In­sists it can­not be held li­able for debts ac­crued dur­ing re­ceiver­ship Things not so rosy for flower farm as it fights Sh1.8bn debt

Stan­bic Bank in­sists that it must be paid all monies ad­vanced to the firm, even when it was un­der re­ceiver­ship

Daily Nation (Kenya) - - NATIONAL NEWS - BY BRIAN WASUNA

bwa­[email protected]­tion­media.com

As a flower farm and a bank await a land­mark court de­ci­sion that will de­ter­mine whether the for­mer’s di­rec­tors are li­able for debts ac­crued dur­ing re­ceiver­ship, the af­ter­math of the le­gal tus­sle has left be­hind ruins at what was once Kenya’s largest flower ex­porter.

Karu­turi, which is fight­ing for its very life, was once worth $90.951 mil­lion (Sh9.2 bil­lion). How­ever, most of the cru­cial as­sets it re­lied on to make it one of the world’s go-to sources of fresh roses, now look like a scene from a post-apoc­a­lyp­tic movie.

From the 29 green­houses to the planted flow­ers, ir­ri­gation and tem­per­a­ture con­trol sys­tems and the Karu­turi hos­pi­tal, a good num­ber of the cogs in the ma­chine that cre­ated an ecosys­tem sup­port­ing more than 10,000 Naivasha res­i­dents are now in poor shape, with dam­age es­ti­mated at over Sh3.2 bil­lion.

Doc­u­ments in court — which Karu­turi’s own­ers are now bas­ing a Sh12.9 bil­lion claim from Stan­bic Bank on — in­di­cate that the flower farm’s as­sets have been among the hard­est hit in the re­ceiver­ship wars.

The green­houses, for in­stance, which were val­ued at Sh2.35 bil­lion, are be­lieved to have suf­fered se­vere dam­age, with many not hav­ing their poly­thene cov­ers re­placed or re­paired.

The firm placed struc­tural dam­age at Sh230 mil­lion and dam­age to poly­thene used to cover the green­houses at Sh212 mil­lion.

“The struc­ture as [of] now can’t pro­tect the crop and the crop has max­i­mum dam­age and mor­tal­ity. Over 50 per cent of to­tal re­cap­i­tal­i­sa­tion on green­house is re­quired to make the struc­tures use­ful to roses grow­ing,” a valu­a­tion by Hectares & As­so­ciates reads in part.

This, the valu­a­tion adds, has de­nied rose plants much needed hu­mid­ity and ex­posed them to di­rect sun­light.

The rose plants too have been ne­glected as the valu­a­tion re­ports states that the farms have not been pruned to get rid of dead veg­e­ta­tion, and pests have been al­lowed to have their way around the vast land. To fix this, re­plant­ing seedlings afresh is re­quired, at least ac­cord­ing to Hectares & As­so­ciates, which says dam­age of Sh2.5 bil­lion has been done.

Sev­eral block­ages, se­vere di­rect sun­light and wild growth of un­wanted plants around the farm has dam­aged ir­ri­gation sys­tems and cost the flower farm Sh230 mil­lion.

Hectares & As­so­ciates adds that prop­a­ga­tion sys­tems, which were used to pro­vide a con­ducive growth at­mos­phere for roses have been com­pletely dam­aged and have seen Sh84 mil­lion go up in smoke.

This, the valu­a­tion firm holds, hap­pened with dam­age to the worm com­post­ing unit and other equip­ment, mostly caused by dirt. The worm com­post­ing unit aids in us­ing worms to help break down food scraps into valu­able soil nu­tri­ents.

Med­i­cal equip­ment at Karu­turi hos­pi­tal has also suf­fered dam­age of Sh10 mil­lion as equip­ment that has not been dis­closed in the doc­u­ment, was not main­tained by re­ceiver man­agers.

The hos­pi­tal is set up on two blocks and has a phar­macy, ca­su­alty area, ex­am­i­na­tion room, lab­o­ra­tory, pae­di­atric ward, gen­eral wards, den­tal clinic and an ul­tra­sound unit.

When con­sul­tancy Deloitte was con­duct­ing a court-or­dered in­ves­ti­ga­tion, it spoke to Mr Jan Rent­ing of Op­ti­mal Con­nec­tion, a firm that helps flower sell­ers search for buy­ers. Mr Rent­ing told Deloitte that Karu­turi’s flower qual­ity has de­te­ri­o­rated since 2014.

But the au­dit firm noted that Mr Rent­ing was not in­volved in the day-to-day run­ning of Karu­turi and that his com­ments were not “in­formed by facts on ac­tual op­er­a­tions at the farm”.

The Deloitte re­port, in many in­stances, gave Karu­turi’s re­ceiver man­agers a clean bill of health, dis­miss­ing claims like in­fla­tion of fer­tiliser prices, de­struc­tion of the manag­ing di­rec­tor’s lake house and poor book­keep­ing.

The au­di­tors also noted that data kept by the work­ers union was in­con­sis­tent, hence could not be used to back up claims by Karu­turi’s own­ers that re­ceiver man­agers un­der­stated sales.

For in­stance, the union claimed that on week 32 of 2015, there were 4,010,776.76 rose stems pro­duced, yet stems can only be counted in whole num­bers.

Deloitte also dis­missed an au­dit re­port by PKF, which had been com­mis­sioned by Karu­turi’s own­ers, and went ahead to in­ter­view the doc­u­ment’s au­thors. PKF’S Phanuel Gad Wekesa held that he would not have called Stan­bic’s re­ceiver­ship wrong if he had been shown all the loan doc­u­ments.

The au­di­tors noted that flower sales may have been un­der-de­clared by Sh114,363, which could lead to VAT dues of Sh15,774.

On the health of the com­pany, Deloitte noted that the com­pany was loss-mak­ing be­fore and dur­ing re­ceiver­ship, hence it was dif­fi­cult to ex­pressly blame statu­tory man­agers for its cur­rent predica­ment.

Karu­turi Lim­ited, Rhea Hold­ings and Surya Hold­ings amended the suit they filed in 2014 to stop re­ceiver­ship, and now in­sist that Stan­bic cost them bil­lions by il­le­gally tak­ing over man­age­ment of their busi­ness.

Karu­turi own­ers are seek­ing com­pen­sa­tion of Sh12.9 bil­lion and a dec­la­ra­tion that Stabic is not en­ti­tled to the claimed Sh400 mil­lion pre-re­ceiver­ship debts. They ar­gue that re­ceiver-man­agers have since 2014 mis­ap­pro­pri­ated over Sh1 bil­lion “in the pre­tence of re­coup­ing Stan­bic’s dues”.

Karu­turi Lim­ited, Rhea Hold­ings and Surya Hold­ings have ac­cused Ian Small and Kieran Day — re­ceiver-man­agers ap­pointed by Stan­bic in Fe­bru­ary, 2014 — of de­lib­er­ately run­ning down the flower farm to en­sure that there is no op­tion but to liq­ui­date it.

The Ap­pel­late court was to de­liver a rul­ing last De­cem­ber on whether or not Karu­turi should pay the dis­puted Sh1.8 bil­lion loans ex­tended to it by Stan­bic, but the judges said their de­ci­sion is not yet ready, and that the rul­ing will be by no­tice to the par­ties.

Stan­bic in­sists that it must be paid all monies ad­vanced to Karu­turi, and that the Sh1.4 bil­lion debt dur­ing re­ceiver­ship was not a loan but pay­ment of ex­penses on be­half of the flower firm.

A ne­glected Karu­turi flower farm in Naivasha on March 6, 2018.

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