KMC’s profits collapse as audit uncovers debts, land disputes and unpaid bills

The financial stability of the Kenya Meat Commission (KMC) has come under sharp scrutiny after its fortunes drastically shifted from a profit of Sh180 million to a loss of Sh365 million within a year.

A new audit by Auditor General Nancy Gathungu covering the year ending June 2024 reveals the state corporation’s revenues tumbled by more than Sh1 billion, pushing it into a deep crisis.

The report exposes glaring gaps in the institution’s accounts, unresolved debt disputes, irregular property records and mounting unpaid bills, raising doubts over the sustainability of an agency that had once been touted as being on a recovery path.

The revelations stand in contrast to the optimism that followed the 2020 takeover of KMC’s management by the Kenya Defence Forces (KDF) under former President Uhuru Kenyatta, a move that was meant to revive the struggling processor and guarantee reliable meat supplies to the military and other state organs.

According to the audit, management linked the sharp 38 per cent fall in sales to prolonged drought that affected cattle quality and availability, coupled with delayed payments by government agencies.

“Management attributed the decline in sales to climate change, which caused prolonged drought affecting the quality and availability of cattle,” the report states. They also pointed to the extension of payment periods from 72 hours to 30 days as worsening liquidity problems.

“In the circumstances, the profitability of the Kenya Meat Commission is dependent on government support in the short term,” Gathungu said.

The Auditor General flagged an unsupported balance of Sh39.8 million declared as cash and bank deposits, including funds in an M-Pesa account, which lacked bank statements and other records for verification.

Disputes over government loans were also highlighted, with Treasury records showing KMC owed Sh977 million, while the commission reported Sh365 million.

Treasury had previously directed the commission to acknowledge a debt of Sh1.66 billion and provide a repayment plan, instructions which were ignored.

Land records were found to be riddled with anomalies. Properties valued at Sh17.5 billion had ownership disputes, including a parcel in Kwale worth Sh616 million without a title deed.

The auditor also raised concern over encroachment on the sheep and goat ranch, valued at Sh8 billion, where informal settlers have moved in as ownership cases drag in court.

Outstanding debts also remain a heavy burden. KMC is owed Sh692 million in receivables, of which Sh539 million has remained unpaid for more than three months, mainly from state institutions.

A tenant in a Riverside Estate house continues to occupy the property despite accruing Sh13 million in rent arrears. Additional amounts include Sh15 million owed by active tenants and Sh1 million from those who have already vacated other rental premises.

“The full recoverability of the outstanding receivables balance of Sh629 million could not be confirmed,” the report noted.

The commission itself owes Sh19 million, with the debt having been pending for over a year. Gathungu warned that the agency was in breach of the law and risked exposing taxpayers to further losses through penalties, interest and litigation.

The audit further found that 79 employees had their pay reduced to below the legal one-third minimum, raising new questions about the commission’s compliance with labour regulations.