Something curious happened in Kenya in 2021, right in the middle of the debilitating global lockdowns caused by the Covid-19 virus.
At one of the sports clubs along Ngong Road, construction of a modern pub began.
The projected cost of the pub, including the rental agreements, was upwards of Ksh 50 million, excluding the cost of stock.
Who was this nutter that was building an expensive pub right in the middle of the Covid-19 lockdowns when the attrition rate on pubs was at its apex and where pubs were being closed, auctioned, and mass layoffs of their employees were the order of the day?
Did this person know something that other pub owners countrywide, or even globally, did not know?
Secondly, at the said sports club, the place where the construction of the pub was taking place was the subject of a protracted legal battle between various different parties, which again begs many questions about how and why such a construction would be allowed.
Be that as it may…
The construction was being undertaken by Shadrach Oriah, the owner of Cogno Distributors, which specialised in Keg beer distribution on behalf of Kenya Breweries Ltd (KBL) and by extension, East Africa Breweries Ltd (EABL), and whose operational territory included nearby Kibra, Kitengela, and Upper Nyanza.
What was the source of the funds that were deployed in this construction?
Oriah had a sweetheart deal with senior officials of the EABL/KBL, where he would act as their frontman, and in return, he would handle substantial amounts of stock and cash on their behalf.
So far, all indications are that the Ksh 50 million used for the construction of the pub originated from a slush fund within EABL/KBL.
Where would a slush fund of such magnitude originate extra-budgetary?
Glad you asked. Well, it was money that had been forcefully appropriated from other EABL/KBL distributors’ bank accounts. Apparently, EABL/KBL has 100% operational control of the trading bank accounts of each of their 100+ distributors countrywide.
This arrangement allowed EABL/KBL unfettered access to distributor funds and discretion on how to (mis)use the funds.
First, EABL/KBL would foment a non-existent crisis with the distributor whose funds they were eyeing.
For example, in the middle of the Covid-19 shutdowns, they would ask the distributor to increase working capital for no apparent reason by insisting that the distributor top up funding in their EABL/KBL-controlled bank account.
Next, EABL/KBL would use their discretion to withdraw this cash (remember they have 100% control of the bank account too) and then advise the distributor that the deduction, running into millions of shillings, was to regularise “free issues” from two or three years prior.
“Free issues” are supposed to be accounted for and reconciled within 14 days of issue, so deducting money from a distributor’s account for something supposedly two or three years old is unconscionable.
EABL/KBL operate a cash business.
They do not advance any credit.
There would be no reason to deduct any funds from the joint accounts of several targeted distributors for any reason that goes beyond normal business.
Diabolically, when the distributors (from whose bank accounts the funds were appropriated by EABL/KBL) genuinely kicked up a stink as to why their funds had been deducted, they were then kicked out of their distribution contracts by EABL/KBL.
Next course of action? Legal action.
The EABL/KBL personnel loved this course of action because legal action in Kenyan courts takes a minimum of 10 years, by which time most of these senior people would have left the company.
It would become someone else’s skunk a decade down the road.
It is also because EABL/KBL has a massive budgeted legal war chest and a retinue of bulldog lawyers who happily engage these distributors in legal acrobatics within the Kenyan courts for decades until either the case dies a natural death or the distributors get frustrated and run out of steam.
More importantly, when a distributor goes to court to sue EABL/KBL, he is instantly classified as an enemy combatant, and the merits of his claim or assertions, no matter how genuine or legitimate, get swept under a rug by the manufactured animosity and juvenile overreaction from EABL/KBL top brass and legal teams.
It is all part of a performance, an act. That is Kenya for you. Gangsters’ paradise we are.
This is how the funds to finance this new pub on Ngong Road were put together.
When construction was completed, the pub finally opened its doors with pomp and fanfare in 2023 under the name ‘THE ORCHID.’ It was stocked with free alcohol from EABL/KBL, alcohol that had been designated for promotions and referred to in the business as “free issues.”
