Cancel State sugar millers leasing deals

Is it just a coincidence that the local mills are deliberately located by their owners, so as to neatly surround and squat around each and every publicly-owned sugar company like parasites?

Within the Kisumu Sugar Belt; Miwani, Chemelil and Muhoroni are surrounded by Mr Ragbhir Chatte’s Kibos Sugar; the only profitable sugar manufacturer in that region. In South Nyanza, the only profitable operation is Sukari Ltd owned by Mr Jaswant Rai. Shares the zone with the State-owned company.

In the Kakamega region, Mumias Sugar- currently under the management of Jaswant Rai’s younger brother Sarjibit Rai; is surrounded by the West Kenya factory in South Kabras and Olepito factory in Busia; both owned by Jaswant and Butali Sugar owned by Mr Jayanti Patel.

The State owned Trans Nzoia Sugar Company is surrounded by the latest investment in sugar factory at Naitiri, also owned by Jaswant.

I belabour the point? By leasing the state-owned factories to these oligarchs, the government is making a mistake as foolish as leasing a national game park to a company owned by a local committee of the most notorious rhino poachers.

The government has ignored likely impact on the perennial problem of sugarcane poaching. We have forgotten the battles between West Kenya and Mumias and the perrenial wailing by South Nyanza Sugar about cane poaching by private millers.

And when it comes to the dodgy and perrenial business of duty-free sugar imports, which undermines economic viability of the state-owned firms, private millers have been the biggest players.

There have been incidences where some of the big local millers were investigated for repackaging imported duty-free sugar, rebranding it as theirs and placing it on supermarket shelves to compete with products from state-owned companies.

Just the other day, the receivers of Mumias shot down an offer by Jaswant to be allowed to lease Mumias on the grounds that such an arrangement would create monopolistic control by the Rai Group.

Read: KISERO: Disperse creditors shackling Mumias

According to the statistics by the receiver, giving the management of Mumias to Jaswant would make the Rai Group control 41.95 percent of the total sugar cane crushing capacity per day in Kenya.

Which is why I ask? If you lease Nzoia Sugar Company to Mr Jaswant who owns the Naitiri factory within the same region, is it conceivable that Mr Rai’s first inclination will be to prioritise Nzoia Sugar Company? The likelihood is that he will want to fully exploit monopolistic advantage the government has handed to him on a silver platter.

I have suggestions. Instead of leasing, let us debate the option of a concession. I do not claim interpretive authority on management of concessions or of any other types of complex privatisation transactions, but as a journalist who has followed and reported on these types of transactions for decades, I can tell when the government is headed in the wrong direction.

We should have started by drafting a concession agreement and circulating it out for public discussion.

A concession agreement is where you spell out the concession fees which the private party will pay.

That agreement should have come with a comprehensive inventory of what are called ‘conceded assets’ - a list of the assets being concessioned out and which must bee returned to public ownership at the end of the 30-year period.

The government should have published and deposited on a public portal, all facts about the terms of the concession, especially the circumstances under which the concession can be scrapped.

Even more critical, the government should have published and subjected to public debate the minimum investment, which must happen, including the time frame within which the money must be pumped into the companies.

In the Kenya Railway concession of 2006, the agreement stipulated that if the private sector player did not pump in the agreed amount of money within two consecutive financial years, the deal, was to be scrapped.

How are the assets which the incoming players may not require such as workshops, residential property, office equipment, furniture and motor vehicles to be treated?

Who will monitor performance and track the assets brought into the company by the private party? These greedy merchants may just dump used machinery and equipment into the companies. The leases should be cancelled.

The writer is a former Managing Editor for The EastAfrican