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Treasury accused of complacency in sale of Ksh 1.4B Uchumi land

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The National Treasury is on the spot for failing to stop acquisition of Uchumi Supermarkets land valued at more than Ks 1.4 billion by UBA Bank for unpaid debt despite being in a shareholder in the retailer.

Findings by the National Assembly Finance and National Planning Committee reveals that the National Treasury failed to file an objection to a petition filed by UBA Bank seeking to acquire Uchumi Hyper Langata property registered as LR 20912/593 under insolvency petition IP25/2018 over unpaid Ksh 162 million loan.

UBA Bank had sort to acquire the property valued at Ksh 1.4 billion as per 2018 valuation to recover the loan owed to it by the troubled retailer which is currently in receivership.

“The National Treasury has clearly treated this matter casually as evident by the inability to file the objections in the court proceeding on time despite the judge even extended the time to give courtesy to the National Treasury to make pleadings,” said Kimani Kuria, Finance and National Planning Committee Chairman.

The genesis of the sale

According to the report, the government in 2016 had provided Ksh 1.2 billion in emergency shareholder loan to the retailer with approval by the Cabinet. The loan which was paid in two tranches of Ksh 500 million and Ksh 700 million was attached to the said property.

However, the Ministry of Defence through the National Lands Commission in 2019 intended to compulsory acquires the land as part of its Project 58. NLC subsequently gazette the land through Gazette Notice 1358 for compulsory acquisition.

The notice led to UBA Bank filing an application on April 7, 2021 seeking to excise is statutory rights to sell the property to recover Ksh 162m loan. The application was however dismissed by the High Court on May 19, 2022 as compulsory acquisition was underway leading the bank to drop its interest in the matter.

NLC would later delete the gazette notice on compulsory acquisition by the defence ministry on February 2, 2023 as it was unclear whether the ministry was still interested in the property.

The decision led to UBA Bank moving to petition the court to set aside earlier ruling and grant leave to the bank to enforce security of over the property by appoint a receiver for the income of the land and enter possession.

Uchumi Supermarkets Acting Chief Executive Officer on the last day granted by the court to make submissions on the matter, informed National Treasury through a letter dated October 5, 2023 on the impeding ruling scheduled for October 18, 2023 and which the latter was unaware.

It is then that Treasury requested representation by the Officer of the Attorney General (OAG) to file for postponement of the ruling to enable consultation with the government for a policy decision.

Even though the court granted Treasury three days to submit its objections, and ruling postponed to October 27, 2023 set for the November 3, 2023, treasury still failed to make submissions.

“Looking at the entire scenario, there was collusion by treasury to purposely fail to be enjoined in the case so that taxpayers can lose this very important property,” said Soi Member of Parliament David Kiplagat who had sort for a statement regarding the sale of the property.

On November 3, 2023, Justice Alfred Mabea ruled that application by UBA Bank had merit and that the retailer had failed to review and meet the terms of the company voluntary agreement which was detrimental on UBA as a secured creditor. He further observed treasury’s failure to submit objections even when the ruling was made.

Way forward

Treasury through a Notice of Appeal filed on November 14, 2023 is now seeking to be enjoined in sale and valuation of the property being a creditor and shareholder in the retailer through Kenya Development Corporation (KDC).

“Among Uchumi’s largest creditors, is the Government of Kenya. GoK loaned Uchumi Supermarket Limited Ksh 1.2b and GoK has a charge on the said property of land. So it would have been prudent to make a submission to the court in the allowable window and petition the court for grant of orders based on the public interest,” added Kuria.

The committee has now directed National Treasury Cabinet Secretary Prof. Njuguna Ndung’u to hold a meeting with OAG, UBA Bank and Uchumi Supermarkets management and submit a report within 30 days.

“It is imperative the cabinet secretary and the director of investments to act with haste and ensure that that property is not auctioned solely by the bank. Being part of investment that Kenya own through National Treasury, it has a duty to protect that investment” said Majority Leader Kimani Ichung’wa.

“We are talking about privatization and divesture of government in certain investments it had made. This is part of the business that National Treasury should be looking at,” he added.

The four bodies are expected to give way forward on how to secure and protect the property as a public asset, undertake a proper valuation of the land to ascertain its true value and explore possibility of compulsory acquisition of the property for use by the government and pay off the debt demanded by UBA Bank.