House team rejects Sh1bn KMC plant plan

KENYA – A parliamentary committee has rejected the planned construction of a new meat processing plant by Kenya Meat Commission (KMC) at a cost of Sh1.1 billion.

KENYA – A parliamentary committee has rejected the planned construction of a new meat processing plant by Kenya Meat Commission (KMC) at a cost of Sh1.1 billion.

The Public Investment Committee (PIC) instead asked the KMC management to modernise the current facility as opposed to building a new one.

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The House team, chaired by Eldas MP Adan Keynan, says in a report that KMC did not have a feasibility study to justify putting up a new facility.

“Their decision was informed by the bidders’ opinions,” Mr Keynan says in 20th report of PIC on the accounts of 64 State corporations that was tabled in the National Assembly before the House went on recess.

The committee observed that KMC was given funds to modernise the plant but it opted for a new one.

 “KMC is an export-licensed facility. Initially, KMC wanted to modernise the machinery only but they did an audit that recommended building a new factory and replacement of all machinery.

 “They also relied on an incomplete technical study to inform their decision. Further, they prepared a tender for modernisation of the commission, but the bidders gave the opinion that it would be better to build a new facility,” says the report in part.

The committee observed that despite KMC adding an addendum to the original tender to build a new facility and re-advertising, only six bids were received from the tender.

According to acting managing commissioner James Tendwa, KMC received bids of Sh1.1 billion from each of the four bidders and two bids of Sh3.3 billion for modernisation of the Athi-River based meat factory.

 “KMC has old machinery and a large workforce of 1,165 persons. We commissioned the Kenya School of Government to do a study on the best number of staff. Though the study is yet to be completed, the recommendation is 300 staff,” says Mr Tendwa in his submissions to PIC.

He told lawmakers during the hearings that although the government has given KMC capital funds to rehabilitate the factory, KMC had huge operational debts, for which the government has not given operational capital to clear.

 “The commission used the money for the capital funds to clear the debts,” said Mr Tendwa.

He told committee that the commission incurred a loss of Sh170,348,721 (2010 profit Sh124,323,278) thereby reducing the accumulated retained earnings from Sh79,276,707 to negative Sh91,072,014.00.

 “Evidently therefore, the commission’s financial performance is precarious and if measures are not put in place to improve and reverse the trend, the commission may in the future face financial setbacks,” the committee says.

Mr Tendwa said the plant is currently operating below capacity (30 per cent capacity) and this has brought in operational inefficiency.

“The cost of operation is not competitive both at local and export markets. Inefficient old machines have also contributed to high cost of operation and wastage, due to frequent break down, power consumption and more manpower.

This has forced the commission to rely on the Exchequer in order to remain afloat,” he said.

The House team now wants the Privatisation Commission to consider the privatisation of KMC.

 “The committee recommends that the appointing authority reconsiders the appointment of the board chairman, Mr Taraiya Ole Kores and the conflict of interest his position may present in the efforts to revive KMC,” the report says adding that Mr Kores is a livestock exporter.

Mr Tendwa proposed long tenures for the senior management and board members to provide stability changes in the senior management and the board  have been happening after every one and half years thereby affecting policy implementation.

January 7, 2014; http://www.businessdailyafrica.com/Corporate-News/House-team-rejects-Sh1bn-KMC-plant-plan/-/539550/3025050/-/1h7pn7z/-/index.html

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