Displaying items by tag: EAPCC

Kenya: Court papers have started to reveal why the Kenyan government may have dismissed the directors of the East African Portland Cement Company (EAPCC) on 22 December 2011. The papers allege that the board spent US$11m on goods without following competitive bidding and in another instance overruled the tender committee to vary the terms of a clinker contract.

"Those purchases were made by direct procurement or restricted tendering," an affidavit by acting Industrialisation Minister Amason Kingi said. "These processes were not authorised by the Public Procurement Oversight Authority."

According to the affidavit, the irregular purchases were made between 15 August 2011 and 30 November 2011. Mr Kingi said that the Kenya National Audit Office had raised a query over the expenditure of US$140,000 that was overpaid to the chairman, Mark ole Karbolo, and the suspended directors.

The affidavit also said that the board changed the terms of a contract to supply 140,000t of clinker after the supplier, Sanghi Industrial, requested to increase the price after supplying only 67,000t. After the company's tender committee rejected the increase, the board granted the variation which ended up costing the company US$850,000.

"The suspended board overruled the tender committee and awarded a price increase for the delivered products as well as for further products to be delivered," said Kingi. The government said that it could not reveal more without jeopardising a forensic audit currently under way.

The ousted directors have previously blamed their removal from office on a multi-million dollar tender that the government wanted swayed in favour of a local supplier. They said that the award of the kiln upgrade contract to South Korean firm, Posco Plantec, in late November 2011 had upset government officials who wanted the tender given to construction firm H Young for US$43m.

EAPCC's directors settled on Posco Plantec on the strength of its financial bid of US$21m. H Young, however, had a superior technical bid. Karbolo and three other directors, Titus Naikuni, Hamish Keith and chief executive Kephar Tande, are seeking to reverse the minister's decision, arguing that EAPCC is not a state-controlled company.

Kenya: East Africa Portland Cement Company (EAPCC) has severed a clinker supply contract, thought to be worth hundreds of thousands of US dollars, with Bamburi, its anchor shareholder. The decision marks the end of a four-year deal that had raised questions over potential conflicts of interest due to common shareholding and market rivalry of the two listed firms. Although EAPCC is a listed firm, it is considered a state corporation, with the majority of its shares held by the government. This makes it difficult to import its own clinker due to stringent Public Procurement Oversight Authority's rules.

The cement maker has now signed a new deal for supply of clinker with rival National Cement, which will see EAPCC save about US$3.10/t. EAPCC's managing director, Kephar Tande, said, "We found out that other players were offering lower prices, which means we could leverage on lower clinker costs to improve our profitability."

EAPCC's decision to single source the supply of clinker from Bamburi alone raised eyebrows when it was signed in 2007. Bamburi, through its parent company Lafarge, controls 41.7% of EAPCC. Lafarge also holds a 73% interest in Bamburi Cement and until 2009 held a 15% stake in the country's other cement maker, Athi River Mining. Cross ownership of the three cement companies has in the past led to accusations of unfair business practices, including collusion over price setting.

National Cement MD, Raval Narendra, said that EAPCC was now its biggest client. "We are the biggest clinker importers in the region now because we have established contacts in Europe and the Emirates. We signed a supply contract with EAPCC for 0.15Mt for 2011," he said.