Disperse creditors shackling Mumias

A farmer top dressing Urea and DAP fertilizer on sugarcane plant at Muliru area Ikolomani in Kakamega county. FILE PHOTO | NMG

The vexed question of whether or not State-owned sugar companies should be privatised is here again. A Cabinet dispatch this week announced that the new government had rescinded the Uhuru Kenyatta administration’s decision to sell six State-owned factories, namely, Mumias, Trans Nzoia, Chemelil, Muhoroni, Miwani and South Nyanza Sugar.

I support the decision by the Cabinet because this whole idea was only going to serve the interests of local private millers who were plotting behind the scenes to grab these assets for a song.

We had all expected the big names or players in the sugar agri-business space in the region — the likes of Tongaat Hulet or Illovo, of South Africa, Ciel Group of Mauritius or even Kenana of Sudan — to express interest in buying these entities.

But when big names gave the process a wide berth, it became clear that the privatisation plan was only going to pave the way for local private millers and oligarchs to snap up the six factories on the cheap.

We must not forget that local private millers want government factories out of existence. Does it surprise that literally all State-owned factories are today surrounded by plants owned by private players?

Is it just a coincidence? The perennial fight over sugar cane poaching is not without context.

The reason the protracted fight over control of Mumias Sugar Company is vicious is that private players see the option of leasing it to Sarrai Group of Uganda as disrupting the plan to transfer the ownership of the company to local oligarchs through privatisation.

The process was going to end up dividing ownership of the six factories neatly between local players, with parties who enjoyed the patronage of the former administration getting the lion’s share.

Thus, the Cabinet decision to kill the privatisation plan is a classic study of the impact of a change of administration on the fortunes of oligarchs who wielded influence in the former regime.

With the privatisation idea dead, the next big thing for the government is to exert its political weight to revive Mumias Sugar. The disruption of interests who want Mumias shut down must continue.

Admittedly, the opportunity for political intervention is currently limited because of the protracted court case. The biggest hurdle is creditor-hold- outs by entities that have debentures over two separate properties located within the company’s premises —the co-generation plant and the ethanol plant.

To save Mumias, the government should come up with a formula for dispersing the small creditors and sending them home.

During the Pan Paper Mills insolvency process in 2015, the government managed to navigate around similar creditor holdouts and unending court cases by paying off the short-term lenders and creditors.

I am not saying that what worked in Pan Paper will work for Mumias. My point is that the government cannot afford to keep away from the matter because at stake are the livelihood options of hundreds of thousands of citizens.

In western Kenya, thousands of households and rural poor were induced by money to vacate the only pieces of land they owned to give way to the so-called nucleus estates for sugar mills and forced into joining the ranks of the urban poor in overcrowded rural towns with no proper amenities such as Mumias, Awendo, and Muhoroni towns.

Compensation given to them was a pittance they ended up squandering in the first two years in conspicuous consumption and in marrying more wives.

The writer is a former managing director of The East African.