Businessman defends controversial Sh1.1bn leasing deal with Uchumi

>>Editor's note appended at the bottom of the story.

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The dealmaker at the heart of a controversial Sh1.6 billion lease agreement with Uchumi Supermarkets Limited has defended his contract with the troubled company, saying it was above-board.

Mr Robert Kanda Nyasimi, a director at leasing company RentCo, instead describes himself as a shrewd businessman who is “an authority” in the field, and insists that his deals with Uchumi were to its advantage.

The report by audit firm KPMG questions the Sh1.6 billion sale and lease-back agreement that former Uchumi CEO Jonathan Ciano and chief finance officer Chadwick Okumu, on behalf of Uchumi, entered into with RentCo.

In such an arrangement, a firm sells an asset — in this case shelves, computers and desks, among others — to a financier, then rents the same from the buyer.

The deal injected much-needed capital into Uchumi, but what is interesting to investigators is that Mr Nyasimi, who initially represented Rentworks in the negotiations, ended up winning the bid, but this time as a director of RentCo.

'KNOWLEDGE BUSINESS'

On Thursday, he admitted that he had sabotaged Rentworks in the deal, but explained that he only did it as a businessman who wanted his own personal growth.

“This is a knowledge business,” he said. “It’s the people behind the company who matter, and that’s why RentCo ended up winning the bid.”

The auditors say Uchumi came out the loser as a result of the agreements; and the devil is in the detail. RentCo signed two leasing contracts with the retail chain, financed by Co-operative Bank and Kenya Commercial Bank (KCB). 

The first was signed on September 3, 2015, but it did not specify the value of the particular items that would be sold to RentCo.

The Strategies and Business Development Committee at Uchumi had approved a request for Sh350 million, but the offer letter approved Sh500 million.

The committee had approved the offer based on information that Co-operative Bank, the financier, would charge an interest of 12.7 per cent, but the contract Uchumi eventually signed indicated that the interest would be at 16 per cent.

The second lease, on January 14, 2015, was financed by KCB to a tune of Sh1.1 billion. The auditors, however, say they did not find any evidence of board-level discussions regarding this agreement.

A document provided to them bore the signatures of the board, but the investigators “were unable to trace evidence of draft versions of the resolutions”.

During a meeting on December 10 last year, the board said it had not signed a resolution authorising the agreement.

“They confirmed that the signatures on the second page of the resolution seemed to be theirs, but suggested that it was likely the second page was taken from another document and attached to the resolution.”

'MALICE'

Based on these findings, the forensic audit recommends that the Sh1.6 billion agreement be looked into from a legal perspective to determine whether or not it was in the best interests of the company, “and whether there was misrepresentation by the vendor”, which would render it “null and void”.

However, Mr Nyasimi reads malice in KPMG’s recommendations. For one, he says, he is being condemned unheard as, he claims, the forensic auditors never made any effort to contact him.

In a letter to new Uchumi CEO Julius Kipeng’etich, dated March 3, Mr Nyasimi complains that the forensic auditors “only consulted with our competitor, Rentworks”, and hence presented “a one-sided version of events”.

Mr Nyasini on Thursday said he had used his business acumen to his advantage, and should not be punished for it. He said that, other than Uchumi, he had successfully leased the assets of Nakumatt and Naivas supermarkets.

CLARIFICATION AND APOLOGY

It has been brought to our attention that an earlier version of this story may have implied that a forensic audit report had stated that Rentco Ltd and its director, Mr Robert Nyasimi, were responsible for forgery of a resolution purported to have been made by the directors of Uchumi Supermarkets Ltd, which approved the sale and lease-back agreement between Uchumi Supermarkets and Rentco.

We wish to clarify that although the forensic report raised questions as to the possibility of the forgery of the resolution, it did not in any way imply that Rentco or Mr Nyasimi were involved in that forgery.

We apologise to Rentco Ltd and Mr Nyasimi for the error and to our readers for any embarrassment or misunderstanding that may have been caused to them by the manner in which the story was reported.