The mysterious case of the vanishing maize

Monday, 21 June 2010 14:53

Written by theNairobian (Reproduced from Noseweek)

1 Comments

South African grain trader Afgri Trading (Pty) Ltd, stands accused of fraud and corruption in relation to procurement of a contract to supply maize to Kenya’s National Cereals and Produce Board. A PricewaterhouseCoopers forensic audit has recommended criminal investigations into the conduct of Afgri Trading and various Kenyan officials. Two of these, Caroli Omondi and Dr Mohamed Isahakia, have already “stepped aside” from senior posts in the Kenyan Office of the Prime Minister, following the February release of the PwC forensic audit. (Omondi also owns the building that houses Prime Minister Raila Odinga’s party headquarters, while Isahakia headed Odinga’s fundraising campaign.)

Kenyan officials arrived in South Africa soon after a May 2008 declaration of a “famine emergency”, following the political clashes that had brought violence to the normally peaceful East African nation. The forensic audit discovered that Afgri Trading had secured an initial untendered contract to supply 18,000 tonnes of maize when the Kenyan delegation paid an unpublicised visit to Afgri’s Centurion, Pretoria, headquarters. A few weeks later a formal tender committee awarded Afgri a contract to supply 55,000 tonnes – and this was later adjusted to read 75,000 tonnes, to include the untendered amount. The entire contract was worth around $34m to Afgri.

The improprieties involved might never have been exposed, had a portion of the first maize consignment to reach Mombasa not been declared unfit for consumption. Some 6,300 tonnes of that 18,000 tonnes consignment were found to be contaminated by aluminium phosphide, a compound used in the fumigation of grains, but which may become toxic if not properly handled.

Officials of the Department of Public Health, which is headed by Beth Mugo, of President Mwai Kibaki’s Party of National Unity, discovered the contamination and barred the consignment from being released from the port.

Prime Minister Odinga, of the Orange Democratic Movement, whose office was involved in the procurement, then accused his opponents in the power-sharing government of fabricating the story in order to stir trouble. In an effort to clear his officials, Odinga contracted a British laboratory, Intertek, to examine the maize – but issued instructions to test only for possible Aflatoxin contamination. This added fuel to the fire, and soon the Kenyan parliamentary portfolio committee on agriculture was accusing Odinga’s son and some of his friends of having benefited from the deal.

The public uproar that followed prompted the Ministry of Finance, which had funded the procurement and importation of the maize, to retain PricewaterhouseCoopers to undertake a forensic audit of the procurement procedures.

The PwC auditors, led by one of their Kenyan directors, Martin Whitehead, quickly tumbled to the fact that the first contract was awarded without a tender process being conducted, and that the figures on the formally awarded tender were then fiddled to reflect the difference, apparently in collusion between Afgri and Kenyan officials.

Hubert Jarlet, chief executive of Afgri Trading, a subsidiary of JSE-listed Afgri Ltd, told noseweek that the company was awarded a contract for 60,000 tonnes, which included the 18,000 tonnes. This contradicts the official Kenya version – and a statement by Afgri Ltd CEO Chris Venter, carried by the South Africa Press Association on 13 February 2010. According to Venter, Afgri entered into a written contract with the National Cereal and Produce Board of the Republic of Kenya (NCPB) for the supply of 18,000 tonnes of white maize, on 25 July 2008. Venter added that Afgri had entered into another contract for 60,000 tonnes (5,000 tonnes more than was actually awarded) on 8 August 2008.

The Kenyan National Cereal and Produce Board’s books show that Afgri was paid for 75,000 tonnes. Could it be that 15,000 tonnes were paid for without delivery being made? Afgri have not questioned the official Kenyan figures, which clash with their own – and apparently refused to co-operate with PwC forensic auditors.

Also at issue are upward price adjustments made by Afgri, which apparently led to an increased profit of around $24m. On 25 July the South African white maize price was pegged at $313 per tonne, with the rand at R7.61 to the dollar. The documentation shows that when signing on that date for the first untendered 18,000 tonnes, Afgri offered to sell at $422 per tonne. Less than a week later, on 31 July, with the market price now at around $250 per tonne and dropping, Afgri offered to supply 60,000 tonnes at $452 per tonne.

