Portland Cement caught up in Sh20 billion land row, power struggle

By PAUL WAFULA

Power politics could be behind the plans to sell 4,000 acres of land owned by East African Portland Cement Company (EAPCC). The piece is valued at over Sh20 billion.

The land, whose limestone reserves are exhausted, is said to be a target of presumed greedy individuals angling to acquire it at a throwaway price and sell it for a kill. Insiders have also indicated that the company could have been marked for sale as Government and the National Social Security Fund (NSSF) look for a way to exit it.

Details are now emerging of how connected wheeler dealers representing sections of the cement maker’s shareholders want to take charge at the decision making table, when the land finally comes up for sale ahead of the divesture.

“They are like vultures. Currently the value of the land is grossly understated and the company has reclassified it as investment property after we finished mining. Now it is very tempting for people with short term goals of buying it and disposing it,” a senior manager familiar with the goings on at the firm, said.

Another insider revealed that some brokers who have access to the boardroom have indicated they would interest Nigerian tycoon Aliko Dangote, who is planning a major entry into Kenya’s cement market, to consider buying a major stake at EAPCC.

Already Mr Dangote, who has been named as Africa’s richest man, has announced plans to open a Sh34.8-billion plant in Kenya.

Shareholders’ spat

Last month’s shareholders’ spat gave the public a peep into battle after one camp of directors rejected the Government’s plan to increase the number of shareholders during the Annual General Meeting (AGM). 

Also rejected was a plan to replace the firm’s current chairman Mr Mark ole Karbolo with former CMC Chief Executive, Bill Lay.

“The talk on selling the company is now growing louder and the recent developments seem to confirm that it is about to change shareholders,” a senior manager at the firm said. Investigations by The Standard on Sunday have revealed that some politicians allied to Jubilee parties, TNA and URP have taken opposing sides, one in support and another against the current top management at the firm.

But most people interviewed for this story said the land disposal is what has sparked the current vicious fight to control the boardroom at the cement maker. “There are some dubious characters who want to acquire 4000 acres of land that Portland has finished mining. They want to control the boardroom and use it to their advantage when the right time comes,” another source told The Standard on Sunday.  

At the current market rates, the land would fetch over Sh20 billion. Whoever buys it can decide to subdivide the land into smaller parcels and if sold immediately would fetch two times more.

Land buying companies are currently selling an acre in Athi River and its environs at between Sh4 million and Sh6 million depending on the proximity to the road and the physical amenities present. They are making even bigger margins when they further subdivide the land into quartres and eighths and sold for residential and commercial purposes. For instance, Ndatani Enterprises is selling an eighth piece of land in Athi River at about Sh900, 000.  This means an acre would fetch as much as Sh7.2 million. The EAPCC land would therefore return as much as Sh72 billion depending on how it is subdivided. Most of the EAPCC land is in Athi River, Machakos County and parts of Kitengela in Kajiado County.

“The land can be used to build homes, industries or rehabilitated into forests,” the firm’s Managing Director Kephar Tande said in an interview, but declined to comment on the boardroom intrigues.

Mr Tande said he could not comment on the reasons why the shareholders were fighting on grounds that it was an owners’ issue.

Acre fetches Sh7.2m

But the fight is hurting the firm which has 90 million shares listed at the Stock Exchange, with each share having lost 15 per cent of its value between November last year and now. 

This has seen the value of the company dip from Sh7.2 billion in market capitalisation to Sh6.1billion in the same period, a Sh1.1 billion loss.

On November 27 for instance, a share was trading at Sh80, but this has been eroded to Sh68 at the close of market last week, Sh12 less.

Kenyans are the biggest losers given that the cement firm is largely owned by the Government and the NSSF on one hand, and French cement conglomerate, Lafarge, on the other hand.

Together, Treasury and NSSF control 52.3 per cent shareholding, in what gives the State a bigger muscle in the boardroom. Lafarge has a 41.7 per cent stake. Minority shareholders own the remaining 6 per cent.

But despite this, the Government has been unable to use its muscles to influence key decisions such as the appointment of the chairman of the board.

 It also risks being unable to influence how this land is disposed of if the decision will be made by voting. But EAPCC chairman told The Standard on Sunday that the planned sale can nevertheless not proceed without the approval of the Government.

“We cannot break the law. The Government must approve this and we are still waiting for this approval before we proceed given that it is a major shareholder,” Ole Karbolo said in a phone interview.

Mr Karbolo confirmed that the firm indeed had 4000 acres of land lying idle after mining had been carried out, and had already put up 1300 acres on sale pending approval by the Industrialisation ministry. This fight to control the affairs at Portland is behind the recent push by the Government to increase the number of directors at the firm from the current seven to 11 in a bid to reclaim its voting rights.

“There is nothing more significant and valuable at Portland cement today that can cause this war than this land. The same people behind the NSSF Tassia scandal are the same that are driving this process,” the source, an accountant by profession, added.

Atwoli lifted the lid

Recently, Central Organisation of Trade Unions (Cotu) Secretary General Francis Atwoli lifted the lid on how top managers at the National Social Security Fund (NSSF) had varied the price of construction of the Tassia Estate housing project by about Sh2 billion.

This, he claimed, was done without following proper procedures. The NSSF board had earlier proposed Sh3.3 billion for the project, but this was adjusted to Sh5.053 billion to construct roads and a sewerage system.

Atwoli termed this “the scandal of the year” at the firm.  “Already the NSSF has indicated that they want to sell their stake to raise money for other investments. The company is being prepared to be sold to Dangote who has shown interest in the country’s cement market,” an insider at EAPCC said.

Unlike the past when NSSF had been at loggerheads with the State over its interests at EAPCC, it has turned its tune in the recent past after its former chief executive was bundled out of office. Now it has been singing to the tune of the State anytime an important decision comes up that the Government needs its support.

The most recent being a plan by the Government to make radical changes at the EAPCC’s boardroom in an attempt to have a bigger grip, but a group of the current board members would hear none of it.