Shadowy firm at the centre of Sh18 billion nuts deal
- Cashewnut farming has in recent years become a thorn in the farmers’ side, its market having been infiltrated by brokers.
- Govt set out to find a bulk buyer for the more than 200,000 tonnes of cashewnuts it had collected from the farmers.
- That search apparently identified the Kenyan company, Indo Power. Its CEO told The EastAfrican the firm is a commodity trader, dealing in coffee and chicken, alcohol importation and wholesale petroleum products sale. Everything but cashewnuts.
Last week’s announcement that Tanzania had struck a $180(Sh18 billion) million deal to sell 100,000 tonnes of its cashewnut stockpile to a Kenyan company, Indo Power Solutions, was perhaps the best news that the farmers, who had earlier surrendered their crop to the state, received in years.
Cashewnut farming has in recent years become a thorn in the farmers’ side, its market having been infiltrated by brokers bent on squeezing every cent out of the trade as they increased their margins — setting the farmers’ earnings on a downward slide.
Tanzanian President John Magufuli had waded into the affair with a directive that threw all private cashewnut buyers out of the market in favour of his government, promising the farmers better earnings for their produce.
But shortly thereafter, the Tanzanian government, which had earlier promised to process the nuts and sell the finished product at a premium to increase the farmers’ earnings, appeared to have changed tack.
It set out to find a bulk buyer for the more than 200,000 tonnes of cashewnuts it had collected from the farmers, in what looked like an international invitation for bids.
That search apparently identified the Kenyan company, Indo Power, and the deal documents were quickly prepared for signing on the sidelines of the recent East African Community summit in Arusha, Tanzania on January 30.
Hussein Mansour, the Cereals and Other Produce Board director and Indo Power’s chief executive Brian Mutembei signed the deal at a ceremony attended by Tanzania’s Minister for Justice and Constitutional Affairs Palamagamba Kabudi, Industry and Trade Minister Joseph Kakunda, Bank of Tanzania Governor Florens Luoga, and Kenya’s High Commissioner to Tanzania Dan Kazungu.
But while Tanzanian officials and farmers found relief in the fact that they had finally found a buyer at what was deemed the fairest price possible in the marketplace, across the border in Nairobi questions immediately arose over the identity of the firm at the centre of the transaction.
“Indo who?” …was the common question on many Kenyan lips on hearing that the little-known company had pulled through a $180 million deal in Arusha.
Since then, questions have continued to be asked about the multibillion-shilling deal, especially coming at a time when Kenya is in the middle of a crusade to clean up its financial services sector that has more recently been discredited by the flow of millions of suspect funds.
Official registration documents show that Indo Power is a two-year old firm based in Thika town on the outskirts of Nairobi that was not known to have transacted any deals worth more than $10 million. Its owners are virtually unknown in Kenya’s big business community and its chief executive is better known in political deal making circles.
The EastAfrican investigations, including a search at the Registrar of Companies, found that Indo Power, which was registered in October 2016, claims to have offices in Indo House’s “Ground Floor, Room 6, Kisii Road, Thika.”
Its directors, Joyce Waithira Gatoho Muigai and Alice Wanjiku Gatoho, jointly own 1,000 shares with a nominal share capital of Ksh100,000 ($1,000).
Mr Mutembei told The EastAfrican this week that the company was registered in 2008 and incorporated in 2016 and the directors are his mother and his wife.
The EastAfrican could, however, not locate Indo House in Thika.
Mr Mutembei says the firm is a commodity trader, dealing in coffee and chicken, alcohol importation and wholesale petroleum products sale. Everything but cashewnuts.
It was not clear if the Tanzanian government had conducted due diligence on the company before inking the multimillion-dollar deal, whose proceeds are expected to be paid to the Bank of Tanzania within a week of the signing.
The presence of the Kenyan envoy at the deal signing appeared to signal Nairobi’s endorsement. Mr Kazungu defended his role in the deal, which many observers have described as curious, telling The EastAfrican that the embassy in Dar es Salaam was expected to facilitate the talks between the investor and the Tanzanian government. He, however, would not divulge details of the deal.
“We attended the signing of the deal because that was part of the economic diplomacy, which the mission is obligated to support. The fact that Tanzania is a grower should interest its neighbours and, as a mission, we are happy to see a Kenyan company clinch this deal. It is in our interest to nurture relations, including trade between the two countries. However, I cannot go into the specifics of the deal. I would advise you to reach out to Brian for that,” Mr Kazungu said.
Indo Power’s latest success comes only months after the Magufuli administration rejected the initial bid to purchase the cashewnuts.
Shortly thereafter, the Tanzanian leader ordered the army to mop up the crop and truck it to depots to await sale.
In Kenya, doubts have continued to be raised about the ability of Indo Power to finance such a massive deal, with analysts pointing to the fact that the little-known firm may have merely acted as a broker for a third party.
It has not been lost on keen observers that a firm that is outward looking and active in international trade has no online presence. Official registration records also indicate that Indo Power has no bankers, no lawyers, no auditors, and no company secretary.
Mr Mutembei however reckoned that “the company has expertise in connecting Tanzania with the buyers of the produce,” a pointer to the fact that it may have merely acted as a broker.
So, who is behind it and where is the money coming from? Which banks would finance such a mega deal?
FINANCING THE DEAL
Sources in Kenya’s financial services sector expressed doubts that this deal would be financed by a Kenyan bank, given the shadowy nature of the firm.
The country’s stringent financial reporting and anti-money laundering regulations would pose serious hurdles to the deal.
Mr Mutembei admitted that the money is not coming from Kenya, indicating that Indo Power had “presented a letter of credit for the total amount to the Tanzanian government as required in the agreement.”
“This LC was from international banks, and this credit line will make the purchase successful. So, the money isn’t going to be coming from Kenya’s financial system. I cannot name the banks that offered these LCs for confidentiality reasons,” he said.