The fall and fall of Sai Ramakrishna Karuturi flower empire
Sai Ramakrishna Karuturi is being accused of sexual harassment in India while in Africa his struggling flower business in Kenya and Ethiopia has withered – first over tax arrears and debts and later over land deals gone wrong.
Daily Nation | 8 March 2018
The fall and fall of Sai Ramakrishna Karuturi flower empire
* The Kenya Revenue Authority demanded Sh962 million from the firm, which it accused of transfer mispricing.
* The Times of India reported that Mr Karuturi was wanted for allegedly sexually harassing a 23-year-old woman staffer of a Spa centre in central Bengaluru.
* What bothers Ms Mwangi is the death of her 12 colleagues. She attributes these deaths to stress occasioned by the job losses.
By MACHARIA MWANGI
Sai Ramakrishna Karuturi is a man in trouble: In India, he is being accused of sexual harassment while in Africa his struggling flower business in Kenya and Ethiopia has withered – first over tax arrears and debts and later over land deals gone wrong.
Like in Murphy’s law, everything that could have gone wrong, went wrong; a multibillion flower empire that was once a showcase in the continent is gone.
Last week, the High Court in Nairobi gave a local bank, CfC Stanbic, the go ahead to auction Mr Karuturi’s assets over a Sh1.8 billion debt, bringing to an end an ambitious plan by the Indian entrepreneur whose flower farms in Kenya, Ethiopia and India once produced 650 million stems of quality cut roses.
An Indian bank has also another chunk of the Sh9 billion farm on sale – bringing the rose flowers growing firm to a thorny end.
Today, it is hard to pick out the wilting white roses struggling for survival in the weed-infested vast farm under the cover of dilapidated greenhouses along the Moi South Lake Road in Naivasha.
Mr Karuturi’s cool demeanour endeared him to the workers - and his favourite car, a Hummer, was a constant reminder of his sophistry.
The Indian businessman had taken over Sher Ethiopia PLC from its previous Dutch owners, Gerrit and Peter Barnhoorn, in 2007 after they were lured from Naivasha to Ethiopia by the promise of better returns.
“He gave us a lot of hopes and having taken over a very stable company, we were optimistic of a turnaround in our fortunes,” Malkia Hassan, a former worker, says.
Ram, as he was better known, had first arrived in Ethiopia in 2005. Ethiopia had low operational costs.
Again, as he told India’s Business Today, “Ethiopian exports to Europe were exempt from customs duty”.
After one year in business in Ethiopia, he decided to purchase one of Kenya’s best-known stand-alone flower farms, the 188 hectare Sher Agencies, which was a producer of cut roses.
For all these assets, Ram paid $67 million (Sh6.7billion) on September 2007 and Karuturi Global now had about 240 hectares of greenhouses in Kenya, Ethiopia and India and revenues of $100 million (Sh10 billion).
But after only seven years, the company was placed under receivership by CfC Stanbic Bank on February 2014 and Mr Karuturi’s dream of becoming the world’s number one exporter of cut flowers was turning to be just that: - a dream.
Mr Karuturi was a tax dodger and the Kenya Revenue Authority told a Nairobi court as much when it demanded Sh962 million from the firm, which it accused of transfer mispricing.
This is a method used by multinationals to trade internationally with their own subsidiaries and while the local firms would make losses, the parent companies continue to make profits.
It also had taken a $20 million (Sh2bn) loan with India’s most aggressive bank, ICICI Limited, and used its Naivasha assets, valued by Hectares and Associates as worth $91 million (Sh9bn), as security.
Further, the Indian bank had a security-sharing agreement with CfC Stanbic to secure a sum of $6.5 million (Sh650m).
Last week, High Court judge Francis Tuiyott ruled that the three-year old court order restraining the Kenyan bank from auctioning the properties of the flower farm stands vacated after the lapse of 90 days.
When it flourished, Karuturi captured global imaginations for flower lovers and heralded good financial tidings for Sher Agencies Ltd, and later Karuturi Limited.
Today, the sorry state of affairs is amplified miles away, in what, from a distance, resembles a veritable wasteland.
Exporting a million stems a day, the apple-eyed company ruled the cut flower industry, with the ripple effect of financial successes being reflected in the lives of more than 3,000 workers who plied trade at the Naivasha-based firm.
Hundreds of refrigerated trucks left the compound every day for the airport.
By then, a walk in the farm was a refreshing moment for visitors mesmerised by the eye-catching roses planted in impressive uniformity.
The workers, too, went through their paces with clockwise precision.
