Kenya Power has been paying billions of shillings to a well-knit cartel that is Kenya Wood Preservers Association (KWPA), that supplies all Kenya Power’s treated wooden poles.
According to details that leaked from the cartel, Kenya Power first restricts its tenders to them to bar out any ‘outsiders’ from applying for the same. In an article by the Standard, membership to the association costs a company Ksh50,000 renewable annually.
“Eligible tenderers: All local manufacturers of wooden poles who are members of Kenya Wooden Preservers Association and do not have an outstanding order for 11m and 12m treated wooden poles. Note that the relevant and valid certificate should be attached,” read tender document from Kenya Power.
The cartel is a collusion of top government officials, Kenya Power top officials and crude business tycoons operating in different parts of the country. Most of them operate under sketchy companies, with one said Cabinet Secretary operating three companies in the cartel.
Each member of the cartel is given a certain zone of the country where to apply for the tender to avoid collision.
“I trust that we are all settled now and it’s all systems go. Mt Kenya remains intact and will tender for supply to Thika, Nyerim and Meru. Central Rift remains with the addition of WTT and Alogo Enterprises and will tender for Nairobi, Rabai and Kisumu. North Rift will replace WTT and Alogo with Prime wood and Rockon. Please note that North Rift will also include Nakuru,” read a leaked communication from IGatumo, one of the group member.
This then follows a series of meetings to dictate prices for the supplies, giving Kenya Power no chance of negotiating prices.
“Members have consulted widely and have agreed that due to expected demand the price of a pole is expected to rise to Ksh5,000 or more, so our delivered price should be Ksh12,5000 (for a 10-metre pole),” read another leaked communication from Alogo, the chair.
According to the association, the Ksh8,787 production cost is arrived at considering pole price from farmers at Ksh3,599, Ksh50 felling cost, Ksh300 for skidding, Ksh200 for loading, Ksh1,000 for transporting the poles to the factory, Ksh100 offloading, Ksh100 debarking, Ksh100 for pole dressing, Ksh60 for drilling, Ksh20 for tagging, Ksh30 for gang-nailing, Ksh1,848 for pole treatment, Ksh200 for loading, Ksh700 for transport, Ksh180 for binding them and Ksh100 for cess.
However, according to the pricing by one of the treatment plants, a 10-metre poll can be sold at Ksh6,500 inclusive of VAT and a 40 per cent profit margin. This means that the cartels are making more than 200 per cent profit.
When things get thick for the cartel, they invite outsiders especially South Africans to help them wade through the murky waters.
“As per our discussions in our last meeting, we agreed that we would do a follow-up meeting on Wednesday, 12th October 2016 to review the various issues related to the recently concluded KPLC World Bank Tender for poles,” read another communication from Ms Maina.
The communication followed a tender for supply of 350,000 poles, in which Kenya Power played them, whereby the cartel ended up supplying only 50,000 poles.
Consequently, the cartel invited Mr Daryll Erke and Mr Rory Milne from South Africa’s Lonza/Archwood Protection.
Whoever seems to be left behind or putting new prices is assigned a member ‘to bring them up to speed’ on the issues.
Here are some of the leaked communications from the cartel:-
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