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FEP: FBI now invited to probe Firm that “used the Bible to promised investors the moon but delivered false hope”

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He came armed with a Bible, silver tongue and hope. But a decade and about Sh6 billion worth of investments later, the bounty dividends that architect John Kithaka promised have not been delivered, The Sunday Nation is reporting.

According to a story appearing in Today’s edition, thousands of Kenyans both at home and abroad put their savings in Fountain Enterprises Programme (FEP) and, 12 years later, they are yet to receive their dividends.

COLLAPSED

“In 2012, investors were promised that dividends would start being paid in 2015, then in 2018 and then this year, 2021 was announced as the new magical date,” writes the paper.

Tired of the tall tales, some investors have invited the Directorate of Criminal Investigations (DCI) to investigate the firm and those in the United States are calling on the Federal Bureau of Investigations (FBI) to intervene. Last year, the company estimated to be worth Sh4 billion made a loss of Sh650 million. So, what went wrong?

An interview with former managers show wrong investments, an overbearing founder, fraud by managers and lack of systems punctured the momentum of what was once a promising company.

“As of May 2011, members were able to sign up on the Sh399,381 per share offer. Original founder members bought tier two founder shares at Sh760,000. By close of share selling in August 15, 2012 a share was going for 465,000,” said an investor who was heavily involved in mobilising Kenyans in United States.

The money was to be invested in hotels, tours and travels, schools, real estate and banking.

To realise this, several companies were established including MobiKash, Fountain Media, Fountain Group of Schools, Fountain Sacco, Nobel Insurance Agency, Suntec Supermarket, Fountain Credit Services, Fountain Technologies, Fountain Safaris, Kisima Real Estate, Nobel Insurance Agency, and Citadelle Security. Several have since collapsed.

According to interviews with some board members, that was the company’s first mistake. It spread itself too thin and was unable capitalise on all the businesses it ran.

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Current FEP Holdings chairman James Kaguchia admitted to the Sunday Nation that the slow progress of projects was due to undercapitalisation triggered by a failed private placement in 2014 but the company is still on course. Fountain radio and TV, for instance, were understaffed and had little cash for operations and thus collapsed.

OVERBEARING

MobiKash, a money transfer service, was one of the earliest investments but it was closed under unclear circumstances down without benefiting investors.

“Although FEP had initially partnered with MobiKash, the deal was later deemed as not viable. FEP therefore exited the partnership with CBK’s approval,” Mr Kaguchia said.

But, perhaps, one of the most iconic investments was Suntec Hotels in Sagana, Kirinyaga County, which has stalled.

“An estimated Sh800 million of investors’ cash has been used to put up the four-star Suntec Hotel in Sagana which is 70 per cent done with a current valuation of Sh1.2 billion. The hotel is due for launch later this year in partnership with a Swiss hotel operator,” said Mr Kaguchia.

Mr Kaguchia said FEP Group comprises three arms, namely, FEP Holdings (the holding company) with 74,000 shareholders; FEP Society (the network) with over 200,000 members; and FEP Sacco (savings and credit), with over 15,000 members.

The firm’s CEO has been accused of being overbearing, accusations he has denied in previous AGMs arguing that as the dream carrier, he needed to be firm.

With a new corporate structure courtesy of the FEP Society Strategy 2019-2021, Dr Kithaka’s designation is no longer President but Patron of FEP Society. He remains the holding company’s CEO but is not directly involved in running the subsidiaries as was the case in the past.  Mr Kaguchia said he is aware of the anxiety among members but adds that all is not lost.

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“In 2017, FEP made a loss of Sh650 million. FEP value currently stands at Sh4.15 billion,” he said.

In 2012, Mr Charles Kabaiku, who was tapped from the United States to help manage the company, left within months after his advice on the need to have systems put in place was disregarded.

“When I came in as the Group Operations Manager, we declared a positive profit on our annual reports at the AGM of about Sh58 million for the year ending 2012. I tried to centralise the financial management system but the move was resisted,” said Mr Kabaiku.

