Bad and ugly Vimal Shah

BY nbm writer

To many people, Vimal Shah cuts the image of a successful businessman and corporate dealmaker. Indeed he is, and several other good things associated with money and success. To thousands of employees Vimal claims work for Bidco Oil (Only 400 out of 2,500 workers at the Thika plant are staff employees), the family business he runs, he is a father figure and provider who feeds families both directly and indirectly in Kenya and Uganda.

The mogul was last year ranked East Africa’s richest man, with the family’s net worth estimated at $1.6 billion. Vimal, his father and his brother together control Bidco Oil Refineries, which is the leading manufacturer of edible oils in East and Central Africa. Vimal claims the company’s annual revenues are in excess of $500 million. Bidco also manufactures baking powder and beauty soaps and distributes in 14 African countries.

When you walk in the corridors of power, be it in economic or businesses circles, Vimal Shah, you cannot avoid the feeling that the doyen of the Shah family business empire and a man said to be a ruthlessly strict, is the go-to guy. No wonder he towers the Kenyan corporate scene like big brother, as head of the powerful Kenya Private Sector Alliance (KEPSA) and featuring in many industry organisations like Kenya Association of Manufacturers (KAM) and the defunct Prime Minister’s roundtable as well as the President’s gathering of industry captains.

Through these groups, and alongside other industry magnets like Manu Chandaria, he has managed to influence policy in favour of private sector industrialists much to the delight of the Asian community in Kenya which, unsurprisingly, dominate manufacturing and retail sectors in the country. He has had the eyes and ears of presidents – from Daniel Moi and Mwai Kibaki and now, Uhuru Kenyatta, to Yoweri Museveni of Uganda, where the company has set up a manufacturing plant.

In short, you can’t talk about corporate Kenya and industry without Vimal Shah. “Vimal and other group of Indians drive Kenya’s economy,” says Mr James Omenda, an economist working for an NGO in Nairobi. “With such a huge investment in Kenya, economic and political leaders have no option but to open arms for him and his ilk.”

Besides employing many Kenyans in different cadre of jobs, Bidco provides market for many local suppliers, more so producers who feed his edible oils and soap manufacturing plants with raw materials.

Money talks and when people who posture as having a lot of it speak, serious people listen. Simply put, the economy needs people with money, especially those with high integrity, intent on strictly observing the law as they grow and expand their empires; pay taxes, observe labour regulations, carry out corporate social responsibilities along the way.

The two faces of business

Yet, like every human being, Vimal has his own weaknesses as an individual and businessperson which combine to paint a picture of a vicious man who will stop at nothing to get what he wants. If whoever coined the phrase “the end justifies the means” were to meet Vimal in his Thika office, he would be delighted at how the principle has been effectively applied to the letter at Bidco and other dealings that Vimal is involved in.

To the outside world, Vimal has managed his image pretty well. With the media always fighting for his interviews, he comes off very positively as the leading entrepreneur and industry magnet who has an eye for opportunities and the magnanimous job-creator. Of course, he must be credited with bringing the much-needed competition in the fast-moving consumer goods segment initially dominated by multinationals like Unilever. In fact, some years back he made history by buying out the iconic Kimbo cooking fat brand from Unilever, in what was hailed as a sign of Kenya’s manufacturing sector coming of age.

Unknown to many, however, is that this success has often come at the expense of something or someone. To build Bidco to the behemoth it is today, Vimah Shah has had to squeeze poor farmers, exploited desperate Kenyan and Ugandan workers and suppliers and stepped on the toes of tax and other regulatory authorities. Bidco is known to be one of the bad employers in town. Little wonder the firm has never featured among the best companies to work for in Kenya or the entire region despite its fast-paced growth, a league that often celebrates its rival Unilever and other blue-chip companies such as East African Breweries (EABL), Safaricom, Nation Media Group and Coca-Cola, among others.

Eye on the bottomline, sitting on souls

Like many Asian businessmen, the bottomline is more important than anything else, even life. So workers at its manufacturing plants in Kenya and Uganda are either paid poorly and overworked or plainly treated below the labour law requirements. An interview with current and former staff reveals the dark side of Vimal, manifested on the production lines, its offices and at its gates, where workers toil silently with scars of their suffering barely betrayed by their faces.

“Working at Bidco is hard,” says a 29-year-old who has been there since 2007. “I work for the money. I carry wood logs, feed the boiler and at times when there is construction, I am involved too. Many times there’s no time to rest. If at all, it is a 10-minute break and 20-minute lunch for a 10- or 12-hour working shift.”

But even the money this boiler wood-feeder works for is not something to write home about. Bidco is well known for its mean remuneration, with workers paid as low as Sh15, 000 per month for working 10-hour or more shifts daily, contrary to the high figures of over Sh20,000 that management showcases to labour officials and whenever media comes calling.

