Kenyan company that received federal subsidies lost over $50M
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Despite a Kenyan door-to-door sales company losing more than $50 million on business operations while receiving federal subsidies, the Canadian agency that approved the funding maintains it was a good investment.
M-Kopa Holdings Ltd. — a company that sells solar-powered appliances and cellphones and offers cash loans on the installment plan — received $12.8 million in federal funding, according to Blacklock’s Reporter. FinDev Canada, a Montreal-based agency launched by cabinet in 2017, approved the subsidy to a Nairobi firm.
The company laid off 150 employees two days after FinDev announced the funding. M-Kopa corporate filings show the company in a two-year period lost over $39,397,000 US, the equivalent of $51 million CDN.
“It has high potential,” said Shelley Maclean, spokesperson for FinDev Canada, according to Blacklock’s Reporter.
Maclean described the losses as “normal” for a start-up, but acknowledged taxpayers’ funding was not secured.
“By definition, equity investments are not secured,” said Maclean.
“A thorough due diligence process was completed and operating losses normally seen in an early stage growth company in the off-grid solar sector were signaled. It has high potential for development impact results and long-term financial returns.”
The CEO of M-Kopa is a Canadian, Jesse Moore of Toronto, a former manager with the foreign aid group CARE Canada who now lives in Nairobi. The company earlier received celebrity endorsements from Barack Obama and Al Gore, according to Blacklock’s Reporter.
Records show FinDev put $12.8 million into M-Kopa before the agency had opened its head office, appointed an independent board of directors or hired a chief investment officer to scrutinize the funding. FinDev said the subsidy was proposed by a lone manager, Paul Lamontagne, who abruptly resigned as CEO of FinDev on Sept. 2.
“He brought the proposed transaction to the board,” a FinDev officer told Blacklock’s Reporter last week.
Lamontagne in 2018 internal memos wrote, “I will manage the relationship with M-Kopa and serve as our board observer.”
“This makes sense as I have a history in Kenya,” he wrote.
Lamontagne quit the federal agency following Globe & Mail disclosures that he had dealings with a separate South African company under a stock trading investigation.
Cabinet launched FinDev three years ago to “support private sector investment in developing countries,” according to a mission statement at the time.
The M-Kopa subsidy was “creating good quality jobs in East Africa,” wrote staff.
Maclean said Wednesday funding for the door-to-door sales company was an investment in empowerment of African women.
“Forty-eight percent of employees are women,” she noted.
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