How cartels eyed Galana project cash

                                                    ENGINEER: DAN BARASA

A worker inspects a maize crop in the pilot Galana-Kulalu irrigation project. The multi-billion project has been marred by delays and claims of financial scandals. PHOTO: FILE

The Galana-Kulalu project at the Coast could have been derailed by an intricate web of cartels seeking to control its multi-billion shilling expenditure reports the people daily of 5^th Jan 2016.

The consultancy for pre-feasibility study and designs was inflated from the initial Sh793 million to Sh920 million.

Questions were also raised about some alleged dubious procurement of at least 50 companies which were to carry out bush clearing and other preparatory activities to the tune of Sh400 milion.

According to official records at NIB , the estimates indicate the farm and irrigation system was to take up to Sh3.5 billion of the Sh14.5 billion model project, knowledge and logistics centre (Sh3.8 billion), piping (Sh846 million), operations and maintenance (Sh3.4 billion) and taxes (Sh2.3 billion).

Lucrative tender “The project was hijacked by interested parties and degenerated into a cash-cow,” an insider intimated.  A lucrative tender was awarded to twin Israeli firms Green Arava and Agri-Green at a the cost of Sh14.5 billion.

Green Arava, the parent company of Agri-Green Consulting undertook a Sh920 million consultancy on the irrigation technologies for the project.

The suspended NIB General Manager Engineer Daniel Baraza declined to comment to the said allegations when he was contacted on phone states the newspaper.  Among contract awards that raised questions were Enwag Company (Sh8.4 million), Techno Brain (Sh10.5 million), the International Institute of Tropical Agriculture, IITA, (Sh3.2 million) and Services & Computer Industries Kenya Ltd (Sh6.5 million).

On August 15 last year, NIB awarded the Sh15.5 billion contract to Green Arava Limited, the Israeli conglomerate, for the establishment of a 10,000-acre model farm.

The paper states that the letter of offer was issued on August 8, 2014 with pre-contract negotiations taking place the following day, two days to the deadline for the submission of tender documents. The opening of the documents was done the same day.

“There was no reasonable alternative competent contractor to implement the design of the model farm other than the sister company of the lead design consultant.  There was urgent need to engage the contractor in order to produce maize crop to mitigate the looming hunger,” a copy of the award of the direct tender dated August 15, 2014 reads in part.

Eyes are now set on the CS for water Hon. Eugine Wamalwa who is hardly one year at the Ministry whether he will decide to revoke the suspension or let investigations take its full course. On the other side the board which suspended Eng. Dan Barasa and three other top officials have their hopes banked on President Uhuru Kenyatta who has declared war on corruption.

High Bank Interest Rates Strangling Saccos

                                                       HABIL OLAKA-KBA CEO

The financial crisis that has been plaguing the country’s commercial financial institutions since last year is strangulating the more than Kshs. 500 billion Cooperative movement forcing operators in the sector either to go back on the drawing board or collapse.

A majority of the Savings and Credit Cooperative Societies (SACCOS) are being forced to review or totally overhaul their ways of conducting business, new products they have to offer their members, transforming from the traditional ways of conducting Sacco business, their lending and borrowing practices among a wide range of measures.

The financial crunch which is still keeping a stranglehold on the country’s commercial financial institutions, has over the months forced them to continuously raise their lending interests rates from as low as 16 to 18 per cent to gallop beyond 28 and 30 per cent.

The Kenya Bankers Association Chief (KBA) Executive Habil Olaka says: “As a matter of fact most commercial financial institutions have been forced to shelve their annual programmes to pay accumulated profits from their shareholders’ investments which they are now being forced to re-plough back into their businesses to shore up their operations as they discourage their major clients against taking credit until after the normalization or stabilization of the loan market interest rates.”

Mr. Olaka says that this state of affairs according to impeccable sources from the sector, affected all loans – the existing when the crunch struck most of which had been secured when the rates were between 16 to 18 per cent, therefore nearly or simply doubling the interests rates that were to be paid by the individuals and institutions which had borrowed the monies.

He says that therefore, it means new and old borrowers are expected to repay their loans with reigning market interest rates which means that if they gallop away to 40 per cent – that is what the borrowers will have to pay to their respectful lending financial institutions.

