According to new corporate filings, a Canadian-funded cell phone company in Kenya lost more than $25 million in 2020. Taxpayers have yet to see a penny in dividends though the firm paid CEO Jesse Moore of Toronto a six-figure salary equal to $397,000 with stock options valued at $633,000.
"The group is under discussion to raise additional capital with new and existing shareholders who would support the operations for the foreseeable future," wrote the directors of M-Kopa Holdings Ltd. in their Annual Report. "The directors have assessed the group's ability to continue as a going concern which includes the current uncertainties created by Covid-19."
M-Kopa is a Nairobi door-to-door sales company that advertises Samsung phones and household appliances. Four years ago, a federal agency FinDev Canada used public funds to buy $15.4 million worth of shares in the company in the name of African development.
FinDev claimed the company would become profitable. "M-Kopa's revenue has nearly doubled since 2018 and achieved a break-even point in 2020," said FinDev spokesperson Shelley McLean.
The company instead saw year-over-year losses double from US$8,549,878 in 2019 to US$19,307,559 last year, the Canadian equivalent of $25.5 million, reported Blacklocks. The pandemic "has no doubt impacted the way of life of the group's customers to some extent," said the Annual Report.
Cabinet never explained why they purchased shares in the Kenyan firm or what if any contacts it had with CEO Moore, a former child activist once praised by the Toronto Star as a "voice of Canada's youth" and "leader of tomorrow." Maclean's magazine in 1997 named Moore among 100 Canadians To Watch.
In an April 22, Inquiry Of Ministry tabled in the Commons. Cabinet said it intended to sell its M-Kopa shares after concluding any chance of a return on investment for taxpayer dollars spent. "The rate of return on this investment is difficult to predict," said the Inquiry.
"Given the wide variability of returns for this type of company in the short term and the expected exit of the investment in 2024, longer-dated expected return calculations would be quite speculative," it said. Asked, "Did any cabinet member approve the M-Kopa investment?" the Inquiry replied, "No."
Cabinet launched FinDev in 2017 with $300 million in five-year funding "to support private sector investment in developing countries," according to a statement at the time. Its first funding, a total of $12.8 million, went to M-Kopa Solar of Nairobi, a direct sales company distributing cellphones and solar-powered appliances on the installment plan to African villagers. "We just received word that FinDev Canada's first deal has officially closed!" wrote staff.
Company products sold door to door include Samsung A11-model smartphones. The phones retail in Kenya for 14,499 Kenyan shillings, the equivalent of CDN$168, but M-Kopa sells its Samsung phones at 17,448 shillings or $202, the equivalent of a twenty percent markup. The company sells consumer products and household loans on installment plans estimated to carry 254 percent annual interest.
It declined repeated requests for comment. CEO Moore earlier sent a confidential email to staff claiming the firm was "subject to untruthful and highly misleading articles written by Blacklock's Reporter."
FinDev spent nearly $13 million to create jobs in Kenya with subsidies for a Nairobi company that promptly laid off staff. FinDev Canada withheld Access To Information records on the transaction for a year and censored thousands of pages of documents. "We performed our own due diligence," read an internal email. Funding was "creating good quality jobs in East Africa," wrote staff.
The Trudeau Liberals signed the M-Kopa contract on February 28, 2018, and publicly disclosed it on March 13. On March 15, M-Kopa announced it laid off 150 employees.
Records indicate FinDev was "operating on a skeleton staff" at the time. It did not open its Montréal head office or appoint a Chief Investment Officer until months later. Its advisory council had yet to meet, and its first board of directors was not announced until April 3, 2019, more than a year after the Kenyan subsidy.
Asked who proposed the Nairobi funding, Minsky said now-departed CEO Paul Lamontagne initiated the project. "He brought the proposed transaction to the board," said Minsky.
CEO Lamontagne resigned September 2 after management told the Globe & Mail they were conducting an "independent assessment" of his private business dealings with a different South African firm under a stock trading investigation. Lamontagne, a former CIBC executive and "social entrepreneur," was appointed CEO of FinDev in 2018.
Lamontagne, in internal memos, wrote he worked on the Kenyan subsidy when FinDev barely had staff to review it. The agency at the time had nine employees, including one lawyer, a "social media and marketing specialist," and a "gender advisor."