Auditor General Nancy Gathungu has termed shareholding changes at the Kenya National Shipping Line as irregular.
In a new report covering the period to end of June 2023, the auditor has flagged the selection of SAS Shipping Agencies Services as a shareholder in KNSL.
She said the regularity of the selection of the company as an equity holder in KNSL could not be confirmed.
SAS is a wholly owned subsidiary of Swiss shipping firm Mediterranean Shipping Company.
It entered into a deal with the government to own part of KNSL in 2018; changes which saw Kenya Ports Authority’s shares in the shipping line company reduce to 53 per cent.
SAS’s shareholding was increased to 47 per cent, being what was shed from KPA, and other firms that had stake in KNSL - Unimar and DEG [13 per cent each].
“Documentary evidence detailing how M/S SAS Shipping Agencies Services (SARL) was selected as an equity holder in KNSL was not provided for audit review,” Gathungu said.
She added that no documentary evidence was provided to prove that the National Treasury conducted due diligence on MSC and its affiliates conclusively.
This would be in order to adhere to the laws, regulations and procedures for achieving better value for the Kenyan public.
Kenya entered into a deal with MSC in 2018 to own 47 per cent of the national shipping line, leaving 53 per cent to KPA.
In the reorganisation, 19,335 ordinary shares of Sh1,000 each was allocated to the KPA, increasing the Authority's shareholding from 70,023 to 89,358 shares.
An additional 55,742 ordinary shares was allocated to M/S SAS Shipping Agencies Services SARL in respect of Sh54,346,500 paid to KNSL by M/S Heywood Shipping Company Limited.
SAS also injected Sh1,395,500 paid by M/S SAS Shipping Agencies Services SARL - all totalling to Sh55.7 million.
Further, the reorganisation of share capital entailed transfer of 11,750 ordinary shares of Sh1,000 each by M/S Unimar and a similar number of shares by M/S DEG to M/S SAS Shipping Agencies Services SARL.
As a result of the changes, KPA ownership dropped from 75 per cent to 53 per cent, while SAS’s portion went up from zero to 47 per cent – having taken over from Heywood, Unimar, and DEG.
Gathungu has also taken issue with the shipping line for failing to disclose that there was a court challenge to parts of the 2018 MOU.
Parties are in court to challenge the transfer of the operation and management of second container terminal two (CT2) to the private players.
Dock workers, through their union, sued to stop the implementation of an agreement signed between KNSL and KPA on January 24, 2022.
The court case is seeking to stop the transfer of the operation and management of CT2 to KNSL.
Coast MPs have fought the bid by the government to revive the dying KNSL, citing massive private interests as clouding the deal.
Gathungu has also raised concerns that the company did not fully disclose earnings from a case it won in a Tanzanian court.
While records showed the court compensation was Sh475 million, only Sh421 million was accounted for, leaving Sh54 million unexplained.
Management explained that the variance was as a result of professional and legal fees amounting to Sh44,088,684 and provisions of Sh10,074,670 to cater for related court contingencies.
“However, no fee note was provided in support of the payments,” Gathungu said, adding that the accuracy and completeness of the court compensation couldn’t be confirmed.
