Corporate News
Njenga Karume rose from selling charcoal to owning and running
enterprises worth billions of shillings by the time of his death in
February 2012. PHOTO | FILE
By BRIAN WASUNA, bwasuna@ke.nationmedia.com
In Summary
- A 2012 audit by PriceWaterhouseCoopers (PwC) shows that the multi-billion-shilling estate was nearly insolvent by the time of Mr Karume's death.
- The report shows that Karume’s nine companies with assets worth billions of shillings made a paltry Sh5 million profit between 2008 and 2012 and that the business magnate’s enterprises mainly survived on borrowed funds and asset sales during the audit period.
- The audit report shows that by 2008, the nine Karume companies were indebted to the tune of Sh1.1 billion, a figure that rose to Sh1.2 billion and Sh1.3 billion in 2009 and 2010 respectively.
The multi-billion-shilling business empire that
Kiambu businessman and politician James Njenga Karume left behind was
already saddled with a heavy load of debt and mismanagement at the time
of his death, an audit report shows.
The report shows that the business empire — perhaps Kenya’s
best known grass-to-grace story — was already on the throes of decline,
having been stricken by bad book keeping, insider lending and irregular
property transfers.
Mr Karume, who was known to many as an astute
businessman, rose from selling charcoal to owning and running
enterprises worth billions of shillings by the time of his death three
years ago.
The report, filed in court as part of the evidence
in the ongoing battle involving Mr Karume’s children and the managers of
a trust in which he left the wealth, also reveals for the first time
the extent of the business empire he left behind upon his death in
February 2012.
The Njenga Karume Trust, formed only nine months
before his death, is an empire of nine firms that are managed through
three holding companies — Jacaranda Holdings (hospitality interests),
Karume Holdings (for the real estate interests) and Cianda Holdings for
agribusiness.
Mr Karume’s hospitality empire includes Jacaranda Hotels in Nairobi and Mombasa, Lake Elementaita Lodge and the Village Inn.
Karume Investments operates Cianda House in Nairobi
and several apartments in Nairobi, Limuru and Kiambu. Cianda Holdings
runs the Cianda and Kachoraba farms.
The September 2012 audit by PriceWaterhouseCoopers
(PwC) shows that Karume’s nine companies with assets worth billions of
shillings made a paltry Sh5 million profit between 2008 and 2012 and
that the business magnate’s enterprises mainly survived on borrowed
funds and asset sales during the audit period.
“The trading performance across the group can be
broadly described as being a mix of entities consistently posting small
profits and others posting small losses. For the entire period from June
30, 2008 to May 2012, aggregate net profit was reportedly around Sh5
million,” the report says.
Trustees of the Njenga Karume Trust filed the audit
report in court to counter allegations by three of the late Karume’s
children — Lucy, Samuel and Albert Karume — that they have run down the
companies since taking control in 2012. The children are seeking to oust
the trustees.
Margaret Nduta Kamithi, the late tycoon’s sister
and one of the trustees, has in response said that the court case is
part of a coup the children are executing to overthrow the will of their
father and take full control of his billions.
The audit indicates that in the five-year period
covered by the PwC investigation, Mr Karume’s companies only managed to
stay afloat by borrowing money and selling some of its assets, most
notably a parcel of land sold to the Kenya University Staff Retirement
Benefits Scheme (KUSRBS) for Sh1.1 billion in 2012.
The report also shows that some of the insider
loans the Karume firms extended to one another were neither repaid nor
accounted for, something the auditors warned was a point of concern.
In some instances, Mr Karume himself loaned the companies money, with some shareholders also chipping in.
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