Mr Charles Kabaiku, an investor and former Group Operations Manager at Fountain Enterprises Programme (FEP), speaks during an interview at Nation Centre in Nairobi on June 5, 2019. He said his efforts to streamline financial systems at the company were strongly resisted. PHOTO | EVANS HABIL | NATION MEDIA GROUP

An audit by KPMG revealed that some managers were pilfering the firm. The company did not disclose the nature of theft.  Fearing that they may lose their investment, Kenyans in the US complained to the embassy in Washington.

The then Kenyan ambassador to US Robinson Githae forwarded the complaint to the Directorate of Criminal investigations but little was done.

Now, fearing that their investigations on the operations of FEP may not be conclusive, Kenyans who also hold US citizenships are mulling forwarding the issue to the United States federal government authorities.

“The Kenya Embassy in Washington DC actually contacted FEP and proposed that CID intervenes regarding alleged misappropriation of investors’ money. However, upon review of the case, the CID did not find a basis to investigate FEP,” said Mr Kaguchia.

Some of the cases the diaspora cites are an investment in Mombasa. Diaspora investors were told to purchase beach plots in Mombasa with fliers showing plots numbers and a hotel to be built, but little progress has been made.

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In 2016, Mr Kithaka went around selling shares of a Tier three bank. The issue has not been heard of since despite shareholders having been promised a stake in the bank.

“FEP Holdings had intended to acquire a stake in the said Bank. However, following further internal deliberations and consultations with the Central Bank of Kenya, FEP decided to pull out of the deal. However, some individual FEP shareholders have invested in the bank in their personal capacities,” said Mr Kaguchia.

Mr Kaguchia said FEP Group currently owns an estimated 6,000 acres of land valued at over of Sh2 billion. The land is earmarked for housing projects and hotels.

CONSULTATION

“We are also exploring agribusiness and any other viable ventures. The new board is currently reviewing and re-aligning the Real Estate strategy to guide the group’s investment through the three-year ‘FEP Mpya’ turnaround journey,” he said.

But the most baffling issue was the sudden creation of a new company, Tai Eagles and Tai Housing, which was done with minimal consultation with investors.

“Tai Ltd is an associate company of FEP Holdings. There exists no financial or governance relationship between TAI and FEP. Tai Eagles deals with healthcare and housing. Tai runs two health facilities, Tai Eagles Hospital in Thika Town and Nairobi CBD. Tai is currently in discussions with KRA regarding certain aspects of compliance. During the 2014  AGM, members passed a resolution to close all FEP offices as a cost-cutting measure. Tai Ltd, an associate company to FEP Holdings, was co-sharing the physical space with FEP,” said Mr Kaguchia.

The chairman calls for patience.

“The best laid plans do not always yield the intended results,” Mr Kaguchia said.

SOURCE: nation.co.ke

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Kenyan scientist Muthoni Masinde created an app that predicts droughts

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An app is combining weather station data with the traditional knowledge of African farmers to predict droughts.

To help prepare farmers for the effects of climate change, Kenyan computer scientist Muthoni Masinde has created mobile platform ITIKI.

The name stands for Information Technology and Indigenous Knowledge, and the platform sends farmers drought forecasts via an app or SMS message.

Although it uses meteorological data, Masinde says most African farmers can better relate to the traditional knowledge that is also used to formulate the platform’s predictions.

“I grew up in a [Kenyan] village and I noticed that most farmers do not have any form of science to tell [them] when to plant,” Masinde told CNN Business.

“They watch insects, they watch the behavior of animals and then they make a decision, ‘I think it’ll rain in two weeks’ time.’”

ITIKI employs young people in farming communities to gather photos and updates about animal behavior and local vegetation, such as which trees are flowering.

They capture their findings on the ITIKI app, and ITIKI collates this information with data from local weather stations to model weather patterns months in advance.

