, NAIROBI, Kenya, Feb 10 – The Kenya Seed Company (KSC) is set to revert to government control, following revelations of a flawed rights issue in 2001 that led to the government losing its majority stake in the company.
A Forensic report released by audit firm PriceWaterhouseCoopers (PwC) indicates breaches and irregularities of the terms and conditions for the transaction.
Releasing the report, Agriculture Minister William Ruto said government privatisation procedures were not adhered to.
“No change whatsoever took place because whatever sale of the shares that was purported to have taken place was not in line with the sale regulations or disposal of government assets,” Mr Ruto said.
These cases of irregularities saw the Government’s shareholding diluted from 53 percent to 40 percent. The government’s stake was run by the Agricultural Development Corporation (ADC).
The report indicates that the share issue raised Sh144.7 million rather than the Sh160 million as it was undersubscribed by 16 percent. It shows the share price valuation was flawed as the auditors felt that the indicative price range would have been higher than that selected by KSC.
Another allegation was the use of nominees contrary to the provision of the prospectus at the time. The agriculture minister said the government never approved the sale as a number of prerequisite conditions were not met.
“The dilution of the shares was a privatization of KSC, as such the government white paper ought to have been followed, which was not done.”
He accused the board and management of the Kenya Seed Company at the time of not giving full disclosure to both the government and the general public, which he said denied Kenyans an opportunity to participate in the privatisation.
The lack of disclosure saw a number of directors increase their shareholding in KSC.
“The sale of shares became a private affair which was not transparent and as a result persons with vested interests and persons who benefited from insider information ended up buying the shares,” he said.
Before the sale, the company’s total shares were valued at Sh10.7 million and Sh14.15 million post 2001.