Acting CEO Peter Gitonga has been accused by people within the company of planning a major swoop even as fortunes dwindle with majority shareholder billionaire Naushad Merali reported to by eyeing other business lines
Gitonga, a board member, was appointed as the acting managing director of the sinking ship mid-last year.
Gitonga was previously Naushad Merali’s personal assistant. Merali is the majority shareholder with a 72.15 per cent stake, and currently lives in Dubai.
Of major strategic moves is the involvement of billionaire Chris Kirubi, whose kin Andrew Musangi bought substantial stake in the company in 2019.
The billions worth of land and moveable assets is what has driven the Mt Kenya businessmen to the company with indications it might be closing operations before sale of the prime Mombasa Road property and land assets.
Mr Ngigi was appointed strategically before Mr Musangi announced that he had bought shares in the company in July 2019.
Afterwards, Mr Ngigi resigned in September 2019, with the company announcing that he had quit to pursue “personal interests”. However, we understand that Ngigi was pushed out to give way for a new managing director, to try and please KPMG.
It is alleged that Gitonga had used Musangi to buy the stake, eyeing the land and other assets owned by the company.
The move was announced by company secretary Edgar Imbamba, who said the board had appointed RSM Eastern Africa LLP to fill the void.
“This is to notify you that following the resignation of the Company’s External Auditors, Ms KPMG Kenya, the Board of Directors of the Company at their meeting held on 4th December, 2019, took note of the said resignation and appointed Ms RSM Eastern Africa LLP to fill in the position as a casual vacancy pending confirmation at the next Annual General Meeting of the Company,” said Imbamba in the notice to shareholders.
This comes at a time the company has closed the tyre business, which is its main business, and started disposing assets.
In 2016, the company was forced to close its Nairobi factory, which used to produce Yana tyres, due to stiff competition from China and India.
Hundreds of employees lost their jobs.
The company accused the government of failing to curb dumping of cheaper and low quality tyres in Kenya.
The closure is estimated to have cost the company at least Ksh725 million.
In February 2020, the company laid off at least 52 employees, attributable to tough economic times that the company has been unable to recover from.
The company announced closure of several tyre centres and offices across Kenya and release employees in batches between February 1 and end of April.
“Arising from the foregoing, the board of directors has resolved to restructure the company further by aligning the company operations to become more of a trading and distributorship outfit,” acting managing director Peter Gitonga said in a notice to Nairobi County labour office.
“It is therefore contemplated that approximately 52 employees drawn from both management and unionisable cadres will have their employment contracts terminated.”
The company has had its staff shrink to 120 from 288 staff in 2017 to 168 at the end of 2018.
The company’s net loss increased 15.8 times to Ksh182.8 million in the first six months of 2019.
Even before the storm calmed, the company shut completely its tyre business in May 2020, leaving 73 employees jobless.
“We wish to inform you that despite the implementation of several changes in our business operations and strategy, the business has not improved, and survival of the company is and remains a major challenge,” Gitonga told the Nairobi County Labour Office on April 24, 2020.
“Arising from the foregoing, the board of directors of the company, at a meeting held on April 20, 2020, resolved to close down the tyre business. It is therefore contemplated that approximately 73 employees drawn from both management and unionisable cadres will have their employment contracts terminated on account of redundancy.”
The tyre business raked in 90 percent of the company revenue, and the company will now depend on rental income which brought in Ksh240 million in the year ended December 2018. The company’s tyre division’s sales stood at Ksh2.1 billion in the same year.
Sameer is now selling its assets without consulting smaller shareholders.
“They have closed the tyre business and are selling assets without involving shareholders,” said Patrick Njogu, the second-largest shareholder in the company with a two percent stake as quoted by Business Daily.
Gitonga has been accused of orchestrating the fall of the company since he took over. According to inside sources, apart from non-performance he seems to be making side deals which are not going down well with the Board or the reputation of the main shareholder.
For instance, the company was set to receive Ksh480 million from the Kenya National Highways Authority (KeNHA) for a piece of land at Sameer Business Park bordering Enterprise Road and Mombasa Road. The said piece of land is said to have been grabbed from the government.
At the time the payment was orchestrated, Erastus Mwongera was Chairman of both KeNHA and Sameer Africa.
They have also been involved in questionable deals with the government, including to manufacture the hand sanitisers at inflated costs. The company produced the Yana Oil Ltd, owned by Merali.