ assets as collateral.

The government watched as KPCU continued to deliver milled beans to Coffee Board, which would not pay. Farmers went for years without pay — or with nothing.

Although it was a government body, Coffee Board was never audited for many years and it operated a record 32 bank accounts in 12 banks.

If you want to know how the coffee sector collapsed, look at the fortunes of all those who worked at KPCU and Coffee Board.

DEBTORS

The insiders had also hatched a scheme where KPCU could comfortably borrow close to Sh1 billion from their then-banker, Kenya Commercial Bank, to ostensibly pay farmers “in advance” — but which became a conduit to steal money.

Actually, this became the main avenue in which wayward directors and managers could easily lend cash to politically-correct individuals, and cronies — as long as they had some coffee account at KPCU.

That is how most of them got millions of shillings from KPCU and which they never repaid. The advances had no collateral and only added to KPCU’s burden.

The list of KPCU debtors once read like a political rollcall, and whether these debts will ever be repaid is another story.

Inside KPCU, fictitious codes were created for purposes of securing funds from the bank facility while some advances were approved without going through the Board.

As a result, KPCU’s non-performing loans spiralled out of control as both the regulator and marketer, Coffee Board and the miller, sandwiched the farmer and his coffee beans.

If anyone wants to find out what happened, the answers lie in the story of Abraham Mwangi and Pithon Mwangi and their cronies in both KPCU and Coffee Board.

These were the wealthy coffee barons who masterminded the collapse of KPCU, sold some of its assets to politically-correct individuals and became millionaires within a short period.

KPCU'S DEFICIT

Abraham Mwangi was a coffee farmer - a big planter. His company, Raki Investments, with a godown at Nairobi’s Gikomba, was a big roaster and exporter.

Besides being KPCU’s chairman, Mwangi was also the director of Coffee Board, the market regulator.

He was also the chairman of Coffee Research Foundation and sat in various coffee committees.

At the heart of this mischief at Coffee Board was the powerful Nandi District Kanu chairman Ezekiel Barngetuny, who had been brought into the scheme to help these barons access Moi’s State House.

By November 1997, a report prepared by Gill and Johnson observed that the organisation had an accumulated deficit of Sh708 million and its liabilities exceeded assets by Sh181 million.

What that meant was that KPCU was a walking dead agency! Its survival now depended on its financiers and Coffee Board - which was deliberately not remitting KPCU’s money.

What was not known was that even Coffee Board could not get the Sh600 million that was due to the farmers. Its coffers had been milked dry too.

KCB COMPLICIT

This was the period when Kenya Commercial Bank, too, was led by rogue managers who had taken huge unsecured and unserviced loans.

They could not ask KPCU to pay up — after all, the bank was the conduit of illegal schemes including payments of Sh5.3 billion to Kamlesh Pattni’s Goldenberg International.

In essence nobody cared. That was the kind of bank that KPCU was dealing with. Three rogue institutions, KCB, KPCU and Coffee Board of Kenya, had met.

It was only after a new KCB management was appointed by Simeon Nyachae when he became Finance minister that KPCU came under pressure to pay its debts.

Cornered, or perhaps worried that the eating could come to an end, KPCU board members then did the unthinkable.

They approached a Mauritius company, Associated Consultants, and incorporated Kahawa Credit International Limited.

This new company was registered in Port Louis, certificate no. C31043 on 22 April 1999, and then in Nairobi as a foreign company (Reg. No. F.41/99).

The aim of the company, with a registered office at 5th Floor of KPCU’s Wakulima House, was to buy the KPCU debts under a repurchase agreement, according to May 2000 minutes.

FAKE AUDITS

Although this scheme fell apart later, it helped the KPCU board members get another grace period — with farmers thinking that a solution was on the way.

Every time farmers would raise a matter, the Board had perfected the art of forming probe committees which were populated with cronies.

Audited accounts would be falsified and by the time Mwai Kibaki took presidency, nobody seemed to know the financial status of KPCU — its assets and liabilities.

The appointment of Kipruto arap Kirwa as Kibaki’s Agriculture minister had brought hopes that the previous mistakes would be undone.

But then, some of the powerful Kibaki allies were part of the coffee mess, too.

Relatives of KPCU managers and board members had become the main suppliers of goods at inflated prices.

An attempt by then-Kenya Anti-Corruption Commission to investigate the vice collapsed. Word was that they had been compromised.

FINANCIAL STRAITS

The Board, in 2001, noted that KPCU was in a “serious financial position” and had only three options: “serious and aggressive debt collection; restructuring of banking facilities; and sale of idle assets.”

Although it had been part of KPCU’s problems, KCB in March 2001 put KPCU “on notice” in a letter signed by Daniel Iriga, then the Relationship Manager, with a threat: “Unless arrears are cleared … we will call up the entire debt and cancel the limits of your overdraft accounts.”

That year, according to records, KPCU reported a loss of Sh484 million and hired audit firm Deloitte Consulting to carry out forensic audit.

The KPCU allowed them to access all the company documents. But before they could hand over the report, and after receiving payment of Sh2.5 million, they returned as receiver managers hired by Kenya Commercial Bank.

The KPCU directors complained to the Institute of Certified Public Accountants (ICPAK) over what they called a “betrayal”.

FORENSIC PROBE

The receivers started selling KPCU assets and even advertised Wakulima House for sale through an auction. By this time, the Nairobi mill had been stolen.

More damage had been done to KPCU and at the moment, nobody seems to know the actual state of its assets and liabilities.

President Kenyatta’s bid to restructure KPCU should start with forensic investigations: a look at all the assets that the body had and how they changed hands; a scrutiny of the shareholders register and when some of the current barons bought shares

And finally, he must get rid of the international and local coffee cartels and their henchmen at the Ministry of Agriculture. Otherwise, we can forget the beans.

[email protected] @johnkamau1