Different scales of employees are usually lumped into one salary scale. For instance, it is not uncommon to find a plant operator, a middle-level employee, earning Sh20, 000, same as a driver or mechanic, according to testimonies from workers.

Most low-level employees, such as packers and cleaners, earn Sh15, 000 gross, which is shaved to about Sh12, 000 after statutory deductions like NHIF and NSSF. This leaves them to live on a shoestring budget, keeps them poor and more desperate to work for Vimal Shah’s business.

If the amount paid is bad, the workers’ welfare is worse. While working for the company, and in spite of injury risks from the moving machines and slippery oily floors, factory workers are left on their own. “Overalls are issued after three years. If it wears out before term, you are forced to buy another using your money. So most people use normal clothes. There is a chemical in the oil called Sterlin that wears out the boots very fast and replacement is not fast enough so we end up using normal shoes,” a worker who used to pack and seal oil products says.

In the event of injury, sometimes medical services will be offered but after that the victim gets only some days off without pay. Consequently, many do not report injuries since they do not want to lose a day’s work.

This year, there have been four demonstrations by workers demanding better remuneration. The workers, some of whom had worked for many years without paid leave, sought to be paid allowances including, leave, housing and others. “They paid leave allowance but they did not distinguish between weekly wages and the leave allowance,” said one of the workers.

The Tatu City melodrama

From Vimal Shah’s office in Thika, Kenya’s second biggest industrial town after Nairobi, it takes less than half an hour to drive to the place that has become a battlefield of wealthy investors planning a high-profile real estate project. The development, Tatu City, embodies what a middle-class economy can produce – a 1,500-acre satellite city that will have planned residential, commercial and light industrial development, valued at over $1 billion.

Tatu City is the other scene where Vimal Shah has been trying to flex his muscle. It all started as a noble project conceived in 2010 by leading emerging markets investor from New Zealand, Stephen Jennings and mid-wifed by Vimal and his business friend, Nahashon Nyagah, who happens to be a former Central Bank of Kenya governor. The two form one hell of a pair, with networks in government and international community.

The international investors, under Rendeavour, a leading land developer in Africa, financed the full purchase of the Tatu land at $20 million while Vimal, Nyagah as well as a coffee farmer called Steve Mwagiru, brokered the transaction. They did not have money to take a stake in the project, so Jennings lent them $10 million to purchase a combined 50% stake. They never paid Jennings back.

The investor also acquired land formerly owned by Kofinaf, a Belgian-owned rubber producer seeking to exit coffee business, at $70 million. Jennings arranged with offshore lenders for a $62.5 million loan and $7.5 million equity investment, according to Tatu City records. “The Kenyans (Vimal, Nyagah and Mwagiru) were paid $500,000 finders’ fee for the transaction,” records at Tatu City show.

But instead of developing the business as partners, the trio has erected bumps in the way of Tatu City using courts in what appears to be a strategy to squeeze more cash from Jennings and Co. or take over the land from them altogether. “Steve Mwagiru told Rendeavour that the Kenyan partners would withdraw their cases in return for an outrageously high payment,” said someone who works with the investors. “That’s pure extortion.”

In January 2013, the court quashed the cases against Tatu City and ruled as fraudulent actions by Steve Mwagiru, his mother Rosemary, and a corrupt court clerk.

Nyagah and Mwagiru have consistently refused requests to co-fund Tatu’s development, and Vimal has invested only $289,000, thus their shareholding was reduced as American and European investors continued to provide full financing for the project, which is owned 77% by an investment consortium whose majority shareholders are Jennings and Frank Mosier. The Kenyan trio’s 23%, owned through some shadowy Mauritius firms, will decline even further as they have not contributed to project financing.

In this clique, too, there has been infighting. Nyagah has sued Mwagiru in Mauritius over shareholding disagreements but lost the case, which led to the dilution of Nyagah’s stake in Tatu City to less than 1.78%. Vimal and Mwagiru are also in an off-shore dispute.

But they are not over with Tatu City.  This year they were back in court to oppose the project, which they had all incidentally supported as board members, accusing the foreign investors of pilfering the proceeds of land sales, a charge denied by the investors, who continue to pour money into Tatu City’s development.

Vimal and Nyagah have also suddenly questioned a loan they previously supported as board members, taken to finance Tatu City’s development which, it turns out, would dilute their shareholding given that they have not contributed to the project financing. “The loan has already been audited by Ernest and Young and the international investors have undertaken further audit,” says a Tatu City document seen by NBM. “A third independent audit has been thwarted by Vimal Shah and Nahashon Nyagah.”

While the loan is governed by Mauritian law, Vimal and Nyagah have taken it to Kenyan courts where, it is believed, they have strong networks that can help them influence the process. In one example, they had a judge replaced in an ex parte hearing at night.

