Auditor terms Joho firm, KRC cargo deal irregular

The procedures followed to have a contractual agreement between Kenya Railways Corporation (KRC) and a firm associated with former Mombasa Governor Ali Hassan Joho to handle bulk cargo was not transparent and lacked the requisite documents with a clear audit trail, the Auditor General told Parliament yesterday.

An audit report has revealed that Autoports Freight Terminal Limited was awarded a contract on concessionary terms to operate at the taxpayer-funded inland cargo terminal in Nairobi in 2018 based on forgeries of board resolutions by the then-acting KRC managing director.

The firm had sought to be given concessionary lease terms after being allowed to set up at the Nairobi Freight Terminal (NFT), similar to those awarded months earlier to Grain Bulk Handlers Limited (GBHL), which was setting up its own facility in Athi River.

“There were red flags considering the contradicting communication evidenced in the board minutes, the appeal by M/s Autoports, and the communication by the KRC on the board resolutions,” said Jeff Otieno a director at the Auditor General’s office.

Revenue loss

Appearing before the Transport Committee of the National Assembly, Otieno said KRC did not adhere to the provisions of the law in entering into the lease agreement with Autoports Freight Terminal Limited.

He said the firm was operating KRC assets to perform functions statutorily reserved for the corporation as opposed to Grain Bulk Haulers which was building up infrastructure on vacant land (greenfield) to undertake its core business.

“As a result of the irregular leasing of the Nairobi Freight Terminal to Autoports, KRC could be losing revenue due to government,” Otieno told the committee which is chaired by Ndia MP George Kariuki.

The firm had asked to pay a discounted freight tariff of $450 (Sh64,400) per wagon of 60 tons for a period of 10 years, waivers of stand premium and annual rent premium for 10 years, automatic renewal of its 45-year lease, and a termination clause period of 24 months.

Valuation reports

The waivers were, however, rejected by the board saying that they were only available to firms setting up their own greenfield facilities, rather than those using existing terminal facilities.

The special audit further noted that out of the reviewed files, there were no valuation reports for nine leased land.

“The 50 acres leased to Grain Bulk Haulers was the only land that had a valuation report issued by the National Lands Commission (NLC) prior to the purchase of the 900 acres.

“The special audit, therefore, could not ascertain if KRC management used the most current independent valuation reports undertaken by the corporation’s valuers every three years to obtain the market values,” he said.

Otieno told the committee that the then-acting KRC managing director wrote to the Transport Cabinet Secretary saying the board had approved the appeal by Autoports, effectively falsifying the resolutions of the board.

The auditor did not obtain any official written correspondence from the CS responding to the request.

The special audit noted documentation that revealed that GBHL had obtained Board approval permitting them to pay nominal annual rents of Sh1 million for the Embakasi land and Sh2 million for the Athi River land, similar documentation for Autoports was not provided for audit verification.

The auditor says in the report that the special audit could also not independently ascertain the origin of the contractual arrangement between KRC and Autoports, or what the firm had expressed as its interest to invest to support the movement of cargo via the Standard Gauge Railway (SGR).