The suitor who wants to build an airport at Mumias Sugar
By Dominic Omondi
| Jan 23rd 2022 | 5 min read
Forget getting bankrupt Mumias Sugar Company out of the intensive care unit - that will be the easier part for businessman Julius Mwale.
In court documents, the investor told the KCB Group-appointed receiver manager Pongangipalli Venkata Ramana Rao that if given the opportunity to lease the assets of the sugar miller, he would also develop an airport in Mumias sub-county within the first four years.
The airport would be built at a cost of $20 million (Sh2.3 billion).
Currently, the only airport in the county is Kakamega Airstrip, which is being upgraded by the Kenya Airports Authority to accommodate bigger aircraft.
And the icing on the cake does not end with the airport: Mr Mwale has also promised to build an agricultural university and a sugar-themed resort at a cost of Sh2.3 billion should his company, Tumaz & Tumaz Enterprises, be awarded the contract.
The Kakamega-born businessman, who has since moved to court to contest the award of the contract to Uganda’s Sarrai Group, had offered to pay Sh27.6 billion for the lease.
However, the receiver manager noted that Tumaz could not raise a bid bond of Sh500 million, which Mr Rao said was a precondition for proceeding to the second stage of the bidding process.
But the court papers presented by Tumaz show that there was a bid bond of Sh500 million from Merchant Insurance dated October 21, 2021.
Mwale argues that the awarding of the contract was not done transparently and that it was shrouded in secrecy.
Besides rehabilitating the golf course at Mumias Sugar, he also promised to construct new residential homes and a hospital should he be given an opportunity to get the miller out of a coma.
Mwale describes himself as a successful industrial entrepreneur and investor with more than 20 years of proven track record in innovative investments in technology, energy, retail and construction industries.
He is the investor behind the $2 billion (Sh226 billion) Mwale Medical and Technology City based in Western Kenya.
This, his firm says, is a 5,000-bed “world class hospital” that has been open since 2019, serving more than 35,000 residents.
“Additionally, it is a major partner for championship golf course and gold club, a modern supermarket, restaurants, a technology park, a digital e-commerce platform,” says Mwale in court documents.
He told the court that his educational background is in telecommunications engineering, and in the early 2000s he founded and chaired SBA Technologies Inc, a New York-based company that pioneered the use of string biometric security that was later used for digital ID verification worldwide.
In court documents, Mwale says he has run several successful enterprises in the fields of healthcare, logistics, supermarkets, shopping malls, restaurants and hotels. He also describes himself as the lead investor in the $6 billion (Sh678 billion) Akon City in Senegal.
Also in the first year of the Mumias lease, Mwale promises to restart water bottling operations, rehabilitate the co-generation plant and ethanol factory (which have since been excluded from the lease).
He projects to recoup all his investments between the sixth and 10th year of operation, and start making profit for Mumias in the 11th year.
However, Rao said in his submission that Mwale’s KE International (Tumaz & Tumaz) could not raise the required Sh500 million bid bond, which was a prerequisite for the leasing of Mumias Sugar Company’s assets for 20 years.
As a result, KE International was among the three companies that were disqualified in the first round of the bid, Rao told the court in response to the case filed by Tumaz & Tumaz.
“The offer was not submitted in the bid document format availed by the receiver as notified in the newspapers advertisement and no bid was submitted. It is also important note that the bid was submitted unsealed,” said Rao.
A bid bond is used as insurance should the bidder fail to honour the terms after the bid is accepted, and the project owner is compensated with the cash.
Besides details of the bid bond missing, the part on proof of funds in Tumaz’ appendices was also missing.
The other companies that were disqualified in the first stage were Transmara Sugar Group and Kruman Finances.
The receiver manager also said Tumaz and Kruman had put a lot of emphasis on the financial aspect but did not take time to go through the technical bid.
“The plaintiffs have not, in fact, spoken to the evaluation process at all but have taken the easy path of sensationalising the figures alone,” Rao said.
KE International and Kruman Finance’s bids of Sh28.6 billion and Sh16.8 billion respectively were not valid, said the receiver manager in an affidavit that was sworn on January 19, 2021.
WestKenya, which is owned by Rai Group, was among the companies that were knocked out in the second stage with the receiver manager noting that awarding of the lease to the company would have seen it become a dominant player in the market with 41.95 per cent of the sugarcane crushing capacity per day.
Another firm, Kibos, lost due to a weaker technical capacity compared to Sarrai’s, which offered Sh6.15 billion.
Mwale says he received a line of credit from United States’ Commercial Mortgage City of $200 million (Sh22.7 billion).
Less than 10 days after Sarrai won the bid, it came up against a barrage of lawsuits by losing bidders. There are several ongoing court cases touching on the leasing of Mumias, including an injunction against any interference with Mumias Sugar’s assets by Sarrai Group as well as a contempt suit against its directors and the receiver manager for allegedly disobeying the court orders.
Sarrai Group and the receiver manager have argued that the injunction will scuttle the timelines for resuscitating the miller and deal it a financial blow.
The winning bidder is expected to rehabilitate and operate Mumias Sugar Company for 20 years, with the leasing fees going to the miller. The collapse of Mumias Sugar, which at its peak controlled 60 per cent of the local sugar market and directly employed more than 1,600 people, left behind a vacuum that was quickly filled by Rai Group.
Sarrai Group is owned by Sarbjit Singh Rai, a brother to billionaire Jaswant Rai, who owns Rai Group of Kenya.
Jaswant’s fight against Sarbjit will not only be a clash of egos by two brothers who do not seem to see eye to eye and who have been battling for control of their late father’s multi-billion-shilling estate since 2015. It will also be a fight for regional dominance.
For long, the two brothers’ sugar businesses have not crossed paths directly, each carving his sphere of influence; one in Uganda and the other in Kenya.
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