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

Wed Sep 21 22:06:21 EAT 2005

For everyone's information very few companies when applying for a  
license have the money "in the bank" - most of the time they have  
lined up the funding which is triggered when the license is awarded.

On the question of turnover does anyone here want to claim that  
Kenya's cooperatives have less than 7 billion shillings of turnover?

I'm not taking sides here, just asking questions that I think should  
straighten what is clearly spurios reasoning...

Brian

On 21 Sep 2005, at 16:06, <alice at apc.org> wrote:

>
> ----- 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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