Farmers can subscribe to the service for just a few cents, and receive regular updates in their local language, helping them make early decisions about which crops they should grow and whether to sell or save their produce.

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Economic impact of drought

Many African countries are especially vulnerable to climate change and small-scale farmers in particular, who rely on rainfall for their harvests, could face poverty and food insecurity, according to UN climate experts.

That could have major economic repercussions. Agriculture contributes about 15% to Africa’s total GDP, according to a 2017 UN report, and accounts for around half of the continent’s employment, according to the African Development Bank.

Now a professor at the Central University of Technology Free State, in South Africa, Masinde launched the app in 2016 in Kenya, where agriculture makes up around a third of GDP.

“Investments in climate adaptation solutions, especially targeting small scale farmers, would lead to GDP growth [in Africa],” said Masinde.

She added that African governments tend to react to drought and extreme weather, rather than proactively planning for these events.

“We do not prepare for [drought],” she said. “It’s like we just wake up and discover that people in rural Kenya are starving, that people on one side of the country have no rain.”

Masinde says ITIKI is now used by more than 15,000 farmers in Kenya, Mozambique and South Africa. Since farmers started using the app their crop yields have increased by an average of 11%, according to Masinde.

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ITIKI has received $750,000 in funding from the US and South African governments, which will be used to scale up operations. By the end of this year, Masinde hopes to have signed up over 100,000 farmers to the platform.

BY Citizen

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Why I grow my moringa inside a greenhouse

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Some two kilometres from Soy trading centre in Aligula, Likuyani, Kakamega County, Nelson Njuguna runs a moringa farm.

He grows the crop inside a greenhouse tucked in a section of his 30-acre family farm, with the rest hosting maize and beans, the dominant crops in the region.

The 8m-by-15m structure hosts 500 moringa plants, as he planted 700 but 200 died.
“Most people assume that you can only grow tomatoes or capsicum in a greenhouse, but here is the proof that moringa also does well in the structure,” says the 50-year-old farmer.

He developed interest in the crop in 2014 when he met an exhibitor at the Eldoret Agricultural Show, who sold him one kilo of seeds.

“I was impressed at the numerous benefits of the crop, which include its various nutrients and uses, which range from nourishing the human skin, protecting the liver, fighting bacterial infections to preventing cancer,” notes the farmer who quit teaching in 2008 after 15 years in the profession.

Njuguna funneled Sh300,000 into the business, starting with propagating seedlings and selling each at Sh100.

“I used to sell about 800 seedlings every year at an average of Sh100. I realised this did not make economic sense and shifted to growing the plants in the greenhouse for value addition,” he explains, adding that he first grows the plants in a seedbed.

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The seeds germinate in two weeks, after which he transfers them in polythene pots where they stay for two to three months before he moves them to the greenhouse, where he plants them.

“Inside the greenhouse, the plants must be spaced a metre from one row to the next and 0.3 metres from one plant to another. They mature in six months but regular weeding must be done for good growth,” says Njuguna, who notes that he embraced greenhouse moringa farming after birds damaged his crop in the open field.

Besides helping the farmer to curb birds’ damage, the structure makes the crop to grow faster since it thrives in warmer conditions.

Njuguna says the crop has a lifespan of 30 years, but he replaces the plants after four to five years, when the yields starts to go down.

He has embraced value addition, making soap, powder and perfumed and non-perfumed herbal cream from the plant.

“From the 500 plants, I harvest about eight kilos of leaves, which I dry and grind to make the products,” says the farmer, who identifies pests like white flies and spider mites and rust disease as the biggest enemy of the crop.

To make the jelly, after drying the leaves in an oven for eight hours, he mixes them with sunflower (50 per cent) and palm, soya and canola oils (50 per cent).

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He then mixes with beeswax, allowing it to heat up to 70 degrees Celsius and then it cools for 24 hours to form the final product.

