Portland resumes operations as more anomalies emerge

By Alex Kiprotich

Even as the troubled East African Portland Cement Company resumed partial operations, The Standard on Sunday has learnt that the reinstated management and directors have changed bank signatories.

The new signatories now include the board chairman, who is not an executive director, according to documents in our possession.

Usually, operational managers are supposed to operate the accounts so as not to delay company operations when a business transaction needs to be executed urgently.

A letter written to Standard Bank manager Kenyatta Avenue Branch, by the MD Kephar Tande, conveys to the bank the decision by the board to change signatories of three accounts held by the multi-billion cement factory.

East African Portland Cement Company MD Kephar Tande. [PHOTO: FILE/STANDARD]

"Enclosed please find an extract of the meeting of the board of directors for your immediate implementation," reads the letter signed by Mr Tande.

The MD instructs the bank on change of bank signatories and bank mandates account numbers 0104021138700 (KES-Current account), 0104521138700(KES-Premium investment) and 8704021138700 (USD-current account).

A week after the board was suspended by acting Minister of Industrialisation Amason Kingi, the board of directors met on January 3, and effected the changes and forwarded an extract of it to the bank. It was signed by board chairman Mark ole Karbolo and company secretary John Maonga.

Suspicious Signatories

It is noteworthy the changes were done while the directors had not been reinstated by court and the meeting was held at Dallis and Fijis offices whose managing partner is Hamish Keith and who is also a director at the cement factory. The High Court reinstated the suspended directors on January 9.

It is also suspicious that one of the signatories, Jane Kiarie who is the acting head of finance management, is not a permanent employee of the company but a consultant.

This raises the questions why the board would put her as a signatory, which is an irregularity.

In the operations of the company, four panels – A, B, C and D, consisting at least two signatories each, are constituted, and sign jointly when withdrawals are being done for normal operations of the company.

In the changes, Mr Karbolo and Tande became members of a reconstituted panel A. Ms Jane Kiarie, who had been seconded by Price Waterhouse Coopers and was the acting head of financial management, was replaced.

In panel B, Tande became the sole signatory and the two members who were previously signatories were removed.

This is an anomaly in that each constituted panel must have at least two members so that when one is away or disposed, the other member can sign the transactions.

According to the minutes, the new mandate is that panel A signatory will sign jointly with panel B and C signatories for any amount exceeding Sh50m.

This was in contrast with the minutes of December 15, before the acting minister suspended the reinstated management and which signatories who were different from the current and could only sign together for any amount exceeding Sh20m.

The Standard on Sunday also found out that the board members formed a tender and procurement oversight committee consisting of only directors whose role is to approve proposed awards by the tender committee for procurement.

"The company being a commercial entity, it was necessary for the board to oversee the activities of the internal procurement and participate more actively in approving the award of major contracts.

All proposed awards by the tender committee would be presented to this committee," read the minutes.

The committee runs parallel to the procurement committee whose membership is spelt in the Procurement and Disposal Act.

According to the minutes of the first sitting of the oversight committee which was attended by four directors, including the board chairman and the committee chairman Keith representing lafarge, it was agreed that: "The committee shall comprise of four members of the board appointed by the board and three members of the board shall form a quorum."

And in their first meeting, the committee went ahead to cancel a forensic audit that had been awarded, citing lack of experience by the firm.

Irregular awards

"It was noted that the proposed award for the forensic audit had not been awarded to any of the experienced firms in forensic audit. Upon deliberation, it was recommended that the board cancel the award for the forensic audit and to seek fresh bids for the same," reveals the minutes dated February 17, 2011.

The standard on Sunday also discloses how outsourcing of haulage of kunkur at quarry is making the cement factory incur very high costs despite a financial justification presentation by Tande while he was the head of finance management that awarding the tender to a third party company at Sh302 per tonne would reduce cost. From documents in our possession it is apparent that the presentation by the head of financial management was in conflict with the Procurement Act and Regulation, which stipulates that the head of finance is the vice chairman of the tender committee and as such should not be involved in tender evaluation, which was not the case in this matter.

It is also instrumental that the tender award was given prior to fulfilling the conditions set out by the tender committee that a signed financial appraisal justifying the business case as presented by the head of financial management should be appended to the committee, minutes prior confirmation.

Apparently, the haulage cost skyrocketed to Sh755 per tonne as the material recovery rate was only 40 per cent and therefore 60 per cent of the paid for haulage was for waste material and this factor was ignored in the financial evaluation.

Consequently the landed cost of the material at the factory now costs the company more than Sh1200, unlike previously when the company was undertaking the whole process of excavation, screening and haulage to the factory at a cost not exceeding Sh600 per tonne.

The documents in our possession show that the annual need for this material for the company is 250,000 tonnes, effecting an extra increase in cost by over Sh150 million shillings and affecting the company’s profitability.