Red Cross projects fail to reap expected dividends

Monday, January 20th, 2020 00:00 |
Red Cross’s Boma Hotel in Nairobi and four others have been put under receivership for defaulting NBK loans.

Kenya Red Cross (KRC) private investment platforms, used to fund its humanitarian work, have failed to reap dividends straining the organisation’s finances.

Last month, four hotels owned and managed by the organisation were placed under receivership after defaulting on National Bank of Kenya (NBK) loans.

NBK books show that Boma Hotel Nairobi, Red Court, Boma Inn Nairobi and Boma Inn Eldoret are the most indebted to the struggling lender.

On December 16, NBK appointed PVR Rao as an administrator of the hotels, alleging KRC was cooking books that indicate the businesses are financially healthy.

“None of the directors, shareholders, employees and no other person is authorised to transact any business on behalf of the company without express written consent from the administrator,” read a notice from PVR Rao.

Missapropriation of funds

Questions now abound on the viability of KRC’s private ventures amid claims that proceeds from their investments were being misappropriated or out-rightly pilfered.

During the launch of Boma Hotel, KRC secretary-general Abbas Gullet outlined  plans to expand commercial programmes.

“We want to get more into food security projects. We want to get out of handouts and food aid into agricultural sustainability,” he said.

He further announced plans to do commercial farming in Tana River where it was recently allocated 3,000 acres of land by the local Madogo Community.

KRC had for years relied on donor funds and allocations from the government which fell short of its operational budgets.

Abbas Gullet. Photo/Courtesy

In another investment move gone wrong, KRC’s ambulance leasing deal to counties, at a cost of Sh600,000 per vehicle, ran in to headwinds after some devolved units termed the fee exorbitant.

The organisation had purchased about 100 ambulances that it hoped to lease to counties, but high costs forced some of them to buy their own emergency vehicles.

Last year, Bomet county said it was weaning itself off KRC ambulances due to high operation costs and opted to purchase their own. Some MPs had also criticised the organisation for “predatory” investment that would milk millions from counties every year.

Nyamira and Homa Bay counties also questioned the price asserting it was cheaper to purchase one.

“The deal with KRC is uneconomical  because it does not have value for money,” said Nyamira Governor John Nyagarama. Kakamega and Kisii, however, signed an agreement with the humanitarian group.

And Switch TV, a station that was launched in September 2018 fired 35 of its employees in cost-cutting measures as it struggled to attract advertising.

Sources at the station told Business Hub that the media outlet was finding it difficult to break even, pointing to another ill-thought investment move by KRC.

Commercial ventures

While serving as the Special Programmes Minister, Esther Murugi was taken to task by the National Assembly over the society’s commercial ventures.

Former Wajir South MP Mohamud Sirat termed the income generating activities as cash cow ventures citing failure by Murugi to disclose the amount of money the society spent to build four hotels. He demanded information on the source of the funds and the amount of money each of the facilities generated annually.

But Gullet defended the organisation asserting that Boma Hotel in Nairobi’s South C Estate was financed through its savings and a loan from Equity Bank.

“This hotel was built using a Sh2 billion loan from Equity Bank and KRC Society also put in Sh700 million,” he said.

He said the 3.7 acres land the hotel sits on was donated by the government. The land was previously owned by the Energy ministry.

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