Asked by noseweek to explain the reasons for the upwards adjustments, Afgri Trading chief executive Hubert Jarlet responded that there were no upwards adjustments made to the signed contracts. He said there were, however, demurrage bills that were payable due to a slower discharge of cargo than agreed in the contract.

Another curiosity of the Afgri deal was that the company chose to channel their shipment through Maputo instead of Durban – at a significantly higher cost. Jarlet told noseweek that this was due to a lack of rail capacity for carrying grain to the ports, and to a lack of export slots for bulk grain through the port of Durban. The next best was to ship via Maputo.

An independent grains exporter told noseweek that Afgri’s explanation doesn’t add up. Why would the Kenyans have accepted the higher price of shipping via Maputo? Our source says that Durban harbour actually has a high capacity for loading grain – but the grains are carefully examined to prevent contaminated shipments from leaving SA shores. Which suggests that someone was aware that part of the shipment was contaminated, and knew that this was unlikely to be picked up at Maputo.

Shortly before PwC released their report, the Kenyan National Cereals and Produce Board released a media statement claiming that an insurance company had paid the state agency for the contaminated maize. The alleged settlement was widely reported in Kenya and public interest in the matter died down.

However, two months later, noseweek contacted Precious Shipping of Thailand, operators of the Fanarun Naree when it was used to ship the grain from Maputo to Mombasa. According to the company: “There has indeed been a claim by NCPB that around 6,000 tonnes of white maize discharged in Mombasa in January 2009 were contaminated, or otherwise damaged. These claims are strongly denied and are being contested. We regret that, since the matter is the subject of arbitration in London and litigation in Kenya, we are not presently at liberty to enter into further correspondence.”

So who actually settled the claim?

Noseweek’s latest investigations have revealed that the allegedly contaminated maize mysteriously disappeared from the port of Mombasa, and was apparently later found being sold in rural locations around the country.

• Last month a ship carrying 40,000 tonnes of genetically modified maize from South Africa was prevented from docking at the Port of Mombasa, after protests by the Kenyan Biodiversity Coalition, which accused Monsanto (see nose116), producers of three of the four maize varieties in the shipment, of seeking to “contaminate the continent”.

HOW THE ROT STARTED

Until the turn of the millennium, corruption in public procurement was simply part of life for public servants in Kenya. As with the South African arms deal questionable contracts were veiled with the banner of “National Security Contracts”, which enabled public officials to secretly plunder the public coffers and foreign loan-funded contracts.

This began to change with increasing pressure from foreign donors, civil societies and opposition politicians, who all campaigned for transparency. Nevertheless, corrupt public officials continued to have their way – and were constantly on the lookout for new terrain. It was soon discovered that tender procurement processes could be circumvented by declaring national emergencies – food security has been one such exploited area.

Food Emergency procurement for private gain was first tried out in 2004 when an emergency was declared and businesses with the right connections were allowed to import maize, either duty-free or at state-subsidised rates.

In 2008 three factors played into the hands of the corrupt: Post-election violence affected most maize-growing areas of the country; the allocation of maize from the Strategic Grain Reserves to politically connected individuals saw the depletion of the Reserve: and post-conflict power-sharing arrangements failed to clarify whether the prime minister or the president was in charge of the cabinet.

The result of this was the declaration of a “famine emergency” – which led to the arrival in South Africa of Kenyan officials on a buying spree.

This Article first appeared in noseweek and has been reproduced here with due permission.

| More...

Comments  

 

0 #1 Anthony Ruoro 2011-12-06 18:13

Site owners pls contact me - agmofreekenya@g mail.com

Very good site and interesting articles. Thnx

Quote

 

Refresh comments list
RSS feed for comments to this post.

Add comment

Name (required)

E-mail (required)

Website

Notify me of follow-up comments

Refresh

Send

Cancel

JComments