[ad_1]
President William Ruto’s name has been dragged into a parliamentary committee hearing where senators are probing the alleged fraudulent acquisition of shares in East African Breweries Limited (EABL).
This comes as MPs raised questions over the recent acquisition of an additional 15 per cent stake in EABL worth Sh22.7 billion by British multinational alcoholic beverages company, Diageo Kenya Limited.
The lawmakers poked holes in the deal inked in March this year, which increased Diageo’s shareholding in EABL from 50.03 per cent to 65 per cent.
The development follows a petition filed in the Senate by Rono Nicholas, sponsored by Bomet Senator Hillary Sigei, alleging fraudulent activities within EABL.
Appearing before the Senate Trade Committee on Thursday, EABL Chief Executive Officer Jane Karuku defended the transaction, describing it as above board and a case of “willing seller, willing buyer”.
Ms Karuku explained that Diageo acquired the additional stake through a public offer to all EABL shareholders for Sh22.7 billion, which was approved by the Capital Markets Authority and relevant regulators.
“This transaction was the largest single foreign direct investment in the Kenyan stock market in 2023, with Diageo paying a total of Sh22.7 billion to EABL shareholders in the market,” Ms Karuku told the committee, chaired by Kajiado Senator Lenku Seki.
“This was acknowledged by His Excellency the President Dr Ruto on March 22, 2023 during the bell ringing ceremony at the Nairobi Securities Exchange as a vote of confidence by foreign investors in the local market.
The EABL boss downplayed the petition’s allegations that Diageo’s recent acquisition of shares was a fraud, claiming that the shares were acquired for onward transfer to a new buyer at a much higher value for the benefit of Diageo shareholders.
The petitioner alleged that the onward sale of the shares was agreed with the Heineken/Castel Group and that the purchase of the additional shares was intended to ensure that the Heineken/Castel Group would have a controlling interest in EABL after the onward sale.
Mr Rono further alleged that the onward sale was prompted by Diageo’s desire to fraudulently evade tax liabilities that EABL had allegedly hidden through massive bribery of KRA and National Treasury officials, claiming that the company had manipulated the water and alcohol content of its products to change the tax bracket of its products, allegedly managing to evade more than Sh875 billion in taxes to date.
But Ms Karuku told the committee that there was no evidence to substantiate the wild claims made by the petitioner and asked the committee to treat the petition as a false allegation.
“As part of its disclosures in the 2023 public offer, Diageo Kenya disclosed that it had not entered into any agreement or arrangement to sell EABL shares to any other person. It is our position that the petition lacks credibility and has no legal or sound basis,” she said.
However, Uasin Gishu Senator Jackson Mandago expressed concern over Diageo’s recent moves to sell some of its beer operations in the African market to the Castel Group, citing Cameroon, South Africa, Namibia and Ethiopia.
The MP asked Ms Karuku to assure Kenyans that Diageo’s recent trend should not be taken to mean that the company has little interest in beer but in the spirits business.”The petitioner was informed of this trend of buying shares and later selling.
Was it a mistake to have Diageo on board as an investor? Can we confirm that Diageo does not intend to sell its shares to anyone else at a later stage?” asked Mr Mandago. Nominated Senator Esther Okenyuri also asked Ms Karuku to clarify the allegation that Diageo intends to sell its shares in EABL at a later stage.
“The last time the Capital Market Authority appeared before us in August, they were non-committal on this issue.Please come clean so that these allegations don’t remain as serious as they are,” said Ms Okenyuri.
Ms Karuku told the committee that EABL, the largest production facility in sub-Saharan Africa, was like a jewel to Diageo and that there were no plans that she was aware of to sell the shares to another person or company.
“We have no information that they are going to sell their shares to another person. The rate at which they are investing in the country does not show that they are going to sell to anyone. The investment is a signature and a signal that we are a jewel to them,” Ms Karuku said.
But Busia Senator Okiya Omtatah challenged the EABL boss to tell the committee if there is anything in the law that prevents Diageo from selling its shares.
He complained that since Diageo entered the Kenyan market, there had been deliberate downsizing, asset sales and a reduction in EABL’s corporate social responsibility. This is on top of the repatriation of profits.
“How can we take you at your word when this is the kind of organisation we have been dealing with?” asked Omtatah.
But Ms Karuku said Kenya was a free market and there was nothing stopping an investor from selling his shares.
Kiambu Senator Karungo Thang’wa added that Diageo had been on a sales spree of assets belonging to EABL.
“Can we say that EABL is on the verge of disappearing? What is the motive for selling the assets like the land and the Ruaraka headquarters?” he asked.
However, the EABL boss defended the company, saying it had actually invested Sh96 billion in the country and that the assets had been sold because they probably did not make sense for the company.
She also denied any repatriation of profits, saying they have been distributed to shareholders in the form of dividends. “These are decisions made for the good of the business at the time. They looked at what assets were working for the business.
Let’s be fair and look at both sides of the coin,” she said. Senator Mandago asked Ms Karuku to explain why EABL used to have 6 000 employees but now only 1 400, questioning how investments were made without any correlation to operations. “This is the petitioner’s argument that the investor has taken much more than it has invested back. Why are the numbers small and not correlated to the investment?” he said.
However, Ms Karuku said the 1,400 were direct employees but the company outsourced other workers including cleaners, trackers and the number could even be more than 6,000. She added that Diageo had invested in the market rather than divesting.
“We have protected our people and continued to pay dividends to our shareholders and also to our suppliers. We have also increased our asset base to Sh110 billion over the last 10 years,” she said.
[ad_2]
Source link