A local firm easily bagged a Sh1.1 billion tender to supply edible oils without applying for it and despite having not previously traded in the commodity, senators heard on Thursday.
The firm secured the lucrative deal through an email notification and was never required to provide proof of certification to supply goods fit for human consumption although it was the first time it was making such a delivery.
These revelations emerged as a Senate committee commenced investigations into the controversial Sh16.5 billion edible oils scandal.
Appearing before the Senate committee on Trade and Industrialisation, Charma Holdings Limited Director Ruth Kinyanjui shocked the committee when she revealed that she was approached by an officer from Kenya National Trade Corporation (KNTC) to supply edible oils despite having never supplied such a commodity before.
Ms Kinyanjui, who is the sole director of the company, disclosed that although her firm, which has been in existence since 2008, is among KNTC’s pre-qualified suppliers, it had never dealt in edible oils.
She said that they were contacted through email by a KNTC officer to send their quotation for the supply of edible oils. The firm has been supplying commodities to Kenya Police, General Service Unit and National Youth Service.
The director said she has been in business for over 10 years supplying different commodities. However, it was the first time her company was supplying edible oils.
Ms Kinyanjui said her firm was contracted to supply 599,000 20-litre jerrycans of cooking oil but they supplied 499,224 at a market price of $23 per jerrycan. Using an exchange rate of Sh100 to a dollar, the total cost of the tender amounts to at least Sh1.14 billion.
She told the committee led by Kajiado Senator Seki Lenku that the tender was never advertised but they learnt of the opportunity because they were approached.
“It was not advertised but we learnt of the opportunity from one of the officers from KNTC being one of their main suppliers,” said Ms Kinyanjui.
“We have been supplying different commodities to several government entities but we had not gotten the opportunity to supply edible oils but we said we can try our hand at it,” she added.
Busia Senator Okiya Omtatah pressed the director to reveal to the committee the identity of the KNTC officer who approached her and the mode of approach.
“I don’t know the person but it was either Jessica or Amos who wrote the email asking us for an offer of prices,” she said.
When asked when she was contacted, she responded: “It was a long time and I don’t know the exact date the email was sent.”
Ruth Waithira Kinyanjui before the Senate Standing Committee on Trade, Industrialization and Tourism on August 22, 2024.
Photo credit: Dennis Onsongo | Nation Media Group
But Mr Omtatah pressed her further, asking if KNTC asked them to demonstrate their capacity to supply the commodities, tax compliance and whether the company went through a pre-qualification process.
“We were part of their suppliers so we did not go through pre-qualification. After the email, we sent our offer, which they responded to,” Ms Kinyanjui said.
Mr Omtatah further asked if KNTC asked them for a certificate to show that the firm is qualified to import commodities for human consumption. She said the re was no such demand.
Nominated Senator Esther Okenyuri asked Ms Kinyanjui to explain why the commodities they supplied had the same packaging as another supplier, Purma Holdings Limited. She also wanted to know why apart from Charma Holdings having uniform packaging and sourcing with Purma Holdings, why the two firms are also domiciled in the same building.
“Where we got our oils, we don’t have powers to limit them from selling to anyone else because they are not our own manufacturer. So, if any company that got the order sourced from our source, then we have no control over that,” said Ms Kinyanjui.
“I don’t know if Purma also supplied edible oils. We are just one of their buyers and we are in the same block but not sharing the same door.”
Uasin Gishu Senator Jackson Mandago asked why the procurement was done in US dollars yet they are a local company. He also sought to know why Kenya Bureau of Standards (Kebs) first said the commodities were not fit for human consumption only to later say they were.
In her response, Ms Kinyanjui disclosed that everything was being done by KNTC; the testing was done by Kebs through SGS, a world leading testing, inspection and certification company, before the commodity was imported into the country from Malaysia.
She also said that KNTC even opened a letter of credit on their behalf and all the documents that were coming from the bank were forwarded to the agency.
However, she could not tell the committee the name of the port where the inspection was done, prompting nominated Senator Betty Montet to ask her to provide the name of the port, date of inspection and the documents of inspection.
“So your work was just to forward documents, get the commodity and KNTC did everything else because they were to benefit from all the tax waivers?” Ms Montet asked.
Marsabit Senator Mohamed Chute wondered why KNTC had to open a letter of credit for a middleman yet it can import directly from the international market. He also wanted to know whether the company was among those that inflated their prices by $7 after the contract had been signed.
“The country has lost a lot of money in this deal as it was initiated by cartels who increased the costs and that is why goods are lying in go-downs because they cannot sell. Some companies were instructed to refund the money received after inflation of the price but only some have complied,” said Mr Chute.
The committee directed Ms Kinyanjui to provide original tender documents, offer letter, and offer price.
Appearing before the committee, KNTC General Manager for Strategy Lucy Anangwe said only three suppliers—Charma Holdings, M/s Multi Commerce FZC and M/s Shehena Commodity—were contracted by the government agency to supply the edible oils.
According to a special audit report released early this month, Multi Commerce is a foreign company that was incorporated in Kenya four months after signing the KNTC deal.
She admitted that several companies were pre-qualified but their contracts were cancelled, with only the three receiving financing through a letter of credit.
Ms Anangwe said the commodity was procured under special procurement procedures and the decision was made by the project implementation unit established for the task.
She was responding to a question from Senator Mandago who wanted to know how the procurement process was done.
“Is it your organisation that decided to use the procedure or it was an external organisation that imposed it on you because in there lies the culpability of what happened,” said Mr Omtatah.
“We want to see the criteria used during pre-qualification and the standards set. What due diligence was carried out on the companies and the history they had in importing food commodities,” he added.
But Ms Anangwe told the senators that the committee established under the project implementation unit was in charge of the procurement of the firms for the supply of the commodity.
She surprised the committee when she said that substantive managers who were in the evaluation committee for the importation have all been dismissed.
“Currently, we don’t have substantive management in place. Only two general managers and HR manager while the rest are acting,” she said.
According to the auditor’s report tabled in Parliament on August 6, out of Sh16 billion, some Sh9.3 billion was allegedly paid to firms contracted by KNTC to help the government to import the edible oils so as to lower prices.
The report indicated that firms contracted by KNTC delivered 2.5 million jerrycans of 20 litres each out of the 2.8 million the State merchant ordered.
However, it emerged that unscrupulous dealers sneaked a consignment of edible oils into the pack to enjoy tax exemption.
The audit also flagged the deal, saying the products arrived late and did not make the much-needed impact on prices.
Interestingly, KNTC has no record of container numbers or quantities of jerrycans delivered by the mysterious supplier.
When KNTC was handed the mandate in November 2022, cooking oil was trading at Sh344 a litre, and went down to Sh328 in December. But the first consignment by the contracted firms landed in May 2023, when the price had dropped to Sh319 per litre.
KNTC made peak sales later in September and November 2023 when the prices were Sh316 and Sh326 per litre.
The corporation has now been forced to sell the products at throwaway prices and some of the imported edible oil, the report indicates, could be missing.
The Senate committee now wants the KNTC board to appear before it to shed light on the use of special procurement procedures, why they do not have a substantive managing director as well as provide a complete list of contracted suppliers.
“The board and the members of the project implementation unit have to appear before us because there are a lot of things that need to be clarified,” said Mr Lenku.
