----- Original Message ----- From: <alice@apc.org> To: "KIPlist" <kiplist-cl@lyris.idrc.ca> Sent: Wednesday, September 21, 2005 3:51 PM Subject: Fw: [DigAfrica] How broke company won tender
This is scandalous! more so as consumers continue to suffer the consequences of a duopoly.... ------------------------------------------------------------------------------
How broke company won tender
By Gordon Opiyo
Details of how companies that were in the red won the country's third mobile license have been exposed.
Initial investigations by the Kenya Anti-Corruption Commission into the award of the license in 2003 show that two of the major shareholders in consortium were had financial difficulties at the time of the award.
The investigations could expose what could be one of the country's biggest public tendering scandals.
At the same time, court documents from the South African High Court have shed more light into intricacies that led to the controversial award.
Audited accounts of Econet Wireless International made available to `The Sunday Standard' show that the company's financial state was so bad in 2003 that they could not qualify for an overdraft from any international bank.
Sources at the Kenya Anti-Corruption Commission say investigators were startled at the state of accounts of the two main shareholders.
The winning consortium consisted of Kenya National Federation of Co- operatives 81 per cent, Econet Wireless International 10 per cent, Rapsel and Corporate Africa each with 4.5 per cent.
The Communications Commission of Kenya required members of the consortium to have a minimum turn over of $100 million (Sh7.5 billion).
"Econet's and Kenya National Federation of Co-operatives' records could not pass any basic stage even in low capital expenditure projects," says a senior investigator at the anti- graft body.
The turn over of Econet Wireless International in that year was $8 million that of Econet Satellite Services was $9 million, while Econet Wireless New Zealand, was in deficit. Thus the total turnover of companies that qualified for the Econet bid was less than $20 million.
With the other partners not being financially stable, the consortium fell short of the minimum financial requirements by well over $80 million.
Accounts audited by the London-based Deloitte & Touche LLP paint a gloomy picture of the state of affairs at Econet Wireless International.
In one of the reports, auditors declare that Econet Wireless Limited, Company Registration No. 4149948, in the year ended June 30, 2003, urgently needed a cash injection.
The auditors say: "Each of the Group's (Econet's) Investment requires additional financing in the short term in order to develop their businesses which could then support the carrying values of these investments in the group's balance sheet.
The ability of these investment businesses to raise further financing is not known with any reasonable degree of certainty at this time. "
The auditors also declare the Econet group could not acquire overdraft facilities at the time it acquired Kenya's third GSM license.
The auditors declare: "The financial statements have been prepared on the going concern basis, however, the company is in the process of obtaining further funds to finance ongoing day to day operations and to finance future capital expenditure."
The report continues: " In this respect the directors are aware that they do not have overdraft facilities and there is an immediate and ongoing need to raise cash to fund day to day operations of the company and group and to finance the construction of the New Zealand Telecommunications network." On June 28, Co-operatives Development minister Njeru Ndwiga shocked the nation when he announced that the group that had acquired the 81 per cent stake in the third mobile company was bankrupt.
Ndwiga announced KNFC was indebted to the tune of Sh40 million against an asset base of Sh25 million.
Ndwiga said the cash-strapped organisation was unable to honuor basic financial obligations such as its Sh1.3 million monthly wage bill, repayment of a Sh10 million loan from the Cooperative Bank, Sh5.6 million in statutory deductions and Sh800, 000 in legal fees.
The minister said that the printing press worth Sh20 million was vandalised. Ndwiga's revelation came months after The Sunday Standard exclusively reported that the company was unable to honour its obligations in the mobile phone company.
As a result, the minister banned all officials of KNFC from holding any position within the co-operative sector.
The other shareholder, Manga Mugwe of Rapsel Limited had a dispute with Kenya Commercial Bank over a loan.
More details of the financial state of Econet Wireless International came into the public domain in June this year at the South African High Court. Econet had taken its former finance director, Mwaura Njiri, to court; accusing him of using confidential information he got during his tenure to hurt the company.
In the case number 05/12059 that was heard at the Witwatersrand Local Division, Mwaura defended himself against the allegations. In a sworn affidavit explaining how funds for the license fee were raised, Mwaura says, "The first applicant's (Econet Wireless International Limited) balance sheet at that time was so bad that it (Econet) was unable to obtain funds from any bank.
The First applicant in fact had been unable to raise the required amount of $27 million ."
Mwaura, during whose tenure Econet bid for the license says the company managed to get funding as a result of his personal commitment.
As Econet drags its feet on its roll out plan, the two existing mobile companies continue making huge profits as the public pays heavily for their services.
source : http://www.eastandard.net/hm_news/news.php?articleid=29062
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