When pubs run promotions like “buy three get one free” promos, that one free beer is referred to as a “free issue” directly from EABL/KBL. For every three crates (cases) sold, the pub would get one free crate (case) to give out to its customers. Some pubs can sell 1,000 cases over a weekend, which would imply upwards of 300 crates (cases) in “free issues.”
You get the picture, do you not?
It was a poorly kept secret that Shadrack Oriah was working as a front for EABL/KBL bosses, namely Joel Kamau (Commercial Director) and Jane Karuku (CEO). Only these two senior officers of EABL/KBL had sufficient gravitas to sign off on substantial quantities of “free issue” alcohol.
Free issue alcohol can only be channelled through a contracted distributor. In this case, both Jane Karuku and Joel Kamau needed Shadrack Oriah and his infrastructure in order to pull off this caper.
The trio of Oriah, Karuku, and Kamau therefore co-own the ORCHID pub. To date, this pub is still stocked exclusively with “free issues” from EABL/KBL.
Diageo, the parent company that owns East Africa Breweries Ltd (EABL), completed an independent general review of the business practices at the company following both complaints from third parties and a mismatch in the outcomes of internal financial and compliance audits.
Diageo, a global behemoth in the alcoholic beverages space, then took the decision to sack the EABL Commercial Director, 45-year-old Joel Kamau, in November 2024 for his role and complicity in this malfeasance.
Joel became the fall guy for this scheme.
EABL top brass, led by Group Managing Director Jane Karuku, was intentionally bypassed by Diageo in this probe, and with good reason too. Diageo was unsure how deep the rot within their Kenya and East Africa subsidiaries went and who else their continuing probe would eventually finger.
Diageo was genuinely afraid that the involvement of EABL in the probe would taint the investigations due to either misplaced loyalties or misaligned interests.
Diageo may not have missed the mark on this.
When the termination decision was formally communicated to both EABL and to Joel, the first impulse of EABL Group MD Jane Karuku was to throw Joel a company-funded farewell party where she would invite the entire sales team from across the region, all on EABL’s dime.
Her close confidants were able to quietly dissuade her from this course of action, explaining to her that it is this type of thing that leaks to higher-ups and draws an unwarranted level of attention both to her and her team.
A sober assessment indeed.
But Karuku was not quite satisfied. She insisted that Joel had been a top performer, that he at least deserved a quiet shindig with only the top brass invited. Now exasperated, her confidants reminded her that Joel had been terminated and was neither retiring nor had he resigned, and they advised that she was free to host the party, just as long as it was not at the company’s expense.
Joel was a mini-tornado.
He left massive destruction in his wake, and the magnitude of his destruction will only be properly understood in the fullness of time.
How and where did this trio of Oriah, Kamau and Karuku meet?
The story is rather convoluted and goes back to 2016/2017 when Jane Karuku was the MD at KBL and Joel was the Head of Route to Consumer at KBL. In his role, Joel would be in charge of the 100+ EABL/KBL beer, spirits and Keg distributors countrywide.
The two biggest distributors of alcohol for EABL/KBL at the time, both in terms of territory and sales volumes, were BIA TOSHA DISTRIBUTORS and KAMAHUHA DISTRIBUTORS.
Someone well connected inside EABL had a hard-on for these territories and a lustful eye on those massive revenues.
In 2016, KBL and its associated company UDV terminated its distribution agreement with BIA TOSHA Ltd. To give an indication of the sheer size of the distribution zone covered, picture Namanga, Bissil, Kajiado, Kitengela, Athi River, Industrial Area, South B, Nairobi West, Kenyatta, Langata, Rongai, Kiserian, Magadi, Upperhill, Ngong Road, Hurlingham, Kawangware, Satellite, Dagoretti and a few others.
BIA TOSHA ltd had diligently served these areas without problem for more than a decade before this decision to terminate their contract was made.
