Unpaid debt deepens Kenya Seed Company Rwanda’s financial crisis
According to the auditor general, the firm is on the brink of collapse following years of debt owed by its primary customer, the Rwandan government.
KENYA – Kenya Seed Company Rwanda Ltd, a subsidiary of the Nairobi-based agricultural seed firm, is now operating at a negative shareholder funds of KES 40.3 million (US$311,966) following years of financial losses.
The company’s financial strain has been compounded by a significant domestic debtor: the Rwanda Agriculture and Animal Resources Development Board (RAB), the state organ entrusted with the strategic development of Rwanda’s agriculture sector, currently owes it KES 108 million (US$843,066).
Auditor-General Nancy Gathungu, in her recent audit report, confirmed that these receivables have been outstanding since 2016, radically undermining any prospects of recovery.
“Review of the unpaid invoices and debtors ageing analysis revealed that the trade receivables from districts had not been settled since the year 2016,” she stated.
“However, management has not documented the strategies put in place to ensure the debts are recovered. Under the circumstance, the recoverability of the receivables is in doubt.”
Financial performance in the year to June 2024 shows a marginal improvement in losses, with a deficit of KES 16 million (US$123,841) compared to KES 33.8 million (US$262,026) in 2023.
However, revenue declined sharply, from KES 51 million (US$395,861) in 2023 to KES 38.8 million (US$300,345) in 2024, largely attributed to a “lack of maize seeds for sale.”
Gathungu cautioned that without a properly monitored turnaround strategy for maize and other cereal seed production, the company may face going-concern issues, especially as it relies on co-financing from its Nairobi parent firm.
The dependency deepened as the Rwanda unit now owes the parent company approximately KES 203 million (US$1.6 million) for seeds supplied but not paid for. This liability significantly exacerbates its already precarious financial position and reliance on Nairobi’s financial backing.
Kenya Seed Company Rwanda Ltd is one of three regional subsidiaries established during the parent firm’s regional expansion drive initiated in 2010, aimed at diversifying revenue sources across East Africa. The other two units, Simlaw Seed Company Uganda Ltd and Kibo Seed Company in Tanzania, have similarly struggled to achieve profitability.
Indeed, while the Kenya-based parent firm has remained profitable, its subsidiaries have persistently underperformed.
The Tanzanian subsidiary, Kibo Seed Company, is currently operating with a negative capital of Tsh 5.4 billion (US$2.4 million) and has been declared technically insolvent following years of operational deficits.
Like its Rwandan counterpart, Kibo is also grappling with unrecovered debts, amounting to Tsh 1.3 billion (US$529,531), though the specific debtors remain undisclosed.
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