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.

Errol Johnson Is The Mumias Sugar Lifeline

                                      Mumias Sugar MD-Errol Johnson (L) with a farmer

By Joseph Barasa

The troubles that brought the giant Mumias Sugar Company to its knees have been well documented. Troubles that caused the once only sterling performer in the country’s sugar

industry reduced to a mere shell constantly posting losses year after year forensically audited.

Troubles that the government and its agencies of justice have failed to bring to book the crooks

behind the mess and recover of the billions that were looted from the company well publicized, but nothing done but only gloom and doom left to hung over the miller and millions of people who either directly or indirectly depend on it. However, there appears to be a ray of hope that the

company may eventually be salvaged from total collapse.

                                                          Mumias Sugar Company

The appointment of Errol Johnson to become the new Chief Executive Officer of Mumias Sugar,

may be just the right dose that the company needed at its most desperate hour. Mr. Johnson is not

new at the company and indeed it is on record that he steered that company to the best of its

highest performances in its history since establishment in 1976.

Indeed it is from that background that the government was emboldened to offload the majority of

it’s shareholding in Mumias Sugar in the 1990s privatization programme. Of all the state owned

sugar producing state corporations, like Sony, Nyanza, Nzoia, Chemilil, Miwani, and Muhoroni

only Mumias became the first and the last to be privatized and listed at the Nairobi Stock

Exchange (NSE).

Since its establishment, the company is the only one in the country’s sugar industry which had

not been under the management of local government appointed personnel. Booker Tate Plc of

London had taken the mantle of the company’s management right from the factory construction

level to production and management operations.

Therefore it is from this background that Mr. Johnson found himself at the helm of Mumias

Sugar as Chief Executive in the mid to late 1990s and one of the first things that happened was to

brand the firm, establish a marketing department that embarked on aggressive marketing and repackaging of the company’s sugar products before marketing them.

Perhaps one of the most critical factors that many people do not understand about the sugar

industry though they enjoy the sweet granules from it is the production processes these sweet

white and brown granules have to go through before they end up in the supermarkets and shops

to our tables – particularly the technology involved in the production processes.

During the reign of Mr. Johnson as Chief Executive under the Booker Tate Management period,

the company embarked on one of the most ambitious expansion programmes no sugar company

in the country has ever attempted – the introduction of the ultramodern diffuser technology sugar processing means away from the old and archaic milling processes that are still being used by the rest of the millers in Kenya.

The diffuser technology involves chopping up of the sugarcane which is then processed through

high pressure diffusion processes to extract the maximum sucrose content from the sugarcane to

produce the white and brown granules, while the milling process merely mills the cane to out

with the produce.

The diffuser technology factory which was installed at a cost of more than Kshs. 5 billion in the

late 1990s completely revolutionized the production capacities of Mumias Sugar to processing

more than 2 million tones of mill cane annually to produce more than 300, 000 kg of sugar

annually thus far outpacing all her competitors on the market.

The diffuser technology meant highly increased consumption of raw sugar cane by the factory

which translated into increased demand for the same from the farmers for the factory to be able

to operate at full capacity, in the process more sugar produced and revenue generated from the

sales of the commodity to consumers.

It also meant more bargasse produced which is in turn used to generate electricity which the

company sells to the national grid as a byproduct and opened the opportunity to start an ethanol

production plant therefore highly increasing the viability and productivity of Mumias Sugar by

the time Booker Tate Plc management of London was denied renewal of the management contract in the year 2000.

High level manipulations in the government by the powerful cartels owned by the wealthy sugar

barons operating mafia style ensured that the multinational corporation was locked out of Mumias Sugar after babysitting and nursing the company to maturity for a period of more than

30 years.

Indeed Mr. Errol Johnson was at the helm of Mumias Sugar when the sugar barons started

fighting to ensure Booker Tate was locked out just before the end of the retired president Daniel

Arap Moi regime. The barons are indeed ruthless, vicious and deadly in their way of operations

and in most cases will stop at nothing to get what they want.

Therefore, the current Nairobi Governor Evans Kidero who was previously managing director,

Nation Media Group the Newspapers Division must have known about the manipulations and

therefore it came as no surprise when he was the one who took over from Mr. Johnson as the first

Kenyan Chief Executive at the helm of that Company.

It is from this background that the steady decline of Mumias Sugar started being recorded,

though not overtly but activities were reportedly going on at the top level of the management

including the Board of Directors that the company had never witnessed before in its history.

The first thing that Mr. Kidero did as the company’s Chief Executive was to immediately get rid

of virtually all top managers of the company that had served under Booker Tate Plc to replace

them with his own to begin his leadership of the multibillion shillings sugar company.

Though he has persistently denied highly credible audit reports including parliamentary

committee on agriculture findings that implicated him in the huge losses Mumias Sugar has

incurred, Mr. Kidero is yet to be taken off the hook in relation to massive malpractices at that

company that brought it to its knees.

With the exit of Mr. Kidero, Mr. Peter Kebati entered the scene as the Chief Executive of the

giant milling company but what has clearly emerged is the fact that the giant was already

mortally wounded and slowly but surely limping to its death bed unless otherwise salvaged.

Though the government has already injected into the ailing company more than Kshs. 1 billion to

try and resuscitate it, that is a far cry for what must be done if the company has to be completely

Salvaged from total collapse and steered back to possible total recovery.

That is why the entry or recall of Mr. Johnson to head the company at its most desperate hour by

the government may be the lifeline that the company needs considering the man’s highly nonsense professional style of management that saw Mr. Kidero inherit a gold mine to manage

only to leave a gutted ghost in the hands of Mr. Kebati who did not survive at the helm for long.

However, the most critical matters here are that there must be a total overhaul of the company

board of management to be completely replaced by new blood and Mr. Johnson to be given a

totally completely free hand in the management without any external interferences – but above

all the government must also use its power to completely neutralize the notorious mafia like

cartels operating in the country’s sugar industry.

As for Mumias Sugar Company it is indeed extremely important that thorough forensic audits are

conducted from the time when Booker Tate’s management contract was terminated and some of

the most critical projects that must be put into focus should include the tarmacking and street

lighting of the Shibale to the factory road, the construction of the company’s administrative

headquarters in Mumias, the ethanol processing project, the bottled water project, the construction of the sugar cane buying centres projects among others.

Indeed it goes without saying that those who are found to have been involved in the massive

looting of the company must be brought to book and the assets and monies the company lost

recovered and restored to its rightful owner – this just part of the daunting task that Mr. Errol

Johnson is facing to turn around the country’s giant miller.