In an audited report, the Auditor General claims that a logistics firm connected to the family of Hassan Joho obtained a contract by forgery.
Autoports Freight Terminal Limited had sought concessionary lease terms after being permitted to establish itself at the Nairobi Freight Terminal (NFT), similar to those granted months earlier to Grain Bulk Handlers Limited (GBHL), which was establishing its own facility in Athi River.
The company desired a discounted freight tariff of $450 per wagon of 60 tons for ten years, waivers of stand premium and annual rent premium for ten years, automatic renewal of its 45-year lease, and a 24-month termination clause.
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However, the KRC board voted to reject these waiver requests, stating that they were only available to firms establishing new greenfield facilities rather than those using existing terminals.
The board determined that offering comparable rates for Autoports’ operations at the NFT and GBHL’s proposed rail logistics hub at Athi River was not like for like because the NFT had already been developed with public funds.
According to the Auditor-General, the then-acting KRC managing director wrote to the Transport Cabinet Secretary (CS) claiming that the board had approved Autoports’ appeal, effectively falsifying the board’s resolutions.
“There was a letter from the acting MD (Ref: KRC/CS/MD/3/388) dated December 14, 2018, addressed to and received by the CS for Transport on December 17, 2018. The content of the letter misguided the CS that the board approved all the conditions of Autoport’s appeal and was requesting the CS’s approval. The special audit did not obtain any official written correspondence from the CS responding to this request,” says the Auditor-General in the report.
“A letter was then sent to Autoports by the acting MD (Ref: KRC/CS/MD/3/338) on the same day communicating a resolution of the board and indicating concurrence by the CS contrary to the actual events.”
“There was a letter from the acting MD (Ref: KRC/CS/MD/3/388) dated December 14, 2018, addressed to and received by the CS for Transport on December 17, 2018. The content of the letter misguided the CS that the board approved all the conditions of Autoport’s appeal and was requesting the CS’s approval. The special audit did not obtain any official written correspondence from the CS responding to this request,” says the Auditor-General in the report.
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“A letter was then sent to Autoports by the acting MD (Ref: KRC/CS/MD/3/338) on the same day communicating a resolution of the board and indicating concurrence by the CS contrary to the actual events.”
According to the Auditor-General, the special audit could not independently determine the origin of the contractual arrangement between KRC and Autoports, or the firm’s expressed interest in investing to support cargo movement via the standard gauge railway (SGR).
According to the report, the Attorney-General also provided legal advice on the deal, stating that KRC could not legally lease without using the provisions of the PPP Act because it had already been built with taxpayer funds and required no additional investment on the part of the company leasing it.
Autoports had been putting pressure on KRC for months to give it exclusive use of the freight terminal in Syokimau, which is strategically located near the SGR terminal, a move that would lock out other players and spark fierce protests in the sector.
Rival logistics firms objected to the allocation, claiming it would cost the government money and harm traders with long-term transportation contracts with other logistics firms.
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Autoports also secured a preferential 10-year deal to transport cargo from Mombasa to Nairobi at up to an 80% discount.
This is in contrast to the corporation’s tariff book’s maximum volume discount of 10%.
Autoports promised the KRC guaranteed business volumes of 1.6 million tons (or 24,615 wagons) per year in exchange for the special rate.
Autoports would ideally pay KRC Sh5.28 billion to transport the 24,615 wagons it promised to transport at the preferential rate of Sh45,000, but under the concessionary terms, this would be reduced to around Sh1.1 billion.
