TRANSPARENT JOURNEY OF MUMIAS SUGAR. Story of Grace to Grass....... then Grace?

FACADE; The main gate of Mumias Sugar. The company collapsed due to mismanagement.

ANALYSIS BY Musa Ekaya 

Mumias Sugar company- MSC was supposed to be a showcase small-scale agricultural enterprise. Yet it has become the sad story of a failed scheme. Perhaps.

 

Dateline 1967: The Kenyan government had decided to open up vacant land in Mumias in a land transfer program funded by the British government. It was the largest scheme by the standards of the day, with the UK giving a soft loan of £2.9 million (Sh400m).

The government had approached a British foods company, Booker McConnell, to do the feasibility studies and advise on how satellite small-holder sugar plots could sustain a sugar factory in the midst of the scheme.

SWEETNESS; Sugar on the shelves of shopping malls

With all the planning done, Mumias Sugar Company was registered in 1971 with the government owning 71 per cent while the rest of the shareholding was taken up by Commonwealth Development Corporation (17 per cent), Kenya Commercial Finance Company (five per cent), Booker McConnell (four per cent) and the East African Development Bank (three per cent).

There were initially 8,000 acres under cultivation owned by the factory and a separate outgrowers scheme. A factory built by Fletcher and Stewart sprang up at a cost of £4.5 million (Sh315 million at the time).

Kenya was an importer of sugar mainly from Uganda but with Mumias in place the imports stopped. That was in the 1970s and Idi Amin had decided to close down the Asian-run sugar farms and firms.

Booker was to run the 8,000-acre estate and the factory under a management contract and they went home with a handsome profit. They even built a Booker Academy.

Today, however, Mumias is in a sorry state. A tale of a failed dream.

On June 30, 2003, the management contract between Mumias Sugar and Booker Tate expired and they advertised for the position of a new managing director. In Parliament, questions were raised why Mumias was still run by expatriates.

“It is a shame that 40 years after Independence, Kenya is still looking for a European to crush sugar,” said then Mumias MP Wycliff Osundwa. “Could the minister assure this House that we are going to recruit a local person to run Mumias and forget about the Europeans?”

Two years earlier, Mumias had listed at the Nairobi Stock (now Securities) Exchange, becoming a public company. By this time, the roads network, farmers’ morale and the entire sugar industry was low. Barons were still dumping cheap sugar into the market.

The era of Evans Kidero, the first managing director, did not offer much either. He inherited a sickly loss-making enterprise that had made Sh300 million loss in 2003. By the time he left, the numbers had grown past Sh1.67 billion. The shares tumbled too.

Mr Kidero, who resigned in 2012 to join politics and was elected Nairobi governor, passed the mantle to his former chief finance officer, Peter Kebati.

Mr Kebati’s three-year stint saw Mumias continue to plunge deeper into losses which were blamed on falling cane supply. In 2014, the miller’s losses hit Sh2.7 billion and the share price plummeted to a new low of Sh1.45.

Embarrassed by losses, Mr Kebati in 2013 embarked on a management shake-up to improve productivity. Four senior managers, including operations director and agriculture director went home. Others sent packing were the ICT manager and production manager. Interim managers were appointed immediately.

The board followed the changes in September with a one-year time frame for profit turnaround. Board chair, Dan Ameyo, a lawyer appointed in 2014, said he will get rid of employees who had defrauded the company. He never did.

The miller, it now appears, had been tricked by senior managers to import cheap sugar as a stop-gap measure on dwindling sugar production which had decreased substantially due to cane poaching. The executives dumped sugar from the Sudan.

When the parliamentary Committee on Agriculture went to Mombasa, they found 10,000 tones of imported sugar at a depot. A total of 115,000 tones of sugar had been imported.

Mr Kebati is still facing charges over illegal imports. KPMG’s forensic audit is said to have unearthed the illegal sugar trade by managers at MSC.

In 2014, Mumias filed a case against Mr Kebati and three other managers seeking to recover Sh1.1 billion it says the four caused the miller to lose over sugar imports. It also advertised four senior positions and required those serving to apply afresh.

This was in line with a Sh500 million cash bailout pledge by the government. Three days later, 52 employees, most of whom were supervisors in agriculture, were fired for causing the miller to lose Sh400 million by irregularly terminating farmers’ cane supply contracts, which the company said made it difficult to pay farmers’ debts.

Mumias owed banks more than Sh6.5 billion. After three management changes, Mumias remained stuck in a deep rut.

However, there is some potential since Mumias has a co-generation plant which supplies 26 megawatts of power to Kenya Power, and a bottled water project.

The Kenya Plantation and Allied Workers Union confirmed that the huge losses were due to 300 contracted services. Mumias relied heavily on contracted services from security to cane delivery. KPAWU said in 2013 that the company could save Sh2.5 billion if it were to review some of the contracts on a needs basis. 

Kakamega Senator Cleophas Malala who stood firm against attempts by other forces to take over Mumias Sugar from the receiver without full disclosure.

Who was to blame?

Msc board of directors 

Msc management and staff

National assembly 

Kenyan government 

KSB

Kakamega County Government 

Revival

Mumias Sugar went under receivership when KCB moved to court seeking to recover it's debts.  KCB then appointed a Mr. Rao to manage msc under receivership. 

This move was opposed by a number of stakeholders within the region including BHUM.

This year,2021,the receiver manager collaborated with some leaders including the kakamega County governor Wycliff Oparanya to bring Devki on a leasing agreement that was single sourced and full of irregularities. 

This move was opposed again by a number of stakeholders. The Kakamega County Senator Cleophas Malala moved to senate to stop the irregularities that could have seen Devki occupy MSC through backdoor. 

After several push by stakeholders who wanted a transparent process, the senate summoned the receiver manager PVR Rao and ordered him to re-advertise the bids and make the process transparent. 

Several court cases then followed and a cat and mouse game thrived.  The senate remained put and pushed for a transparent process. 

In October 2021,the bids that had been advertised by the receiver manager were finally opened and made public. The process of evaluation is on going.

Musa Ekaya is the Secretary General Bunge La Haki Usawa na Maendeleo.