Auditor General has said that the Agriculture and Food Authority (AFA) is at the risk of losing more than Sh3.1 billion in unsecured loans advanced to sugar companies without the authority of its board.
According to the Auditor-General’s office, the loans were advanced to the companies through the authority’s sugar directorate in the 2014/15, 2015/16 and 2016/17 financial years. There were no background checks on the companies undertaken by AFA before the loans were given.
The report shows that the loans were disbursed from the grants reserve that was created from the defunct Sugar Development Fund (SDF). The amounts loaned to the sugar factories also remain a mystery.
“No documentary evidence has been provided to show that due diligence was done on the firms before the loans were disbursed,” the audit report for the year ending June 30, 2018, says.
In the 2014/15 fiscal year, about Sh2 billion was disbursed, 2015/16 (Sh671.182 million) and Sh548.613 million in the 2016/17 financial year. The report adds that the loans had not been captured in the authority’s financial statements, an indication of understatement in its books of account.
Even though the report did not list the companies that were given the loans, there is an indication that the amounts were for the improvement of cane growing for the country and farmers. With the status of the farmers remaining the same even after the disbursement of the huge amounts, there are fears that most of the money may have been used to import cheap sugar even though the report does not explicitly say so.