A federal agency created by the Canadian government during the tenure of former Prime Minister Justin Trudeau is said to have lost Ksh6.9 billion after investing in a loss-making Kenyan company.
According to reporting from the Toronto Sun, FinDev Canada, officially known as the Development Finance Institute, revealed in an internal memo that it did not do ‘due diligence’ before investing millions into the company.
The federal agency, created in 2017, revealed the new development on Wednesday, August 13, after withholding the memo for over half a decade.
“Due to lack of time, the team must rely on due diligence performed by others,” said minutes of a November 10, 2017, meeting of the board.
A separate staff email said: “Because (our) first transaction will be the object of significant scrutiny, we will need to ensure the rationale for our involvement is articulated clearly and convincingly.”
According to the media reports from Toronto, the agency’s first investment was buying $10 million (Ksh1.2 billion) worth of shares in the door-to-door sales company that markets cellphones and housewares.
Further records revealed that the approval for the investment came weeks after being contacted by the company’s Chief Executive Officer (CEO).
It was later established that since 2018, FinDev has bought additional shares in the company valued at $43.4 million (Ksh5.6 billion).
However, during that period, the company reported approximately $138.6 million (Ksh17.9 billion) in combined losses, but FinDev could not determine the effect of these losses on its taxpayers.
“FinDev takes seriously its responsibility for transparency regarding its financing and investment activities,” the agency said in a statement.
“At the same time, FinDev is mindful of the need to protect certain commercially sensitive or personal and otherwise restricted information related to its private sector clients or other stakeholders,” it noted in response to enquiries on the effect of the losses on taxpayers.
For its part, the Kenyan company is still operational, having reached four other African countries. It was founded in 2010 and raised significant funding from global investors.
However, it has faced legal and regulatory challenges in Kenya, including being forced to pay millions in unpaid taxes after losing an appeal at a tax tribunal.