KBL MD Jane Karuku engineered the exit of BIA TOSHA Ltd and replacement by 2 new companies namely Ngong Matonyok Wholesalers Ltd and Manara Ltd.
BIA TOSHA went to court and obtained orders keeping them in place as distributors until the matter was heard and determined.
The civil suit by Ngong Matonyok and Manara Ltd was dispensed with by the High Court which ruled that there was mischief in the award of the territories to them.
By 2017 Joel had joined KBL, and he was a resourceful guy.
Joel convinced Shadrack Oriah of Cogno Distributors, a sly operator with whom he got on well, to go to court and submit that he had already been granted part of the BIA TOSHA territory and that therefore the decision of the High court to reinstate Bia Tosha was null and void, and would negatively impact him and his business.
This matter has been up and down court corridors for 8 years, going all the way to the Supreme Court where it was ruled that (now) EABL CEO Jane Karuku was infact in contempt of the High Court orders to reinstate Bia Tosha.
Remember, it has been 8 years of shenanigans in court, the main matter of the dissolution of the BIA TOSHA contract has not even begun. Bia Tosha is seeking more than Kes. 1 billion in damages.
Shadrack Oriah, a smooth operator, realized that he was probably being (mis)used to linchpin a hostile takeover of the BIA TOSHA route, and he obviously asked himself what was in it for him.
In order to placate him, Karuku and Kamau hived off 60% of the BIA TOSHA territory and handed it over to him.
The other 40% of the BIA TOSHA territory would be awarded to O’BRADLEYS DISTRIBUTORS LTD, a company owned by Capt. Ronald Karauri, best known for the Sportpesa heist and owner of Milan Lounge. He also masquerades as Member of Parliament for Kasarani Constituency in Nairobi.
For this new award of 60% of BIA TOSHA territory, Oriah couldn’t use his regular company, COGNO DISTRIBUTORS, instead he was forced to incorporate a brand new entity by the name TONY WEST DISTRIBUTORS LTD.
It is TONY WEST DISTRIBUTORS that owns the ORCHID PUB along Ngong Road.
If the veil of incorporation on TONY WEST DISTRIBUTORS was lifted, you would be able to find the stakes of both Jane Karuku and Joel Kamau
Nothing illustrates this pompous arrogance from EABL than this BIA TOSHA fiasco, a truly diabolical story about the excesses of blue-chip companies that enjoy near monopoly status in their respective markets.
We mentioned earlier that EABL/KBL are able to access the bank accounts of their 100+ distributors and independently move funds without consultation.
The idea is that there would be weekly and monthly reconciliation of those accounts.
The arrangement is one of good faith.
Here is how it came about.
In 2018, EABL required all 100+ distributors to be part of a new Distributor Finance Scheme (DFS) with 5 nominated banks (including SCB, KCB, Equity & Absa). All clients (pubs) were required to pay for their alcohol via Safaricom till numbers which were in turn linked to these DFS accounts, which are controlled by EABL.
All the working capital from the distributor is also deposited into these bank accounts and EABL/KBL has the mandate to singularly debit (remove funds) from the account of the distributors.
So whenever the distributor orders alcohol, an invoice is generated and the funds deducted from the DFS account. Similarly payments like VAT etc.
It should work seamlessly. Unless of course the system is abused.
Many Kenyans now believe that the role of MD or CEO of our blue-chip companies like EABL should exclusively be head-hunted out to foreigners.
Whenever MD or CEO positions are held by Kenyans, it is other Kenyans that bear the brunt of the sickness (corruption)of the Kenyan soul.
Diageo apparently only cares for reputational damage, and has never been worried by small inconveniences like weird trade practices by its employees, only up until, as with the case of Joel Kamau, it threatens to tip over into a scandal that cannot be ignored.
In the next chapter, we will delve into the VAT robbery by EABL on its distributors and the skewed allocation of distributorships to friends and cronies.