But Jennings and group are not taking it lying down. The investors have filed a criminal case against Nyagah, law firm Nelson Havi and other conspirators with the Criminal Investigation Department (CID) in Kenya, accusing them of stealing over Sh10 billion in land from the Kofinaf estate by transferring it to Nyagah, his relatives and other associates. The CID has recommended that charges be filed against Nyagah and Havi, who could face multi-year jail terms.

The international investors have also prepared a multi-million dollar damages claims against them. They have also reached out to their governments to protect the Tatu City investment from Vimal, Nyagah and Mwagiru.

If previous actions on Tatu City are any guide, you have not seen nothing yet.

Here cometh the taxman

When it comes to money, as it were, Vimal Shah does not leave anything to chance. Not even oiled organisations like Kenya Revenue Authority (KRA) can have their way easily on him.

On September 16, 2009, KRA sent a bill of Sh702 million arising from edible oils and related products that Bidco Oil imported in 2008 from Josovina Commodities Ltd in Singapore. KRA said it assessed the firm’s import bill and found that it was in arrears of the amount. According to KRA sources, this was due to Bidco claiming oil imported from Asia was destined for Uganda. By doing this, Bidco skirted Kenyan taxes. But once the oil reached Uganda, it was re-exported tax free to Kenya and dumped on the market.

Bidco moved to court seeking orders to have KRA restrained from making the demand and sought a review of the decision to charge the company the punitive penalty.

While Vimal was willing to pay, he wanted the court to determine whether the taxman acted within the narrow confines of the law in computing the tax arrears, according to the high court documents. After back and forth, and even with lawyer Ochieng Oduor on his side and KRA constituting a team of technical experts to review the matter, Bidco lost the case.

The court dismissed Bidco’s case, arguing that the company had not suffered any prejudice under the procedures used by KRA to handle the application for review. The loss effectively increased the bill, suit costs and interest included, to Sh1.3 billion. KRA at some point wrote to Bidco seeking to attach its bank accounts and property for failing to pay the arrears. Bidco moved to court again to challenge this, earning some temporary reprieve courtesy of Judge David Majanga on May 2, 2012, who restrained the tax agency from taking action against Bidco.

As fate would have it, Vimal and Bidco lost the case, a rare thing for a man used to having his way, perhaps because he was dealing with a government agency in a case that had public interest at its heart and was highly publicised.

On August 6, 2013, Judge Majanja dismissed Bidco’s petition challenging enforcement of collection of taxes against it on grounds that its fundamental rights and freedoms had been violated. Mr Majanja said Bidco’s case lacked merit and gave the company 21 days to pay up. To this day, the Sh1.3 billion tax bill has not been paid.

Vimal seemed to agree that in the fluid money world, sometimes you get; sometimes you don’t.

Ugandan farmers dig in for a fight

Investing in Uganda by setting up a Bidco palm oil plantation and manufacturing plant was seen as a valid expansion that benefited from the East African Community’s trappings. The plant would create jobs and of course provide market for Uganda palm oil farmers besides earning the exchequer millions in taxes. Oil Palm Uganda Ltd, was launched in 2002.

In 2011, Oil Palm acquired land leases from Uganda businessman, Amos Ssempa, to expand its plantations. About 18,500 acres of palm trees have been planted since then in what Oil Palm Uganda says is aimed at increasing vegetable oil production in the country. It emerged that some 100 farmers were forcibly evicted without compensation. In 2004 World Bank withdrew from the project since it was not complying with its forestry polices.

On February 19 this year, a group of farmers filed a lawsuit against Bidco Uganda and Ssempa who leased the land to Oil Palm Uganda Ltd. Ssempa says due process was followed and farmers compensated, though some say the money was insufficient for the value of land and food destroyed, while others assert that they were forced to sign for the money.

The18, 000 acres of land were mowed down and replaced with palm oil trees. Bidco’s business in Kalangala has left locals destitute. Revenues for households have dried up and many can’t take their children to school. A good number have been turned into casual labourers, a painful transition from once successful farmers.

Earlier, in 2012, Vimal Shah ran into trouble with environmental activists as he tried to acquire more land around Lake Victoria’s Ssese islands to produce more palm and setting up a plant on Burgala Island.

Good guy, bad man?

At the end, trying to bring out the dark side of Vimal Shah is hard in a society where bad things are swept under the carpet and wealth is worshiped regardless of the source. Every time you pick any product, be it cooking oil or a detergent, consumers should stop and think about how it’s manufactured, but low consumer activism means that a lot goes unnoticed.

For a man who features among the league of leading industrialists of the century in East and Central Africa, it would be expected that a human face would the hallmark of his expansion. Vimal says his company will grow to $2 billion by 2020. He may well achieve that feat if he can keep the KRA at bay, but along the way there are likely to be pain, tears and poverty. Thanks to the dark side of Vimal Shah.