- Senators in Kenya have initiated an investigation into the alleged fraudulent acquisition of shares in East African Breweries Limited (EABL), which has raised questions surrounding President William Ruto's involvement in the matter.
- He further claimed that Diageo sought to fraudulently evade tax liabilities through alleged bribery of Kenya Revenue Authority (KRA) and National Treasury officials, suggesting that EABL manipulated the water and alcohol content of its products to change the tax bracket, allegedly evading over Sh875 billion in taxes.
- Karuku assured the committee that EABL remained a vital asset to Diageo, with no plans to sell the shares to another entity.
Senators in Kenya on initiated an investigation into the alleged fraudulent acquisition of shares in East African Breweries Limited (EABL), which has raised questions surrounding President William Ruto's involvement in the matter.
The parliamentary committee hearing centres on the recent acquisition of an additional 15 per cent stake in EABL valued at Sh22.7 billion by the British multinational alcoholic beverages company, Diageo Kenya Limited.
The lawmakers have scrutinized the deal, inked in March of this year, which elevated Diageo's shareholding in EABL from 50.03 per cent to 65 per cent.
This development follows a petition filed in the Senate by Rono Nicholas and sponsored by Bomet Senator Hillary Sigei, which alleges fraudulent activities within EABL.
Appearing before the Senate Trade Committee on Thursday, EABL Chief Executive Officer Jane Karuku defended the transaction, asserting that it adhered to all regulatory requirements.
She described it as a "willing seller, willing buyer" transaction, further explaining that Diageo acquired the additional stake through a public offer to all EABL shareholders, which was approved by the Capital Markets Authority and other relevant regulators.
"This transaction was the largest single foreign direct investment in the Kenyan stock market in 2023, with Diageo paying a total of Sh22.7 billion to EABL shareholders in the market," Karuku emphasised.
President Ruto's name was drawn into the spotlight when Karuku revealed, "This was acknowledged by His Excellency the President Dr. Ruto on March 22, 2023, during the bell-ringing ceremony at the Nairobi Securities Exchange as a vote of confidence by foreign investors in the local market."
The petitioner, Rono, alleged that the onward sale of the shares was agreed with the Heineken/Castel Group, and it was intended to ensure the Heineken/Castel Group would have a controlling interest in EABL after the onward sale.
He further claimed that Diageo sought to fraudulently evade tax liabilities through alleged bribery of Kenya Revenue Authority (KRA) and National Treasury officials, suggesting that EABL manipulated the water and alcohol content of its products to change the tax bracket, allegedly evading over Sh875 billion in taxes.
In response, Karuku urged the committee to treat these allegations as baseless, stating, "As part of its disclosures in the 2023 public offer, Diageo Kenya disclosed that it had not entered into any agreement or arrangement to sell EABL shares to any other person. It is our position that the petition lacks credibility and has no legal or sound basis."
Nevertheless, some senators expressed concerns about Diageo's recent moves to sell some of its beer operations in African markets to the Castel Group, specifically in Cameroon, South Africa, Namibia, and Ethiopia.
Senator Jackson Mandago asked Karuku to assure Kenyans that Diageo's actions do not indicate a diminished interest in beer and a shift towards the spirits business.
"Was it a mistake to have Diageo on board as an investor? Can we confirm that Diageo does not intend to sell its shares to anyone else at a later stage?" Mandago questioned.
Nominated Senator Esther Okenyuri sought clarification on the allegation that Diageo intended to sell its shares in EABL at a later stage, highlighting the previous non-committal stance of the Capital Markets Authority on this issue.
Karuku assured the committee that EABL remained a vital asset to Diageo, with no plans to sell the shares to another entity.
"We have no information that they are going to sell their shares to another person. The rate at which they are investing in the country does not show that they are going to sell to anyone. The investment is a signature and a signal that we are a jewel to them," Karugu stated.
Busia Senator Okiya Omtatah challenged EABL's assertion, inquiring if there were any legal restrictions preventing Diageo from selling its shares.
He pointed out downsizing, asset sales, a reduction in corporate social responsibility, and profit repatriation since Diageo entered the Kenyan market.
Senator Karungo Thang'wa also questioned Diageo's motive for selling EABL assets such as land and the Ruaraka headquarters.
In response, Karuku defended the company's actions, stating that they had invested Sh96 billion in Kenya.
She clarified that asset sales were made based on the business's needs at the time and denied profit repatriation, explaining that dividends were distributed to shareholders.
Senator Mandago inquired about the significant reduction in the number of employees, to which Karuku responded that the figure mentioned represented direct employees, with additional workers outsourced.
Karuku concluded by highlighting Diageo's commitment to the Kenyan market and its substantial investments over the years.
The Senate investigation will continue to scrutinize the matter, with implications reaching the highest echelons of political and economic influence in Kenya.