How Sh16b was paid to firms in flawed cooking oil procurement

Ghosts of a Sh16.5 billion edible oil consignment import have returned to haunt the country following fresh probes by Parliament to determine whether there was any value for money.

The Senate is currently questioning firms involved in the tendering process after it emerged that the country could have lost billions in what has since erupted into a mega scandal.

According to the auditor’s report tabled in Parliament on August 6, out of the Sh16.5 billion, some Sh9.3 billion was allegedly paid to firms contracted by the Kenya National Trading Corporation (KNTC) to help the government lower the price of cooking oil.

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“The purpose of the memorandum was to seek the approval of the Cabinet for KNTC to import essential commodities (maize, beans, rice, sugar, wheat soya, and cooking oil/fat) and fertiliser as an interventional measure to lower the current cost of living,” read the letter in part.

On November 20, 2022, the National Treasury ordered the Kenya Revenue Authority (KRA) to facilitate the exemption of duty for 150,000 tons of cooking fat, 200,000 tons of sugar, 800,000 tons of beans and 25,000 tons of wheat.

The exemption of duty on edible oil was later operationalized through a November 2022 Gazette notice which also established the National Steering Committee on drought response.

The Auditor General’s report further states that when KNTC was handed the mandate in November 2022, cooking oil was retailing at Sh344 a litre, and went down to Sh328 in December. By the time the first consignment imported by the contracted firms landed in May 2023, the price had dropped to Sh319 per litre.

‘Special’ companies

KNTC made peak sales later in September and November 2023 when the prices were Sh316 and Sh326 per litre.

“The analysis implies the cooking oil programme might not have had the required impact on the prices of cooking oil,” read the report.

And while appearing before the Senate Trade House team on Thursday, KNTC general manager for strategy, Lucy Anangwe, revealed that the corporation used a ‘special’ procurement method spearheaded by the steering committee to contract three firms to import the oil. They are Charma Holdings Limited, Multi Commerce FZC and Shehena Commodity.

“It is the project implementation unit which was formed that found it proper to use a specially permitted procedure to procure the items,” Anangwe submitted.

At the time she was the finance boss at the agency. She, however, said she wasn’t part of the committee that conducted the procurement.

The team had sought to know the criteria used for pre-qualification, and whether they were audited.

Anagwe requested for more time to provide details.

And on a day that all three firms had been summoned to appear for grilling, only Charma did.

The firm director, Ruth Kinyanjui, wowed the committee after she revealed that she easily bagged a Sh1.1 billion tender to supply the edible oil without applying for it and despite not having previously traded in the commodity.

It came to the fore that the firm secured the deal through an email notification and was never required to provide proof of certification to supply goods fit for human consumption.

Kinyanjui was consequently hard-pressed to explain whether her firm was among those who hiked the prices of the commodity.

“There cartels who hijacked the process and increased the prices by $9. Some companies were made to return the money to the government but others have not. Was your company one of them?” said Marsabit Senator Mohamed Chute.

Kinyanjui denied being paid excess or asked to refund any amount to the state.

“Our company is not a cartel and we have not been asked to refund any money,” Ruth, who is the sole director of the company, said.

Unscrupulous dealers

Additionally, according to the audit report, the firms delivered 2.5 million jerrycans of 20 litres each out of the 2.8 million the state merchant ordered. It further emerged that unscrupulous dealers sneaked a consignment of edible oils into the pack to enjoy tax exemption.

“It is therefore possible that Sh306 million may have been exempted for cooking oil which was not part of the programme,” further noted the audit report.

And according to Gathungu, KNTC has no record of container numbers or quantities of jerrycans delivered by the mysterious supplier. Multi Commerce FZC and Shehena Commodity companies are now expected to appear before the committee to shed light on the scandal.