Auditor: Kenya lost millions of dollars in corrupt food deals on maize meant for the poor

Auditor: Kenya lost millions in corrupt food deals

NAIROBI, Kenya — Kenya wasted up to $26 million through corrupt deals in a government program meant to feed the country’s poor, a senior private auditor said Thursday.

A government-commissioned investigation by global audit firm PricewaterhouseCoopers found that Kenya lost as much as 2 billion shillings ($26.1 million) to corruption in a program meant to provide subsidized maize to the poor. Those losses are drastic in a country where the government estimates that 46 percent of the population of 30 million lives on less than a dollar a day.

Kenya CEO of PricewaterhouseCoopers Philip Kinisu said the government-run National Cereals and Produce Board lost money by selling subsidized maize to fake companies. He also said the agency sold 277,000 bags of maize that it had not been authorized to take from emergency stocks. The government also lost money through delays in importing maize that forced Kenya to pay a price higher than planned because of rising food prices.

Prime Minister Raila Odinga, who ordered the audit and whose office hosted Thursday’s media briefing on the report, assured the public the government will take action against those implicated.

“We are committed to make this a test case. We do not want to continue just carrying out investigations,” Odinga told journalists. “We as a government are not going to cover up,” anything.

The program PricewaterhouseCoopers audited involved a program to sell from the government’s emergency maize stockpile to millers at a subsidized price. The audit investigated dealings from May to November 2008, when Kenya suffered a decline in maize production and maize flour, which is a staple, became unaffordable for hundreds of thousands of poor Kenyans.

Maize production in Kenya declined because of drought and because significant amounts of that year’s crop were destroyed during the violence that saw more than 1,000 people killed in the wake of a contentious December 2007 presidential election.

The previous year’s maize shortage led President Mwai Kibaki to declare the food crisis a national disaster in January 2009 and ask international donors to contribute $406 million toward emergency food aid. Donors asked the government to investigate corruption allegations in its subsidy program.

Martin Whitehead of PricewaterhouseCoopers said the managing director of the National Cereals and Produce Board and four other senior officials of the agency played a role in aiding the corrupt deals.

He also said that three top bureaucrats who serve as trustees of the government’s fund of the emergency maize stock were negligent for not ordering investigations or suspending further sales when millers wrote to them with serious allegations of corruption.

The government had intended the millers to buy the subsidized maize so as to sell their maize products at a reduced price to the poor. PricewaterhouseCoopers, however, found that at least 27 percent of the companies allocated some of the emergency maize stock were just trading their maize stock with established millers, for a profit.

In one case, a former lawmaker told PricewaterhouseCoopers he revived two dormant companies he owned and was allocated 20,000 bags of maize. The former lawmaker, Barre Shill, said he then sold the maize to millers, who deposited some $39,000 into his bank account for “facilitation fees.” Investigators found this was a common practice when non-milling companies were allocated the maize.

Some of the millers told PricewaterhouseCoopers they paid fees to trading companies who had access to subsidized maize.