The Sacco Societies may have no option but to take this option of capitalizing their members’ dividends. This is a route that has already been adopted by Stima Sacco which embarked on it first through an aggressive advertisements campaign to convince their members.

This state of affairs has adversely hit the country’s cooperative movement, especially Saccos most of which had existing credit facilities with their traditional lending commercial banks like the Cooperative Bank of Kenya and the Kenya Commercial Bank (KCB) from which they have traditionally enjoyed preference soft lending rates.

KUSCCO Managing Director, George Ototo says that the worst scenario is the fact that as the commercial financial institutions tighten up their belts, their customers most of whom are members of the cooperative movement, particularly contributors to their respectful Sacco societies have mostly abandoned borrowing from the banks due to the prohibitive interest rates and move to their Saccos for credit.

“This has resulted in massive credit demand from the Saccos thus exerting extremely high pressure on their existing credit facilities for their members, whose financial supplies cannot meet the demand pressure – the worst of it all pay their members the annual dividends from their shares that are due this month,” says Mr. Ototo

He says this was worsened by the fact that a majority of the Saccos had before the commercial financial institutions credit interest rates started sky rocketing had secured loans from the banks for their members running into billions of shillings whose interest rates they must pay at the current rates as dictated by the market forces.

The Managing Director says that the worst scenario is the fact that most of the Saccos are forced to lend their members loans whose interest rates are stagnated at only 12 per cent reducing rates and at the same time service the high bank interest rates on existing loans as well as meet the highly increased demand for loans from them and pay their members dividends running into hundreds of millions by the end of this month.

That is not the end of the story on the Saccos woes, since they have to pay millions of shillings to the Saccos’ Regulatory Authority (SASRA) in annual licenses and a myriad of other charges to stay in business or forced out by the authority.

The KBA CEO said: “In short the Saccos are caught up not just between a rock and a hard surface, they are caught up between un-breakable steel and another un-breakable steel, a state of affairs from which they have to wiggle themselves out or perish – hence the need to go back to the drawing board.”

It is from this background that the former minister for cooperative development and marketing, Joseph Nyagah  made a proposal for Credit Co-operative Societies (Saccos) to review up their loan rates spells more trouble for borrowers, especially those who had been fleeing from commercial banks to other alternative avenues.

Nyagah was quoted as saying,"There is a lot of pressure on Saccos brought about by the prevailing high interest rates from banks. This is why we urge them to adjust rates upwards to safeguard their savings from being depleted." 

The Afya Sacco Chairman Vitalis Lukiri said: “Leaders and the Sacco societies must be focused and adjust to the current economic forces otherwise the Saccos will collapse. They are business concerns and not social entities. We cannot borrow and pay interest at nearly 40 per cent increasing rates and expect to pay these loans when we are loaning our members to pay interest at 12 per cent reducing rates.”

Mr. Lukiri says that the situation demands that the Saccos have to review their modes of operation if they have to remain relevant and sustainable as business entities on the market in the current financial market environment.”

“As leaders within Afya Sacco we are consulting widely with the movement leadership and members so that we can come up with the way forward that is acceptable to all of us, but we can’t afford to let the society to collapse,” he said.

Mr. Lukiri’s counterpart at Harambee Sacco Maclaud Malonza says the society leadership was critically looking at the emerging scenario in the movement and will take appropriate measures to counter the challenges.

“We must face reality of the fact that matters have drastically shifted in the general financial sector and as Micro financial institutions we cannot afford to live and operate in isolation in an environment where we are facing increasing competition even from commercial banks,” says Mr. Malonza.

The UN Sacco chairperson Mary Oyugi says the Sacco has moved into high gear to review the interest rates levied on members loans as well capitalization of their dividends since in the long run it will be of immense benefit to the members.

Ms. Oyugi says that with the rapid dynamic developments in the country’s financial sector some of which have been un-predictable, it was paramount that the Saccos have top swiftly shift gear and modes of operation including products to market to stay afloat.

“These developments are coming too fast and too many but we have to meet the challenges, because as we all know many financial institutions we have come up with many products and services that traditionally the preserve of the Saccos,” Says Mwalimu Sacco Chairman, Mrs. Teresa Mutegi.