DEVELOPMENT OF NEW ONES

To make soap, he uses a similar process but introduces olive and beef oils to the canola, sunflower, soya and palm.

He then mixes with sodium hydroxide solution and leaves it to be ready. He sells soap and the jelly at Sh40 and Sh120 respectively.

He grows the crop organically, using plants like tree tomato, basil, chia, lavender and oregano to attract and repel some of the destructive pests.

“I mix farm-yard manure with inorganic fertiliser during planting and top-dress especially after cutting the branches to allow development of new ones,” notes the farmer, adding that he plants cuttings for faster growth as he still sells the seedlings.

Dr Shem Mwasi, an environmental biologist at the University of Eldoret, explains that moringa oleifera is a fast-growing deciduous soft wood tree that can grow up to 12 metres high and reach a trunk diameter of 45cm when fully mature.

“It grows well in areas with an annual rainfall of 760 to 2,500mm, an annual average temperature of between 18 and 28°C and an altitude of up to 2,000m above sea level.

In Kenya, it can grow in areas that receive an annual rainfall of as low as 300mm,” he says, adding that it can grow in any soil type with a pH of 4.5 to 8, save for areas with a lot of clay soil that is constantly waterlogged.

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Dr Mwasi notes planting is done by sowing seeds or vegetative propagation (use of cuttings).

He said trees raised from seeds produce poorer quality fruits but develop longer roots (an advantage for stability and access to water) compared to those grown from cuttings.

“A single mature tree can produce from 15,000 to 25,000 seeds, with an average weight of 0.3 grams per seed during the harvesting season. Almost all parts of the tree are utilised but leaves and fruits (pods and seeds) are the most used parts.”

Leaves are used in human and animal nutrition and in traditional medicine because they are rich in bioactive compounds. They are rich in mineral, beta-carotene and natural antioxidant compounds.

“They are a good source of natural antioxidants, which protect the human body from free radicals that play a role in the pathogenesis of diseases such as cancer. The leaves added to cow feeds led to an increase in daily weight gain while daily fresh leaves resulted in increased milk production,” he said.

By Seeds of Gold

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Govt demands answers from Fairmont after mass layoffs

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The government has demanded answers from Fairmont Hotels on its reason to sack all staff over what it attributed to uncertainties of the coronavirus pandemic.

The hotelier that runs Fairmont the Norfolk and Fairmont Mara Safari Cub said on Wednesday that they have ceased operations as a spiral effect of the Covid-19 pandemic and the recent flooding of Fairmont Mara Safari Club.

In a letter addressed to the Country General Manager, Mehdi Morad, Solicitor General Ken Ogeto on Friday, said the move by the hotel has generated a lot of public interest especially after some of the employees petitioned his office saying the due process was not followed.

“This matter is of public importance and great concern to the government and in view of the Attorney General’s mandate to promote, protect, and uphold the rule of law and defend public interest, this office should be very grateful if you would provide it with clarification regarding the said media reports and complaints from employees including on the veracity thereof and justification for taking such action, if this is the case,” Ogeto said in a letter dated May 29.

Declare all positions redundant

Ogeto noted the move to declare all positions redundant would have far-reaching consequences on the welfare of the employees and the country’s economy.

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“This is therefore a matter of profound public interest, in respect of which this office demands a response,” he added.

In a memo to staff, the country manager said, owing to the uncertainty of the direction the global pandemic will take, they have been forced to terminate employee contracts and close their properties.

“Due to the global Pandemic will result in the business picking up in the near future, we are left with no option but to close down the business indefinitely,” Mr Morad said in the memo.

“It is therefore the decision of the management to terminate the Services of all its employees due to “frustration” by way of mutual separation and taking into account the loyalty and dedication the employees have put into the success of our company in the previous years.”

Employees will receive their termination letters by June 5.

All major hotels in Kenya have remained closed since mid-March when international flights were suspended and movement restrictions imposed by the government to curb the spread of Covid-19.

BY NN

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