How taxpayers lost billions in edible oils scandal

Kenyans lost billions in the bungled State-backed edible oils scandal, Auditor General Nancy Gathungu says.

Gathungu is now calling on investigative agencies to conclude their probe to allow for the prosecution of culpable persons and entities.  

In her just-published special audit findings on the multi-billion scandal following a request by the National Assembly’s Public Accounts Committee into the Sh15 billion programme, Gathugu lays bare how Kenya National Trading Corporation (KNTC) messed up, leaving Kenyans grappling with high prices of cooking oil.

The report says the government spent Sh14.45 billion to import 2,807,806 million 20-litre jerrycans of edible oils out of which only Sh12.05 billion was paid.

It says only 2,518,434 million jerrycans were delivered but only 1,710,216 million were actually received.

At the time of the audit, Gathungu said 603 containers carrying 807,864 jerrycans were yet to be cleared. A physical count in February found 833,742 jerrycans. At that time, there was a short landing of 301 jerrycans.

Despite an expenditure of Sh14 billion, the government only realised Sh2.4 billion from the sale of 653,174 of the jerrycans, the report says.

The report queries how the entire process was carried out, from conceptualisation to budgetary approval and financing.

The provider was tasked to oversee both the clearing process and the release of stocks (stocks control) as provided for in the initial letter of offer between Kenya Commercial Bank (KCB) and KNTC.

Given emphasis in the report is the role KCB, which has been fingered over the manner in which it secured a deal to provide credit to KNTC to facilitate the importation, which was part of a Sh100 billion initiative covering various food items.

According to the special audit report by the Auditor General, there is no documentary evidence on how KCB was identified from the government-approved banks that the National Treasury had asked KNTC to pick from. The process of evaluation was not provided for audit.

In her report, Gathungu says the KNTC board of directors had asked its management to seek approval from the National Treasury for a Sh15 billion credit from KCB.

“However, the Cabinet Secretary, The National Treasury’s approval dated November 4, 2022, allowed the corporation of a Line of Credit of Sh15 billion from any government-approved bank. Documentary evidence on how KCB was identified from the government-approved banks and the process of evaluation was not provided for audit,” the report reads in part.

KCB and KNTC signed an initial letter of offer dated December 7, 2022, of Sh10.77 billion, instead of the approved Sh15 billion. Thereafter, a loan enhancement letter was signed on January 10, 2023, with a total facility of Sh24 billion.  

“It was not clear why on December 7, 2022, KCB could not offer to the corporation Sh15 billion as approved by the National Treasury and instead, offered only Sh10.77 billion, and on January 10, 2023, a month later, agreed to increase the amount to Sh24 billion,” Gathungu poses.

The report also flags irregular procurement of collateral management services. On November 1, 2022, the KNTC manager for supply chain and logistics, through an internal memo, wrote to the managing director seeking approval for the use of a restricted tendering method for sourcing collateral management services and the request was approved on the same day.

The process thus started a month before KNTC accepted and signed the letter of offer on November 7, 2023.

“The sale of the cooking oil might not have significantly achieved the intended goal,” the report reads.