Moi University chiefs on cross over Sh30m gate, Sh3bn Rivatex loan

MPs are probing the circumstances under which the cash-strapped textile firm Rivatex Limited was extended a Sh3 billion loan from Exim Bank.

National Assembly’s Public Investments Committee on Education heard on Wednesday that Moi University acquired the textile company at Sh600 million.

It emerged that after the acquisition, Treasury took the loan ostensibly to upgrade the facility with modern equipment.

University Vice Chancellor Isaac Kosgey was hard-pressed to explain how the institute would repay the loan, which is maturing next year.

This was after it turned out that the textile company was on a loss-making streak and posted a Sh300 million loss in the year to June 2023.

“If the University could not buy the company, what interest did they have?” Bumula MP Wamboka Wanami, the committee chairman, asked.

“Your core mandate is education but you detour and invest in a company that is not functional. There is more to be done on this.” 

MPs also questioned the management over a Sh30 million expenditure on the university’s main campus gate.

The committee was told that the gate was initially built at Sh4.8 million but was pulled down for sitting on a road.

After the demolition, the university spent another Sh25 million on the current gate, triggering audit queries.

In his defence, VC Kosgey said the university bought Rivatex to train textile engineering students, reach out to farmers and produce fabrics.

“It was a small component…Jubilee sought to revive it and former President Uhuru Kenyatta agreed to connect us to the Exim bank to buy the equipment,” he said.

But MPs want answers on why the varsity, through Treasury, opted for the amount, yet only an average of 600 students out of 30,000 pursue textile-related courses.

“If you were given Sh3 billion, would you not improve learning facilities? Are you getting value for money?” Wanami asked, saying it beat logic why a financially constrained university would go for a non-priority project.

“You have more urgent needs but opted to take a loan and pump in textile which only serves a small component of production.”

Kosgey said the university was liquid when the decision to purchase the textile firm was made.

“We had money up to 2008 and it was decided we buy Rivatex as a lab for our students. In 2017, the government came in and there was a discussion on it and we used Sh600 million,” he stated.

On whether the varsity has the capacity to repay the loan, the VC said the performance would depend on the availability of raw materials.

The questions followed an audit that flagged the different platforms on which the varsity and the company were accounting for the funds.

Auditors established that accounting was done on different platforms - in violation of international audit standards.

Kosgey said Rivatex is audited separately after it was delinked from the varsity in 2022 and is now a standalone entity.

But MPs said despite this, there was no way the varsity boss could escape the queries, as the university still sits at the board.

Kiminini's Esau Karan questioned the rationale behind the decision to venture into a loss-making business when the university was struggling with statutory deductions.

“Who is going to repay this loan? Is it Moi University or the company? This matter is not adding up. It was a wrong decision, the government has lost,” the MP said.

The committee questioned why the institute would be teaching students on strategic management yet it doesn't practice the same.

The VC said there were ongoing high-level engagements at the executive on how to go about the repayment headache.

“We are working with the ministry to see how we can be compensated for the money we put in since it is now a parastatal,” he said, disclosing that the firm is now funded by the Industrialisation ministry.

Igembe Central MP Karitho Daniel asked, “Was there a feasibility study to ascertain that Rivatex was sinking and we were taking money to a sinking institution? What comes out is that there was special interest.”

MPs want the Industry Ministry, Education Ministry, Treasury, former VC Richard Mibeyi and any other person of interest to appear before the committee to explain the events.

Also under probe are circumstances under which unscrupulous officers diverted welfare contributions to bank accounts.

It emerged that staff formed a welfare group and colluded with the bank to use the said account at National Bank.

The university said action was taken against the staff – some were sacked and the bank refunded the money in question.