Kenyans to pay Sh6bn in meat factory scandal - Daily Nation

Sh6bn meat factory scandal returns to haunt Kenyan taxpayers

Monday February 11 2019

Halal Meat Products Limited slaughterhouse

The defunct Halal Meat Products Limited slaughterhouse in Ngong, Kajiado County, in a picture taken last Wednesday, February 6, 2019. PHOTO | EVANS HABIL | NATION MEDIA GROUP 

By BRIAN WASUNA
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One of Kenya’s forgotten scandals, the 45-year-old Halal abattoir in Ngong, has resurfaced, and the taxpayer will, once again, shoulder the Sh5.7 billion burden of the private meat venture that went terribly wrong in the 1970s.

It has emerged from court proceedings that the National Treasury could be planning to pay out the cash for the botched project that has become a case study of all that could possibly go wrong with public-private partnerships.

TWISTS

In this case, the government provided land for the project and a loan towards its development, but has now been slapped with the massive bill.

At the High Court in Nairobi, tycoon Mohammed Ali Motha is fighting Mr Ramadhan Juma Ali, a man claiming to be his son, and who insists on getting a slice of the anticipated Sh5.7 billion payout from the government.

The pair has every reason to be confident about the payout after Livestock Principal Secretary Harry Kimtai told a court in December last year that the payment had been approved.

Halal Meat Products had asked the High Court to jail Mr Kimtai, arguing that he had stalled the release of their award. Replying, Mr Kimtai blamed the Treasury for delaying release of the funds, saying, the Agriculture and Livestock ministry had already approved the release of the funds to Halal.

It is a story of twists and turns, exposing government lethargy, bureaucracy, ineptitude and high-handedness.

The saga is traceable back to the meat shortage of 1972 in Nairobi, when the Agriculture ministry allowed the construction of privately-owned slaughterhouses in several towns across the country to compete with the Kenya Meat Commission. Within no time, there was an influx of meat, which raised new concerns over its fitness for consumption.

To address the concerns, the Agriculture ministry ordered that any vehicle transporting meat products should have a red stripe, with the word “meat” in white, a rule that stands to-date.

City Hall had also floated the idea of having a meat inspection facility on the city’s outskirts. The idea was to have all meat products destined to Nairobi inspected at the facility before being released into the market.

Automatically, Ngong was floated as a suitable location. After all, most meat coming into Nairobi at the time was from the nearby Ongata Rongai and Waithaka village.

BLOCKED

That is how meat tycoon Mohammed Ali Motha and his business partner Abdul Habib Adam came into the picture. Mr Adam owned the Adam’s Arcade shopping centre on Nairobi’s Ngong Road, which he had founded in 1954, to serve the white community. Mr Motha was running a butchery there.

Thus, in 1973, Mr Motha and Mr Adam approached the government for assistance in getting a loan from the East African Development Bank, saying, he had some land in Ngong on which he wanted to put up a slaughterhouse.

The abattoir, he argued, would double up as an inspection unit, hence solve the City Hall’s puzzle and ensure Nairobi residents ate certified meat, akin to the standards applicable at the Kenya Meat Commission (KMC).

Word went around that Mr Motha intended to buy 60 acres of land in Ngong to expand his business empire. This irked the El-Kejuado County Council where Ngong town fell, and it blocked the businessman's plan for a slaughterhouse and inspection unit.

But in 1974, Mr Jeremiah Nyagah, the then Agriculture minister, gave the two entrepreneurs the green light to set up an abattoir and inspection unit at a cost of Sh9.6 million. 

By then, the ministry had £500,000, which the Danish International Development Agency (Danida) had given for a project, but which had failed to materialise. This money was redirected to the abattoir project — as a government-guaranteed loan. Parliament was later told that this was a scandal.

In a series of mistakes that would haunt the government later on, the two businessmen were allowed to use their Halal Meat Products Ltd as the vehicle for the project, with the government having no shareholding in it.

FOUR YEARS

The company had been incorporated on December 20, 1972 with Mr Adam, Mr Motha and his wife Fatuma Tunny Motha as its directors.

Mr Motha had expressed interest in meat export especially to the Middle East and part of his strategy was to use the name “Halal” to attract the unique, predominantly Islamic market.

But on March 4, 1974, Mr Adam died at the Nairobi Hospital. Mr Motha’s wife, Fatuma, bought his stake in Halal Meat Products and the project preparations proceeded.

Land was now the only challenge, but the ministry agreed to help the company acquire some in Ngong.

But a standoff ensued in August 1974 when Commissioner of Lands James O’Loughlin asked the Department of Veterinary Sciences to surrender 20 acres for the project.

Veterinary Sciences argued that some of the diseases it was studying could cross over to the abattoir and affect cattle before they were slaughtered. After the department refused to surrender land. Mr O’Loughlin threatened to initiate government sanctions against it.

Veterinary Sciences then proposed to surrender six acres. This was not enough, and Mr O’Loughlin demanded that the acreage be doubled. The Commissioner of Lands wanted more land so that a buffer zone could be created to reduce the risk of infection of the animals. Eventually Veterinary Services agreed to give 10 acres. It later gave another 1.5 acres to allow sewerage construction.

