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Cane farmers fight lease given to Ugandan miller

By Kamau Muthoni | Jan 20th 2022 | 3 min read


Mumias Sugar company gate. [Benjamin Sakwa, Standard]

Sugarcane farmers have thrown their hats into the legal ring and challenged the lease issued to Ugandan miller Sarrai Group

The farmers have filed a separate case before the commercial court in Nairobi claiming that billions of shillings are at stake if Sarrai is allowed to run the ailing miller.

They now accuse the receiver-manager, Ponangipalli Venkata Ramana Rao, of ‘giving away the soul’ of Kenya’s largest miller at a throw-away price and without considering their stake.

Those who have sued include Lambert Lwanga Ogochi??, Augustino Ochacha Saba, Prisca Okwanko Ochacha, Robert Mudinyu Magero, and Wycliffe Barasa Ng’onga.  Their lawyer, Kibe Mungai, said it was absurd to lease assets worth Sh15 billion for an amount that is three times lower than the total value.

“The applicants who are shareholders of MSCL and farmers who have been supplying the factory with sugarcane are aggrieved by the lopsided deal between the first, second, and third respondents (Rao, Kenya Commercial Bank, and Attorney General Kihara Kairuki) that would sound the death knell to Kenya’s largest sugar plant as a company controlled and managed by its shareholders and board of director,” argued Mr Mungai. 

According to them, Sarrai will be giving Sh20 million a month from 150,000 tonnes of sugar it mills while other bidders had offered between Sh119 million and Sh250 million for the same lease. 

Joint venture

Mungai argued that New Mumias Sugar Limited offered Sh250 million per month while West Kenya Sugar Company Ltd floated Sh150 million for the same deal. West Kenya Sugar Company, he said, had offered Sh119 million. The farmers say that Tumaz and Tumaz Enterprises Limited, a firm associated with businessman Julius Mwale, offered Sh27 billion for the lease. They also claim that New Mumias, which allegedly floated its bid in a joint venture with steelmaker Devki Group, had dangled a lease offer of Sh61 billion. 

The farmers argue that if Rao’s decision is allowed to stand, it will take 10 years and four months to clear KCB’s Sh2.6 billion debt.

Meanwhile, it would have taken New Mumias Sugar and Devki 12 months to clear the same debt. The West Sugar bid, on the other hand would, have taken 18 months to clear the debt owed to KCB.

Likewise, it would have taken KE International, which submitted an annual bid of between $100,000 (Sh11.4 million) and $10 million (Sh1.14 billion) per annum 90 months to clear the debt.

“The decision of the first respondent to grant the lease of Kenya’s largest sugar plant with a capacity to produce 1.8 million tonnes of sugar per year and annual revenue of Sh2 billion as at the year ending June 30, 2017, to the sixth respondent for a pitiable sum of Sh5.841 billion is not only scandalous but a manifest financial raw deal,” argued Mungai.

He continued: “It is a miscarriage of justice for the shareholders of Mumias Sugar Company Ltd, the suffering farmers and workers of the company as well as the other stakeholders of MSCL such as unsecured creditors and also Kenya’s long-term strategic interests in the sugar sub-sector given the protracted competition between Kenya and Uganda in the sugar trade.”

The farmers also argue that Sarrai was hurriedly given the greenlight without first being registered by the Agriculture and Food Authority, and consent granted by all the creditors.

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