Safaricom Investment Co-operative (SIC) failed to conduct enough due diligence when it signed a contract with real estate developer Sycamore Pine Limited in 2020 to act as a sales agent that left Kenyans at risk of losing money.

When SIC penned the deal in 2020, in which it was to receive a 4.5 per cent commission for every unit sold, Sycamore, which had just been registered in October 2019, did not have all the necessary documentation for the Samara Estate Development project.

But SIC proceeded with the deal on hopes that the developer would later complete and furnish it with all the paperwork for verification of a company that had little experience in Kenya’s real estate landscape.

The only safe provision, which rescued potential homeowners from loss, was the requirement that allowed the interested customers to deposit their money into an escrow account held by a law firm, Murui Mungai and Company Advocates, hired by the developer.

While appearing before the National Assembly’s Finance and National Planning Committee investigating the matter of alleged fraud in the project, SIC CEO Sarah Wahogo said the approval of the developer’s documents took longer than anticipated, but the cooperative was still confident to be part of the deal.

“As a co-operative, we’ve grown by leaps and bounds by the level of due diligence we do. What gave us confidence [in the project] was that there were plans to have the documents approved. Unfortunately, approvals take long,” she told the Kuria Kimani-led Committee.

“The money was going into an escrow account agreed between the investors and the developer,” Wahogo added while calling on the committee to help address many challenges affecting the real estate industry, among them taxes, regulation, and market dynamics.

The Samara project stalled in 2021 on court order after the residents of Migaa Estate opposed the construction of high-rise apartments within their neighbourhoods, promoting SIC to terminate the agreement, 1,200 units were to be constructed. The society is an interested party in the petition, which will be heard on November 22.

Once SIC identified a customer, he/she was required to sign purchase agreements with Sycamore Pine Limited and directly deposit at least 20 per cent of funds into the developer’s account.

A two-bedroom unit cost Sh2.95 million, while a three-bedroom went for Sh3.95 million. Since the halt of the project in August 2021, customers who invested in the project have been demanding refunds, citing fraud.

SIC told the committee that since the termination, it has held several meetings with eight victims of the project to facilitate a refund amounting to Sh10.152 million. But it was until 18 October that five of the victims received their full combined refund of Sh6.158 million.

The remaining three are set to receive their Sh3.994 million total refund next week. This was just a few days after the Committee had lodged an investigation over the matter.

“I want to confirm that 5 clients out of 8 have been paid. For the three, I have a commitment from the lawyer to make the repayment. Their funds are available, and the law firms will release the money on Monday [6th November],” said Wahogo

Commissioner for Cooperative Development David Obonyo told the Committee it was strange for SIC to engage in such a marketing deal despite having its own successful real estate investments, including Sh568 million Miran Residence phase 1 currently under construction.

Sycamore only hired Safaricom. I think this is a very funny issue. I have also informed them that they should refrain from a business of the third party because it is tainting their image,” said Obonyo.

Since its inception in 2009, SIC has enrolled over 5,000 members in Kenya and the diaspora. In 2022, SIC recorded a 37 per cent profit growth to Sh276 million.