Within two weeks, a title deed had been processed for Mr Motha and Mr Adam. This was curious considering the laborious process usually took months.

The Agriculture ministry then released Sh27.701 million loan to Halal Meat Products Limited.

The company hit the ground running and hired Inter-Africa Construction Company to put up the abattoir.

Construction started towards the end of 1974 and took four years. Equipment worth Sh11.34 million was shipped into Kenya from Denmark, tax-free, on the assumption that it was the government importing and not a private company.

STAKEHOLDERS

After completion, Halal Meat Products marketing manager Wilfred Matheri claimed that the facility cost a total Sh50 million, and that government loaned it Sh27 million.

So, who owned Halal Meat Products abattoir?

In his 1977-1978 report, the Auditor General D.G. Njoroge questioned the government loan arrangement with Halal Meat Products as it appeared to be to the abattoir owners' advantage. Interest on the loan, which was meant to be repaid from 1977, had not been remitted one year later.

The Auditor-General’s query sparked fireworks that would see even more questions raised on the abattoir project.

The abattoir was at this point complete and had the capacity to slaughter 1,200 animals per day. It also had three large chillers and three deep freezing rooms.

But the controversy surrounding it made it difficult to start operations in earnest. The Auditor-General painted a picture of a private company tricking the government into financing a project that would end up cannibalising KMC.

The Mothas refused to let KMC have a board member at Halal Meat Products, fuelling a war. More so because the Halal abattoir intended to export meat, which, at the time,was a role reserved for the KMC

Feeling the heat from the public outrage and Parliament, which was raising questions from the Auditor General’s report, Agriculture minister Jeremiah Nyagah opted to go to war with Mr Motha.

Mr Nyagah had just recovered from a maize scandal and the Halal project was threatening to sink him. Mr Nyagah demanded to know all Halal Meat Products stakeholders and how much the firm had injected into the abattoir.

In late 1978, the minister visited the abattoir with the Permanent Secretary S.D. Gathiuni and other officials. Some mid-level officials had visited the plant earlier incognito.

LICENCE

They found that the plant was operational and some Department of Veterinary Science employees were working there, too. It appeared that the government was now paying employees at a privately-owned abattoir, which was funded by taxpayers.


Several workers at the facility were former KMC employees. Mr Nyagah wondered why KMC staff had left pensionable government jobs for a private company, whose function and future was not yet defined. To the minister, this showed the hand of government officials working behind the scenes of the Halal abattoir.

The minister believed that former KMC managers were clandestinely using Halal Meat Products to hijack the multimillion meat export business.

In 1979, Mr Nyagah decided to deny Halal Meat Products an export licence.

Then former KMC boss Richard Douglas, who had a thriving butchery in Karen, expressed interest in joining the meat export industry. The former KMC commissioner had his eye on the state-of-the-art Ngong abattoir.

As Mr Nyagah planned to take over the facility and to second meat inspectors from Kajiado District to run it, he was moved from the Agriculture to the Environment ministry. The Halal project closed, too. After all it had no export licence.

It was in 1984 that Tourism minister Maina Wanjigi started to push for the reopening of the abattoir, but to process game meat and export it.

COMPENSATION

The KMC was at this time struggling to process meat as several animals were dying before being slaughtered. At KMC’s Athi River abattoir, nearly 40 animals would die from starvation each day. The cattle had been presented to KMC after several days of travel.

The Halal debate was reignited during the June 12, 1984 Kanu Parliamentary Group meeting, when President Daniel arap Moi issued a directive to Agriculture minister William Omamo to reopen the abattoir.

Mr Omamo complied, and the abattoir was reopened towards the end of August 1984 as a subsidiary of the KMC. That is the mistake the taxpayer is paying for.

The government expressed interest to buy out the Mothas from the abattoir, but a deal could not be reached. The Mothas sued government through Halal Meat Products in 1986, but even then an out-of-court settlement was still being pursued.

In June 1988, the government wrote to the Mothas, saying, it was no longer interested in buying the abattoir, and that it would hand them back the facility. By this time, the abattoir was not sustainable as many livestock farmers were also hoarding animals.

The Mothas decided to sue the government and demand compensation for lost profits. In response, the government denied owing the Mothas anything, and argued that the couple owed taxpayers Sh27 million — the loan that was yet to be repaid.

In 1989, High Court Judge Abdul Rauf ordered that the Mothas pay the Sh27 million they owed the taxpayers.

SH1.8 BILLION

Attempts to settle out of court failed, as the parties could not agree on valuation of the abattoir. By 1996, government had not handed the facility back to Halal Meat Products and it was guarded by officers from the General Service Unit (GSU).

On October 7, 2005 High Court judge Jeanne Gacheche ruled that the government had done wrong by taking over the abattoir during the 1984 drought then refusing to buy it or restore it to its original state.

She awarded Halal Meat Products Sh1.8 billion, but ordered that the Sh27 million loan owed by the firm be deducted from the award.

Government’s 2016 challenge of the award flopped at the Appellate Court, which upheld Justice Gacheche’s order.

It has since been a cat-and-mouse game between the Mothas and government. Last December, they sought to have the Livestock PS jailed for allegedly stalling release of their award, which is now Sh5.7 billion due to an annual 12 per cent interest.