Report reveals rot in Ruto’s fertiliser subsidy programme

Auditor General Nancy Gathungu /FILE

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Details have emerged of massive irregularities, mismanagement and systemic failures in President William Ruto’s flagship fertiliser subsidy programme.

A report by Auditor General Nancy Gathungu has exposed how the infractions left farmers with substandard inputs, crippling their harvests.

The National Cereals and Produce Board (NCPB) report for June 30, 2024, has cast doubt on the Sh31.5 billion in taxpayer funds spent in the programme during the year.

One of the most shocking findings was the payment of Sh240.4 million to a supplier that did not legally exist at the time of the contract.

Fifty-One Capital African Diatomite Industries was supposed to provide organic fertiliser (GPC Original Plus), but instead delivered products that failed Kenya Bureau of Standards (Kebs) tests.

Kebs later suspended the product’s permit after tests confirmed it violated safety standards, forcing a recall.

Investigations showed the Kenya Revenue Authority PIN used in the contract belonged to an entirely different firm.

Auditors established the firm’s KRA PIN belonged to Fifty-One (K) Capital Limited, registered in 2020, with no evidence of a name change.

Gathungu has raised serious questions about NCPB’s dealings with the firm, saying the engagement bordered on fraudulent activities.

“It was not clear how NCPB board got into an agency contract with 51 Capital, African Diatomite Industries,” the report reads.

The management has been put on the spot for transacting with a nonexistent company contrary to the Public Financial Management Regulations, 2015.

“Value for money of Sh240 million and integrity of the entire procurement process couldn’t be confirmed. Also, this borders on fraudulent activities,” the auditor general said.

The report is the first since the fertiliser scandal that nearly cost Mithika Linturi his Agriculture CS job - before he was eventually kicked out at the height protracted Gen Z protests.

It paints a grim picture of how the scheme meant to cushion struggling farmers instead became a conduit for embezzlement and negligence.

While some farmers who bought the defective fertiliser were later offered replacements, many never received compensation to recover the said losses.

In Bungoma, Kakamega and Kitale, 1,960 bags of KEL fertiliser had to be swapped, but farmers were not required to return the original bags, raising concerns about accountability.

Also queried is the haphazard manner in which this was done, with no strict verification process, deepening suspicions of further mismanagement.

The audit flagged another Sh139.7 million paid to KEL Chemicals for NPK fertilisers labelled as "planting fertiliser," which Kebs later declared unsafe for public use.

Despite the red flag, Sh98.5 million worth of fertiliser had already been sold to farmers by the time the government halted distribution.

“In the circumstances, the value for money of Sh139.7 million and integrity of the entire procurement process could not be confirmed. It also borders on fraudulent activities,” Gathungu reports.

The report further reveals that Sh241.8 million worth of fertiliser and cereals for Western and Nyanza, where food production is critical, simply vanished.

The supplies, as per the audit seen by the Star, never reached the depots they were destined for.

The worst-hit areas included Kisii (Sh142.5 million), Malaba (Sh47.9 million), Bungoma (Sh34.4 million), Kakamega (Sh9.6 million), Kitale (Sh4.9 million) and Webuye (Sh2.4 million).

Possibly, the farmers were forced to buy fertiliser at exorbitant market prices, diminishing their hopes of profit.

A 50kg bag of fertiliser costs about Sh6,000 at market prices, far above the subsidised rate of Sh2,500–Sh3,500.

“No explanation was provided as to whether a follow-up had been made with the suppliers to ensure that the fertilisers and cereals not delivered were actually delivered.”

In a bizarre twist, 981 bags (worth Sh1.57 million) of fertiliser supplied by the nonexistent 51 Capital were seized by the DCI but left to rot in NCPB stores.

Gathungu flagged the situation, pointing out that no action was taken to destroy or replace them, wasting public funds.

A procurement process for Urea has also been flagged by the auditor for disregarding the law.

Gathungu cited a Sh2.49 billion tender for urea fertiliser that was awarded in its entirety to a single supplier, MEMS Distributors.

This was despite two firms tying in the bidding process; hence were required to share the supplies in agreed proportions.

It emerged the NCPB’s managing director and head of procurement overruled the tender committee’s recommendation to split the contract.

The consequences were immediate as some regions faced artificial shortages, driving desperate farmers to pay nearly double the subsidised price for fertiliser.

“The award of tender to one supplier shows impartiality in the award of the tender and as a result, litigation may be instituted by the other supplier, leading to the government losing money on legal fees,” the auditor general said.

She concluded that in the circumstances, value for money and integrity of the procurement process were in doubt.

President Ruto’s fertiliser subsidy programme was meant to boost food security and cut costs for farmers.

Instead, it became a breeding ground for corruption, leaving farmers with failed crops due to fake fertiliser.

Gathungu further highlights loss of stock at the NCPB stores and in transit between Mombasa port and the stores.

Review of the records provided for audit by the purchases section of NCPB head office revealed loss of various stock by NCPB officers totalling Sh2,613,414.

At least 20 bags of Russian-donated fertiliser were lost during the transfer of stocks (34,000 tonnes) from Kenya National Trading Corporation to NCPB.

KNTC had received instructions after consultations that the NCPB be mandated to oversee procurement, blending and distribution of the Russian fertiliser donation.

Reports indicated there was a shortage of 20 bags from the SGR dispatch and quantity received at Maisha Minerals – the firm which was to blend the fertiliser.

Further, it was also noted there was an excess of 50 bags in the dispatch from Mombasa and received at SGR Athi River.

“No explanation was offered on the variances noted, and accordingly, the recoverability of lost fertiliser and reconciliations of the fertiliser products could not be ascertained.”

The audit further reveals the financial mess at the cereals board amid a negative working capital of Sh3.1 billion.

The board made a loss of Sh992 million, albeit Sh800 million less than the Sh1.7 billion that was reported in the year to June 30, 2023.

“In the circumstances, there is a threat to the entity's going concern, and the financial statements have been prepared on a going concern basis.”

Gathungu says the conclusion was on the assumption that NCPB would survive on continued support from the government and other stakeholders.

“My opinion is not modified in respect of these matters,” she said, further revealing that past audit queries remain unresolved.

INSTANT ANALYSIS

Fertiliser subsidy is at the heart of President William Ruto’s administration's economic revival plan. The government has been positioning it as one of its success stories. With the new audit findings, the gains now hang in the balance, to the woe of farmers seeking to change their stories through the plan.