Karuturi Ltd, the Kenyan subsidiary of an international flower giant has been placed under receivership.
Kieran Day and Ian Small of financial services firm The Business Advisory Group, have been appointed receiver managers of the Naivasha-based flower farm. CFC bank has taken over the running of the farm.
The fate of over 3,000 workers was not clear as they camped outside the farm’s gate waiting for communication from the new managers.
In the green houses, roses ready for harvest lay uncollected, as it emerged that the workers had not reported for duty for three days.
According to Kieran Day, the new managers are in the initial stages of assessing the state of Karuturi Limited’s business.
“Over the coming weeks, we shall be working hard to fully analyse the firm’s financial position and agree on the best course of action. Already, we have received enquiries from parties interested in acquiring Karuturi’s business and assets,” he said.
The firm has been placed under receivership after it failed to meet the monthly wage bill, now three months in arrears and slow payments to trade creditors-adversely affecting flower producers in the area.
“After a long investigation by KRA, it was found that Karuturi Kenya was trading with its subsidiaries in Mauritius, United Arab Emirates and the Netherlands-inflating cost of imports from these tax havens and therefore constantly understating its profits,” said Alvin Mosioma-Executive Director-Tax Justice Network Africa.
In late 2012, KRA ruled that the Bangalore, India-based multinational used transfer mispricing to avoid paying the Government of Kenya nearly $11 million (Euro 8 million) in corporate income tax, part of a larger set of tax disputes with Government authorities that amount to a quarter of the firm’s 2012 sales.
On April 4, 2013, Karuturi appealed the ruling, bringing the proceedings into the public domain. Karuturi produces 580 million roses per year from its operations in Kenya, Ethiopia and India.
Patented seeds
“ What Karuturi has been doing is inflating the cost of patented seeds that it buys from subsidiaries across the world, a practice known as transfer pricing-ensuring that its costs are high and profits low,” said Mosioma.
The flowers it produces in Kenya are shipped to Europe through a subsidiary in Dubai. By under-declaring the value of the merchandise shipped to its warehouse in Dubai, the firm saves costs on its tax bill. This is illegal under Kenyan law.
A worker in the farm,Peter Karatina, said that they were unsure of their fate but were hopeful that the new managers would pay all their dues. Karatina told of their suffering as they went without salaries, water and electricity.
Kenya Plantation and Agricultural Workers Union Organising Secretary Meshack Khisa said they would make sure workers are paid all dues before a new investor comes in.
By Jackson Okoth and Antony Gitonga, The Standard