The Jomo Kenyatta University of Agriculture and Technology has been put on the spot over the noodle manufacturing venture it entered into for extra income.
JKUAT has reported losses in the project to the tune of Sh3 million.
Auditor general Nancy Gathungu warns the varsity of a bleak future if nothing is done to change the trend.
“If strategies are not in place to reverse the trend, the company is likely to face financial challenges in the near future,” the auditor said after a review of the project’s books to June 2019.
The project recorded the loss in its first year of operation despite the varsity sinking over Sh300 million in capital outlay to set up the noodles project.
The project was established in January 2018 to produce noodles for sale in the market by commercialising the ‘yummy brand of noodles’.
JKUAT said the company developed 31 variations of noodles and conducted sampling of the same within focus groups comprising young mothers, students and the general university population.
But in its first year, the company reported gross revenue of Sh250,000 with a net loss of Sh3.2 million, which the management said should not be a cause for concern.
“It should be noted that company had just been handed over from Nissin Foods and this first year was spent putting together systems necessary for the standalone company,” the varsity said in a chairman’s statement to auditors.
Even so, Gathungu has also queried the composition of the company in terms of shareholding and ownership, casting doubt if the university has full control of the Sh381 million owners capital.
The auditor said a search at the Companies Registry revealed that the company was jointly owned by an international food company and JKUAT at 70 per cent and 30 per cent shareholding respectively.
“Although management provided a duly signed share transfer certificate and resignation letters of the directors of the international food company making JKUAT the sole shareholder, it is not clear why the transfer has not been effected at the company’s registry,” the auditor report reads.
“In the circumstances, it was not possible to confirm the ownership status of the company.”
JKUAT, in its explanatory notes, held that the cost of sales was low as “the factory was still doing test runs therefore hardly making sales.
“The company is in pursuit of funding to help build on proper working capital.
"The company is still focusing on getting the right formulation to hit the market. This will enable full production capacity,” the varsity said.
(Edited by Bilha Makokha)
