Mystery of Sh180m Nzoia Sugar goods ‘in transit’ for 8 years now

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Mystery of Sh180m Nzoia Sugar goods ‘in transit’ for 8 years now

A Sh180 million consignment of consumable goods ordered by Nzoia Sugar Company is yet to arrive from abroad eight years later, an audit has revealed, raising questions over the company’s claims that the cargo is in transit

Auditor-General Nancy Gathungu said that the Bungoma-based State-owned miller purchased the consumable goods in the financial 2014/15 but keeps reporting that they have been in transit since then.

“The statement of financial position reflects a balance of Sh494,901,000 in respect of inventories, which includes a balance of Sh430,076,000 relating to consumables out of which Sh179,410,294 is in respect of goods in transit,” she said in a report for the fiscal year to June 2023.

“Records available indicate that the goods have been in transit for the last eight years. No explanation was provided for the long duration the goods have been in transit and whether the goods are still in existence or not.”

The missing goods were part of consumables valued at Sh430 million, which the company reported as part of inventories during the fiscal year.

The audit casts doubt on the existence of the goods, which would point to a possibility that the Sh179 million could have been siphoned out of the company, in the guise of being used to purchase goods.

A previous report showed that the goods undelivered by the end of June 2020 were valued at Sh216.6 million, and included cane carrier chains and sprockets (Sh6.7 million), tubes (Sh135.9 million), boiler blow-down valves (Sh2.3 million) and services such as juice filtration and vacuum (Sh36.9 million).

In 2020, the Auditor-General indicated that Nzoia Sugar management cited port clearance processes as reasons for goods valued at Sh170 million being undelivered after they were bought in 2014/15, and goods valued at Sh34.4 million being under shipment.

It is not clear how the goods have remained under shipment or clearance at the port for eight years.

“The company did not therefore obtain value from the goods and the funds spent are at the risk of getting lost,” the Auditor-General stated in the 2019/20 report.

The current audit, which was signed in February this year, notes that Nzoia Sugar management did not provide an explanation to auditors on the missing goods during the audit process from September last year, after citing port clearance processes and being under shipment in 2020.

Other than the goods, the audit also queried the continued existence of idle property that the miller has, which continues to deny it revenues, even as it struggles financially.

Out of its long-term assets valued at Sh9.5 billion, the miller is reported to have a Sh304 million residential property in Kileleshwa, Nairobi, which has been idle over the past 10 years.

“The property attracts annual land rates of Sh112,600 and has a market monthly rental income of Sh75,000. However, as reported previously, the property has not been occupied for the last 10 years, which translates to a loss of rental income totalling to Sh9,000,000,” the audit notes.

The Auditor-General’s red flag on the idle residential property comes just two years after an audit revealed that the miller had not utilised a Sh290 million cane crushing plant it purchased in 1993 to expand its production.

The machinery was to help expand the factory cane processing capacity from 3,000 tonnes a day to 7,000 tonnes. However, nearly three decades later the machinery is gathering dust somewhere in the factory premises in western Kenya and runs the risk of being rendered obsolete because of evolving technology.

In the year to June 2023, Nzoia Sugar incurred a Sh4.2 billion loss, bringing to Sh63 billion, its total accumulated losses.

“This state of affairs is indicative of an acute financial challenge facing the company which raises significant doubt on its ability to operate as a going concern,” Ms Gathungu states.

The audit also notes that the miller has been unable to repay two loans totaling Sh46.3 billion to the Treasury and the Agriculture, Food and Fisheries Authority (AFFA), and owes the Kenya Revenue Authority (KRA) Sh13 billion in unpaid taxes.

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