Capital Markets Tribunal authorizes CMA to probe Kakuzi’s unsupported payments

KENYA- The Capital Markets Tribunal has authorized the Capital Markets Authority (CMA) to investigate Kakuzi PLC’s financial dealings, involving directors and a former employee.

Chaired by Paul Lilan, the Tribunal dismissed Kakuzi’s application, confirming that CMA was acting within its mandate.

The Tribunal stated, “The tribunal upholds the position taken by the respondent (CMA) that the inquiry instituted against the appellants (Kakuzi and the directors) and the evaluation of the findings on Corporate Governance dated 15th November 2022 were two separate statutory processes with different legal consequences and the latter could not be held to have determined the inquiry that was still ongoing.”

 “In the upshot, this Tribunal finds no merit in the appeal and the same is hereby dismissed with costs to the respondent.”

In a conflict-of-interest charge, company officials are accused of forming companies and approving payments amounting to millions of shillings from Kakuzi, without disclosing their interests in these entities.

According to CMA, between 2018 and 2021, Kakuzi made unsupported payments totaling KSh320.9 million for management services support.

Three officials, who are also shareholders of the management support services company, allegedly approved these payments, entering into an indefinite management support services agreement.

Additionally, an official who served as both a senior executive and a Kakuzi director outsourced his board services through a company he owns.

It is alleged that this official received payments amounting to KSh11.5 million between 2018 and 2021, which were not disclosed to the company’s board.

CMA also sought an order to prevent Kakuzi from discussing the inquiry in the media or disclosing any details of the inquiry, responses to the summons, or any unsubstantiated information related to the inquiry and this appeal.

In response, Kakuzi approached the Capital Markets Tribunal, seeking orders to compel CMA to provide documentation and evidence related to the allegations and inquiry.

In the recent financial update, the company reported a net profit of KSh347.5 million for the six months ending June 2024, a 195.8 percent increase compared to the same period in 2023, driven by a recovery in both the macadamia and avocado markets.

Due to lower market supply from traditional high-volume international markets, especially South America, avocado profits surged 42 percent to KSh951 million from KSh670 million in the same period in 2023. Similarly, macadamia earnings recovered from a KSh329 million loss to a KSh32 million profit in the first half of 2024. 

Revenue grew to KSh1.18 billion in the first six months of 2024, reflecting a market rebound from the Covid-19 pandemic period, coupled with mild weather conditions.

Kakuzi PLC, a listed Kenyan agricultural company trading on both the Nairobi and London Stock Exchange, is involved in the cultivation, processing, and marketing of avocados, blueberries, macadamia, tea, livestock, and commercial forestry.

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