Let us deny vultures hovering over Mumias Sugar carcass

A Senate committee has summoned the receivers of Mumias Sugar Company and top Ministry of Agriculture officials to grill them over the plan to lease the assets of the insolvent firm to a private player.

Parliament risks being accused of meddling since, technically, the receiver operates under insolvency laws and the Companies Act. Yet the stake in the Mumias issue goes way beyond what is stipulated in the fine print of the insolvency law. The receivership process and the plan to revive the miller could go belly-up if the support of both the sugar cane farming fraternity and, indeed, the political leadership of western Kenya were to be ignored.

Here are the key issues the senators should consider raising when they meet the receivers. First, they should demand more transparency and disclosure on the transaction. Granted, the public statement the receiver put out last week was a good starting point. Yet all he did was say that the tender had attracted offers from eight bidders and that the procurement process was yet to be completed.

When, and if, the receiver appears before the committee, senators must insist that names of all the bidders, including details on every bid, be made public. Is there truth in public statements where some of the bidders have been trumpeting how they offered and committed to pump billions of shillings into rehabilitating Mumias?

Is there truth in claims that the process of procuring a leasing company has been infiltrated by politics? From what I gather, many of the big mouths making wild claims might be forced to eat humble pie.

Secondly, the committee must demand maximum transparency on the issue of price. Who among the eight bidders has offered the best overall price and how much will he pay annually in lease installments?

How did the receiver develop the reserve price, and were the prices benchmarked with leading sugar operations in Africa?

Thirdly, take a close look at the financing cost implicit in every bid. This is important because, if we put Mumias in the hands of an over-leveraged company who will be approaching the task of reviving the company with expensive debts, the whole thing is doomed to failure.

Mumias should not be put in the hands of vulture fund-like investors groping all over the place for distressed assets to buy. Ideally, what the company needs is an investor with domain knowledge and experience in running large sugar operations.

Attract the big names

I had hoped that Mumias would attract the big names in the continent — such as Tongat Huleet of South Africa, Kenana Sugar or sugarmillers out of Mauritius. But indications right now are that what used to be the largest player in the country’s sugar industry might end up in the hands of local merchants who see its demise as an opportunity to entrench the chokehold they have maintained on the industry.

Because of its size, Mumias was a source of stability in the marketplace. I hoped that the receivership would bring for us a new player to disrupt the influence of the tiny elite of merchants with tentacles in nearly all segments of the sugar business — doubling as millers, importers, distributors of local sugar and owners of gigantic warehouses.

The notion that sugar production in Kenya is not economically viable is the biggest myth. Just now, West Kenya is spending billions of shillings in putting up a plant at Naitiri, between Webuye and Bungoma.

How I hope that the merchant who ends up taking over control of Mumias is not just a front acting for interests whose secret plan is to have the company shut down so that they can have a field day after becoming the only ones buying cane from the sugar zone. This leasing thing will carry major implications for trends in sugar poaching in the whole of the sugarbelt.

The merchants have proved to be adept at employing restrictive practices — poaching sugarcane developed by State-owned milling companies and erecting barrier entries on new players — and creating confusion and disorientation in the sugar industry. Should it surprise anyone that sugarmills owned by these merchants literally surround State-owned milling companies? Zoning regulations are honoured more in breach than in practice.

Is it not the height of irony that these same merchants fighting over the Mumias carcase are also in front of the queue of companies battling one another to purchase long-term leases to run and take control of other sugarmillers — Nzoia, Sony, Muhoroni, Miwani and Chemelil — under the privatisation programme?

The leasing out of what was our biggest sugarmiller to profiteering merchants is something I will never celebrate. The tenure of the lease must be made as short as possible. After all, it’s not a concession.

[email protected]