Ecobank in Sh295m row with fertiliser import firm

 

An Ecobank branch in Nairobi. The bank has been offloading expensive deposits which have seen its customer savings shrink. Photo/FILE 

 

By BRIAN WASUNA

In Summary

The letter of credit was supposed to secure the importation of urea after Bell Pacific won a tender to supply the fertiliser to the Ministry of Agriculture.

Ecobank is locked in a Sh295 million dispute with a firm that claims to have incurred losses after the lender failed to issue a promised letter of credit to support the importation of 10,000 metric tonnes of fertiliser.

 

Bell Pacific has accused Ecobank of breaching a 2009 contract in which it was to issue a letter of credit to Diamond Gate General, a trading company based in Dubai. The letter of credit was supposed to secure the importation of urea after Bell Pacific won a tender to supply the fertiliser to the Ministry of Agriculture.

Ecobank allegedly failed to issue an acceptable letter to the Dubai-based company, after which the deal fell through. The bank has in its response denied all the allegations, and said it performed its part of the deal.

Defraud

The distributor has further accused Ecobank of attempting to defraud it by illegally opening an overdraft account in its name, and depositing commission on the letter of credit amounting to Sh16 million.

The account was allegedly converted into a loan account that has since accumulated over Sh34 million, which the distributor also wants Ecobank to be held liable for.

“The bank sent a draft letter to Diamond Gate, who sought amendments they wanted Ecobank to make before confirming the letter of credit, but this was not to be. It rejected the draft letter and cancelled the contract,” said Joseph Odundo, Bell Pacific’s managing director.

He has further alleged that his company approached another supplier, Kenlet, who agreed to take a bank guarantee. When Ecobank sent a draft bank guarantee, it was once again asked to make some corrections which it allegedly failed to do once again, and the deal fell through.

The bank admitted having agreed to issue the letter of credit to Diamond Gate and the bank guarantee to Kenlet for importing the fertiliser, but denies any breach of contract. “Having performed our side of the agreement, we were entitled to charge commission and debit Bell Pacific’s account,” Ecobank says.

The bank claims that the distributor is not entitled to seek compensation from the bank. Lady Justice Jacqueline Kamau of the High Court is expected to deliver a ruling on the matter.