[Kictanet] Fw: [DigAfrica] How broke company won tender

alice at apc.org alice at apc.org
Wed Sep 21 16:06:57 EAT 2005

----- Original Message ----- 
From: <alice at apc.org>
To: "KIPlist" <kiplist-cl at lyris.idrc.ca>
Sent: Wednesday, September 21, 2005 3:51 PM
Subject: Fw: [DigAfrica] How broke company won tender

> This is scandalous! more so as consumers continue to suffer the 
> consequences of a
> duopoly....
> ------------------------------------------------------------------------------
> How broke company won tender
> By Gordon Opiyo
> Details of how companies that were in the red won the country's
> third mobile license have been exposed.
> Initial investigations by the Kenya Anti-Corruption Commission into
> the award of the license in 2003 show that two of the major
> shareholders in consortium were had financial difficulties at the
> time of the award.
> The investigations could expose what could be one of the
> country's
> biggest public tendering scandals.
> At the same time, court documents from the South African High Court
> have shed more light into intricacies that led to the controversial
> award.
> Audited accounts of Econet Wireless International made available
> to `The Sunday Standard' show that the company's
> financial state was
> so bad in 2003 that they could not qualify for an overdraft from any
> international bank.
> Sources at the Kenya Anti-Corruption Commission say investigators
> were startled at the state of accounts of the two main shareholders.
> The winning consortium consisted of Kenya National Federation of Co-
> operatives 81 per cent, Econet Wireless International 10 per cent,
> Rapsel and Corporate Africa each with 4.5 per cent.
> The Communications Commission of Kenya required members of the
> consortium to have a minimum turn over of $100 million (Sh7.5
> billion).
> "Econet's and Kenya National Federation of Co-operatives'
> records
> could not pass any basic stage even in low capital expenditure
> projects," says a senior investigator at the anti- graft body.
> The turn over of Econet Wireless International in that year was $8
> million that of Econet Satellite Services was $9 million, while
> Econet Wireless New Zealand, was in deficit. Thus the total turnover
> of companies that qualified for the Econet bid was less than $20
> million.
> With the other partners not being financially stable, the consortium
> fell short of the minimum financial requirements by well over $80
> million.
> Accounts audited by the London-based Deloitte & Touche LLP paint a
> gloomy picture of the state of affairs at Econet Wireless
> International.
> In one of the reports, auditors declare that Econet Wireless Limited,
> Company Registration No. 4149948, in the year ended June 30, 2003,
> urgently needed a cash injection.
> The auditors say: "Each of the Group's (Econet's) Investment
> requires
> additional financing in the short term in order to develop their
> businesses which could then support the carrying values of these
> investments in the group's balance sheet.
> The ability of these investment businesses to raise further financing
> is not known with any reasonable degree of certainty at this time. "
> The auditors also declare the Econet group could not acquire
> overdraft facilities at the time it acquired Kenya's third GSM
> license.
> The auditors declare: "The financial statements have been prepared on
> the going concern basis, however, the company is in the process of
> obtaining further funds to finance ongoing day to day operations and
> to finance future capital expenditure."
> The report continues: " In this respect the directors are aware that
> they do not have overdraft facilities and there is an immediate and
> ongoing need to raise cash to fund day to day operations of the
> company and group and to finance the construction of the New Zealand
> Telecommunications network." On June 28, Co-operatives Development
> minister Njeru Ndwiga shocked the nation when he announced that the
> group that had acquired the 81 per cent stake in the third mobile
> company was bankrupt.
> Ndwiga announced KNFC was indebted to the tune of Sh40 million
> against an asset base of Sh25 million.
> Ndwiga said the cash-strapped organisation was unable to honuor basic
> financial obligations such as its Sh1.3 million monthly wage bill,
> repayment of a Sh10 million loan from the Cooperative Bank, Sh5.6
> million in statutory deductions and Sh800, 000 in legal fees.
> The minister said that the printing press worth Sh20 million was
> vandalised. Ndwiga's revelation came months after The Sunday
> Standard
> exclusively reported that the company was unable to honour its
> obligations in the mobile phone company.
> As a result, the minister banned all officials of KNFC from holding
> any position within the co-operative sector.
> The other shareholder, Manga Mugwe of Rapsel Limited had a dispute
> with Kenya Commercial Bank over a loan.
> More details of the financial state of Econet Wireless International
> came into the public domain in June this year at the South African
> High Court. Econet had taken its former finance director, Mwaura
> Njiri, to court; accusing him of using confidential information he
> got during his tenure to hurt the company.
> In the case number 05/12059 that was heard at the Witwatersrand Local
> Division, Mwaura defended himself against the allegations. In a sworn
> affidavit explaining how funds for the license fee were raised,
> Mwaura says, "The first applicant's (Econet Wireless
> International
> Limited) balance sheet at that time was so bad that it (Econet) was
> unable to obtain funds from any bank.
> The First applicant in fact had been unable to raise the required
> amount of $27 million ."
> Mwaura, during whose tenure Econet bid for the license says the
> company managed to get funding as a result of his personal
> commitment.
> As Econet drags its feet on its roll out plan, the two existing
> mobile companies continue making huge profits as the public pays
> heavily for their services.
> source : http://www.eastandard.net/hm_news/news.php?articleid=29062
> Dig Africa site welcomes you to join us at
> http://www.yahoogroups.com/group/Digafrica
> Also if you are interested to join a Swahili/English discussion group 
> click
> http://www.yahoogroups.com/group/kiswahili
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