Treasury now backs decision to award Mumias lease to Sarrai

 

Mumias Sugar Company entrance. [Benjamin Sakwa, Standard]

Treasury has now backed Mumias Sugar Company Limited (MSCL) receiver manager Ramano Rao’s decision to hand the miller to Sarrai Group.

Treasury Principal Secretary (PS) Julius Muia in his new affidavit argued that it would be of no help to hand Mumias to a competitor or a company with milling machines within the same area as MSCL.

The PS took cue from Mr Rao who claimed that he dropped off West Kenya Sugar Company from the bid race due to conflict of interest. This is despite the company offering the highest financial bid.

According to Rao, West Kenya has a factory that is 36 kilometres east of Mumias and was harvesting 50 per cent of the sugarcane within MSCL’s territory.

Rao also claimed that West Kenya did not produce its financial statements as was required in the bid documents.

Dr Muia in his argument before Commercial Court judge Alfred Mabeya stated that in order for the leasing process to be successful, the best bidder should be able to turn the miller into profitability.

He was of the view that although all creditors want to be paid through leasing of all Mumias assets, this may not be achievable within the 20 years of the lease given to Sarrai Group.

He asserted that the most important issue at hand is balancing the lease rent and ensuring that Mumias has funds for sustainable operations.

“I verily believe that the direct competitor of MSCL, especially one that has mills within the same vicinity as MSCL and competes with MSCL with resources including raw materials for sugar production is unlikely to have the best interest of MSCL due to conflict of interest,” the PS.

Dr Muia told the court that he wanted to clarify on his earlier affidavit which appeared to suggest that he had faulted Rao for picking Sarrai Group as the most preferred bidder. .

“I found it necessary to make this supplementary affidavit upon realizing that my statements in the affidavit of February 15, 2022 may be taken out of context to suggest that I was faulting the first defendant’s (Rao) evaluation of the bids that were presented to him.

“I verily believe that it is in the interest of justice, of all the parties herein and of the public that I provide the context in which I made the statements,” he stated.

Mumias was incorporated on June 29, 1971. It was then privatised through listing at the Nairobi Stock Exchange in 2001.

According to court papers, National Treasury owns 20 per cent while institutions have 4.57 percent shareholding. Meanwhile, individuals own 75.43 percent of the ailing miller.

The miller’s financial troubles started in 2012. According to Treasury’s documents, by the end of 2017-2018, it registered a Sh39.44 billion loss after tax. 

In that year alone (2017-2018), the company posted a net after tax loss of Sh15. 14 billion.

The shareholding equity had eroded to negative Sh14.63 billion, thereby exceeding its Sh628. 24 million assets. It had also accumulated huge debts.