An independent audit has exposed fake sugar exports worth Sh2.7 billion that occurred while Nairobi Governor Evans Kidero was at the helm of Mumias Sugar Company.
The damning findings are detailed in reports by KPMG and Kenya Revenue Authority (KRA) that highlight how would-be exports were diverted to the local market, denying the State at least Sh250 million in taxes.
Produce for export is typically not subjected to 16 per cent value added tax. KRA Customs Commissioner Julius Musyoki told parliamentary investigators that in the seven-year period ending 2012, Mumias Sugar could conceivably have falsely reported that it had exported sugar.
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There were no documents at any points of exit to support the bulky exports in the system.
“We could not confirm exportation of the sugar covered since our system could not confirm the exportation,” Mr Musyoki said in an interim report dated December 12, 2014 and addressed to KRA Commissioner General. The KRA document confirms that the committee had requested it to confirm certain exportation of goods covering the period between 2006 and 2012.
The suspect exports marked the starting point of a wide range of questionable deals that could have sunk Mumias Sugar fortunes, with the company reporting Sh4.3 billion in losses in the last two years alone.
Shortage of sugarcane for crushing has been noted as the single biggest handicap for Mumias Sugar, which in recent years has been exposed to competition from newer and privately owned millers such as West Kenya. Cash flow problems saw farmers ditch the miller for other firms that could pay them in cash.
Mr. Kidero appeared before the committee in May last year but said he lacked the documents to respond to a range of questions, including the said exports. In 2008 and 2011 the largest exports were booked, about Sh1 billion, according to the report.
The value of the supposed sugar exports was ‘Free On Board’ – a term used in trade circles and which requires the seller to deliver goods on board a vessel designated by the buyer.
In its books, Mumias Sugar had indicated that it exported over 500 metric tonnes of sugar to Sudan, 301 metric tonnes to Uganda and 50 metric tonnes to the Democratic Republic of Congo between 2006 and 2008, even though sugar in all these countries is actually cheaper, according to a Parliamentary Committee.
The findings of the forensic audit have been under lock and key, with Mumias Sugar Managing Director Coutts Otolo at one time telling MPs that even he could not find it as he had only been privy to a “verbal summary”.