 Mrs Mutegi says that stakeholders and members of the movement must also change their attitudes face reality and quickly adapt to the emerging changes to ensure that the Sacco movement in the country, which is leading in Africa does not collapse.

The SASRA regulations which technically came into force late 2010 demand that all deposit taking savings and credit societies in the country must have an accumulated core share capital of not less than shs. 10 million before applying for a license for consideration to operate.

They stipulate that the rule applies not only to the already existing Sacco societies on the market but as well as all those new ones that will be seeking entry into the market beginning June this year – a core share capital which must be maintained at all times of operations.

 The regulations also state that every registered society as of now as the new applicants will be required to pay shs. 50, 000 annually as an individual entity and shs. 20, 000 for every branch that the society operates or is planning to open in any part of the country.

The Towering Afya Sacco

 

 

Vitalis Lukiri-Chair Afya Sacco                                        

By Joseph Barasa

Afya Sacco has become a giant co-operative society (Sacco) worth billions of shillings taking up the lead in opening up to do business with the general Kenyan public whereas most main line government ministries’ Saccos remain closed.

                                                Mr.Waroe-Afya CEO         
                                     

 One of the most interesting features about the Sacco is the fact that whereas most mainline ministry Saccos have been embroiled in controversies specifically concerning financial issues, Afya has steered clear and taken the lead to be one of the top five performing Saccos in Kenya.

As at the end of the last financial year, the society posted accumulated savings, assets and other valuables worth more than Kshs. 10 billion shillings when most of its counterparts were still trailing well below the ten billion shillings mark or figure.

While announcing that figure at the last Annual Delegates Conference ADC) last year, Afya Sacco was also celebrating the first anniversary after launching the first ever micro finance business by a Sacco, the chairman Mr. Vitalis Lukiri said  that is open to the general public including its members known as Afya Microfinance Activity (AMCA).

What appears to be one of the strong points that have sustained the society to success is its ability to diversify into a wide range of highly innovative products which have to be attractive and affordable to its members and customers considering the cut-throat competition the Sacco movement is facing from the commercial financial sector.

Indeed most financial institutions in the country have equally diversified their products and the process cut into providing services that were traditionally a preserve of the cooperative movement.

Afya Co-operative Savings and Credit Society was registered on 
May 8th 1971 by some twenty founder members/promoters. Membership has since grown progressively over the past forty years and to date there are over 38,000 members.

Right from its establishment, the Society’s Primary objective is to promote a culture of accelerated monthly savings by the members from which loans are disbursed to them for provident and productive purposes, but also be able to effectively compete in the ever changing financial markets.

What has so far emerged is the fact over the years the Sacco has consistently developed Operating Principles. Out of commitment and concern for members’ welfare, the Society over the years adopted several operating principles that guide it in its relationship with its members and now how it’s going to deal with its customers from the general public in the AMCA business.

These practices are in line with core co-operative values that are shared and nurtured by the co-operative movement worldwide. The operating principles include among others the following captured in the coming details that form the backbone of the society’s operating principles.

Perhaps it’s from its open and voluntary membership policy that Afya Sacco is likely to continue galloping faster than its counterparts based in the other government ministries, Afya’s parent ministry is the ministry for health and related institutions. That is because the Society’s doors are open for membership to all who wish to join it as long as they are within the accepted common bond. Members are free to withdraw their membership if they so wish provided they do not have outstanding obligations with the Society.

Democratic control and practice is one area where many organizations and institutions, even nations have thrown to the dogs, but this appears to be another entrenched principle within the Society.

 

That is because the members enjoy rights to vote and participate in making decisions affecting the Society through their elected delegates. A member is valued for who he/she is and not what he/she owns in terms of material possession. Regardless of the amount of shares the member may have in the Society, he has a right to one vote in the general meeting.

This brings us automatically to another critical area of practice that be-devils many institutions and that is non- discrimination. Indeed it appears that the spirit that reigns in the Society is one of Unity and harmony. The Society does not discriminate against members on account of their political, religious, race and gender diversities.

