Members of Parliament are investigating the circumstances surrounding a Sh3 billion loan granted to the financially struggling textile company Rivatex Limited by Exim Bank.
During a hearing of the National Assembly’s Public Investments Committee on Education, it was revealed that Moi University acquired the textile firm for Sh600 million. After the acquisition, the Treasury secured the loan to ostensibly upgrade the facility with modern equipment.
University Vice Chancellor Isaac Kosgey faced pressure to explain how the university plans to repay the loan, which is due next year, especially given that Rivatex reported a loss of Sh300 million in the year ending June 2023.
“If the university could not purchase the company, what interest did they have in it?” asked Bumula MP Wamboka Wanami, the committee chair. “Your core mandate is education, yet you diverted to invest in a non-functional company. More scrutiny is needed here.”
The committee also questioned the management regarding a Sh30 million expenditure for the university’s main campus gate. Initially built at Sh4.8 million, the gate was demolished for being improperly located, leading to an additional expense of Sh25 million for the current gate, prompting audit inquiries.
In his defense, VC Kosgey stated that the acquisition of Rivatex aimed to provide training for textile engineering students, engage with farmers, and produce fabrics.
“It was a small initiative… Jubilee sought to revive it, and former President Uhuru Kenyatta facilitated our connection to Exim Bank for the equipment purchase,” he explained.
However, MPs are demanding clarity on why the university, through the Treasury, chose such a significant loan for a project serving a small segment of students—only around 600 out of 30,000 are pursuing textile-related courses.
“If you received Sh3 billion, wouldn’t you prioritize improving learning facilities? Are you getting value for money?” Wanami questioned, emphasizing the illogical nature of a financially constrained university investing in a non-priority project.
Kosgey maintained that the university was in a strong financial position when the decision to purchase the textile firm was made, having sufficient funds until 2008. He added that the government became involved in 2017, leading to the purchase with Sh600 million.
On the university’s ability to repay the loan, Kosgey stated that repayment would depend on the availability of raw materials.
The inquiry follows an audit that highlighted discrepancies in how the university and Rivatex were accounting for funds, revealing that accounting was done on different platforms, contrary to international audit standards.
Kosgey explained that Rivatex has been audited separately since it was delinked from the university in 2022, becoming a standalone entity. However, MPs argued that the university’s leadership remains accountable since it still holds a position on Rivatex’s board.
Kiminini MP Esau Karan questioned the rationale behind entering a loss-making venture while the university faces difficulties with statutory deductions. “Who will repay this loan? Is it Moi University or the company? This decision doesn’t add up; it was misguided,” he stated.
The committee also scrutinized why the institution teaches strategic management while not practicing it. Kosgey noted that discussions are ongoing with the ministry to explore compensation for the university’s investment, as Rivatex is now funded by the Ministry of Industrialization.
Igembe Central MP Karitho Daniel asked whether a feasibility study was conducted to ascertain Rivatex’s viability before taking the loan, suggesting there may have been special interests involved.
MPs are calling for representatives from the Industry Ministry, Education Ministry, Treasury, former VC Richard Mibeyi, and others of interest to appear before the committee to explain these developments. Additionally, they are investigating how some staff members diverted welfare contributions to unauthorized bank accounts, with actions already taken against those involved, including dismissals and refunds from the bank.