Sher, as the company was referred to after its establishment in 1986, was exporting tens of millions of roses a year, and offered good remuneration to workers compared to its competitors.
Employees earned bonuses for overtime.
“We had all we could have wished for and we were the envy of many,” Jacob Omondi, an employee and a former Kenya international footballer who played for Sher Karuturi (then a Kenya Football League club), recalls.
When the receivers came, Mr Omondi managed to retain his job as a maintenance worker and is among the lucky 50 or so personnel who are still in the payroll.
But times have changed and the fortunes dipped.
He says their core task is to salvage some of the roses still in the farms but admits that they have only been able to accomplish 50 per cent of the task, given the work involved.
Gone are the days when the Karuturi management would afford to give guests a bouquet of flowers when it was a destination of choice for fresh jobseekers who wanted a career in the horticulture industry.
An acre under the cultivation of roses used to produce 16,000 plants. Each plant produced between 18 and 20 stems annually.
With the huge productions and steady market, the flower growing business was at the peak.
But KRA found that the Indian firm was inflating the cost of seeds it buys from its subsidiaries and under-declaring the value of merchandise shipped to its warehouse in Dubai.
Before changing hands in the year 2008, Sher cultivated more than 200 acres but the number had reduced to less than 120 acres after the firm surrendered some acreage of land to a rival flower company.
Nostalgically, greengrocer seller Mercy Kwamboka stares across the roads, reflecting on the moments when she worked at the company that assured her of decent earnings.
“I used to earn good money and had established a grocery shop that made good sales. On a good day, my takeaway profit was between Sh3,000 and Sh4,000, a tidy sum then,” Ms Kwamboka recalls.
When Karuturi folded, Ms Kwamboka sought casual work at a nearby farm, but abandoned it to manage her kiosk.
“I decided to continue with my grocery work but times have changed with the closure of the firm and now my take home is a meagre Sh200 and Sh400 on a good day.”
In Ethiopia, the business has not been rosy for Karuturi.
Initially, the Ethiopian government had offered Karuturi Global 300,000 hectares of virgin land on a 50-year lease at Gambela province on the banks of the perennial Baro River.
To develop this land, it was to pay $245 (Sh24,000) a week for 50 years, plus generous tax breaks!
This was after Ethiopia promised foreign firms some eight million acres of commercial farming land.
But the Ethiopian government cancelled the deal in 2017, accusing Karuturi of developing only 1,200 hectares of its allocation.
It had planned to grow and process crops including corn, sugarcane and palm oil.
“We stand tired and defeated and wish to exit Ethiopia,” Mr Karuturi said in the letter quoted by Bloomberg.
While the fate of its Ethiopian holdings is unclear, most of the Karuturi workers in Kenya are left with unpaid dues.
On December 2014, they started a wave of protests – burning tyres and blocking the road – demanding their salaries only to be dispersed by police.
The only remedy for the workers is that they still live in the company’s quarters despite numerous efforts to evict them.
“We will only move after getting all our dues from the Karuturi Limited,” Ms Kwamboka says.
While many of the ex-workers – still waiting at the premises - are struggling to stay afloat, others, have died waiting for the dues.
Njambi Mwangi worked at for the firm for 15 years and has little to show for it.
“I walked away empty-handed after the downfall of the flower company,” she says.
But what bothers Ms Mwangi is the death of her 12 colleagues. She attributes these deaths to stress occasioned by the job losses.
The area MCA Peter Palang’a describes the former workers condition as “dire”.
“I have been forced to feed some of them from my pocket. Honestly, I could not stand their suffering,” Palang'a says.
A former shop steward claimed the workers were owed more than Sh300 million in gratuity and were entitled to 23-day dues in a negotiated Collective Bargaining Agreement for each completed year of work.
A former employee of the company, Vivian Adhiambo, said she was owed close to Sh150,000.
Meanwhile, chased by the banks, the workers and KRA, Mr Karuturi fled the country – mocking the liquidators of his farm.
“I am hoping they [liquidators] can find someone to buy air,” Mr Karuturi told a local daily, adding, “there is nothing in there to be sold”.
For a flower farm, the main assets are the plants and the greenhouses, which are now long gone.
With several creditors hoping to get a slice of the sale proceeds – the fall of Karuturi might also see its two sister firms: Surya Holdings and Rhea Holdings close shop.
Last week, the Times of India reported that Mr Karuturi was wanted for allegedly sexually harassing a 23-year-old woman staffer of a Spa centre in central Bengaluru and abusing policemen who rushed to her help.
“Police said the Spa staffer called the control room in the evening, saying a customer was forcing her to have a physical relationship with him,” the paper wrote.
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