Indeed we also established that at Afya Sacco there is also limited interest on capital. The Society pursues the goal of rendering services to the members. Maximizing profits is not among its prime objectives. Interest paid on savings and shares is limited and in proportion to the interest charged on loans.

As with many business entities another extremely critical area to members of whatever business organization it may be is the proportional distribution of surplus which comes in the form of dividends to which shareholders always look forward to with great anticipation during these hard economic times. Therefore, at the end of every year, the Society distributes the surplus earned in proportion to the level of savings.

It is also critical to note that many Saccos do not take very seriously the crucial equation of co-operative education which members not only the members of the Saccos with knowledge about their Society but also that which enables them make wise informed decisions and choices.

Afya Co-operative believes that the key to success is founded on a well informed membership. The Society thus pursues a policy of ensuring that the general membership is fully educated on the Society’s status and the co-operative philosophy not withstanding capacity building of the members on the ever changing dynamics of the cooperative world.

With the world’s constantly changing economic dynamics, it is also critical to network not only Co-operation among co-operatives, but also other stakeholders to progress - we established that the Society recognizes the necessity of strengthening its bond with other affiliate Co-operative organizations. This is based on the value of solidarity. By cementing strong bonds of co-operation with other co-operatives, the Society is and has been able to achieve more.

Indeed the backbone of any Sacco is savings and giving members affordable loans that is with low interest rates some of those being provided by Afya Sacco include, development, emergency, school fees, and special advances for loans clearance by cash.

The wide range of diversification of the services that Afya Sacco provides for its members is shown right from the FOSA services with branches located in virtually every former province in the country which provides easy access for customers who requires services from the Sacco without having to travel all the way to the head office in Nairobi – now with 47 devolved government structures, all these have to be targeted.

The other innovative service that the society came up with and where members of the public can also cash in to make a killing is the investments segment which recently the Saccos’ Chairman and Chief Executive David Waroe were in a section of the local dailies talking about.

As at the moment this comprises of 16 residential maisonettes located at Kamburu Drive off Ngong Road and Afya Co-operative Center a 21-storey high-rise building, situated in Nairobi City Centre. Afya Investments are fully owned by the shareholders of Afya Sacco. Both the maisonettes and Co-operative House are rented out to generate income to members. This income flows back to members as dividends which are distributed yearly.

There is also the opportunity for members to buy land to construct residential houses including rentals through the investments facility with parcels of land scattered in Nairobi and its neighbourhood.

Afya Center acts as the Headquarters of both Afya Sacco Society and the Front Office Services Activities of the Sacco (FOSA). It is a major business center that houses specialized medical clinics, banks, restaurant amongst other offices.

Afya Investment has pioneered an over the counter (O.T.C) facility, in the field of share trading, that enables members trade their Investment shares (not listed in the stock exchange). The concept of the over the counter (O.T.C) follows that of the stock exchange; that is; willing seller, willing buyer, with prices being determined by market forces. The facility is being operated from the Investment Offices at Afya Centre and is open to members of Afya Sacco Ltd. A transfer fee of 3% of the value of the shares is charged subject to a minimum of Kshs. 100.

Both the Afya Holding and Investment have created a solid financial base for the Afya Society and the members as a whole.

Indeed the latest baby on the market is the AMCA service in order to tailor Afya Saccos products to suit and meet the needs of members, the Society has introduced Afya Sacco Micro Activity- AMCA that is offering financial services and products to both the members and the public.

 AMCA targets the unbanked, credit constrained and micro entrepreneurs in the urban and rural communities. AMCA aims at giving opportunity to members, business persons, youth, women and farmers to access savings and credit facilities to enable them boost their business potential, growth and development.

The other services include savings and loans products, and M-Sacco. This product enables Afya Sacco Society to provide mobile financial services to the members. It is a result of the integration of Sacco Banking Solutions with Safaricom’s M-PESA money Transfer Services.

As a result, members are able to carry out transactions including: - Withdraw money from Sacco account to M-Pesa, Balance inquiry of Sacco account, Loan repayment from M-Pesa, Account mini statement inquiry, Apply for FOSA instant loan, Change M-Sacco Pin number and Transfer money from one account to another in the Sacco.