Court stops Uhuru’s bid to oust Portland board chairman
Mr Mark ole Karbolo (left) and Mr Bill Lay. Photos/Salaton Njau
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President Kenyatta had waded into the murky waters of Portland Cement’s boardroom politics when he removed Mr Karbolo from chairing the firm’s board and replaced him with former CMC Motors chief executive Bill Lay.
Mr Kenyatta said he had invoked the State Corporations Act — which gives him sweeping powers to appoint chairpersons and board members of parastatals — asserting the view that Portland Cement is a State-owned company.
The government’s victory over the pro-Larfarge faction of the board was, however, short-lived as Mr Karbolo moved to court and obtained orders quashing the gazette notice and reinstating him as chairman.
East Africa Portland Cement Company chairman Mark ole Karbolo Monday scored a quick victory against the government when he obtained a court order quashing President Uhuru Kenyatta’s earlier decision to sack him through a special gazette notice.
President Kenyatta had waded into the murky waters of Portland Cement’s boardroom politics when he removed Mr Karbolo from chairing the firm’s board and replaced him with former CMC Motors chief executive Bill Lay.
Mr Karbolo’s ouster, announced in a special gazette notice last Friday, temporarily gave the government control of the cement firm’s board setting the stage for a new round of court battles.
Mr Kenyatta said he had invoked the State Corporations Act — which gives him sweeping powers to appoint chairpersons and board members of parastatals — asserting the view that Portland Cement is a State-owned company.
“In exercise of the powers conferred by Section 7 (3) of the State Corporations Act, I Uhuru Kenyatta, president and commander-in-chief of the Kenya Defence Forces appoint William Lay to be the chairman and director of the East African Portland Cement Company, up to November 7, 2014 with effect from 22nd January, 2014 and revoke the appointment of Mark Kitaanyu ole Karbolo,” says the gazette notice dated February 7.
Mr Lay’s appointment to replace Mr Karbolo also sent a clear message to French multi-national Lafarge, whose control of Portland’s board has been at the centre of the power wars.
The government’s victory over the pro-Larfarge faction of the board was, however, short-lived as Mr Karbolo moved to court and obtained orders quashing the gazette notice and reinstating him as chairman.
Mr Karbolo’s argument in court is based on Justice George Odunga’s December ruling in a case pitting the government against Lafarge which ordered that the status quo be maintained until conclusion of the case.
The day-long drama began with the unveiling of Mr Lay as Portland chairman by Industrialisation PS Wilson Songa at the cement maker’s Athi River factory.
Dr Songa said the decision to cut short Mr Karbolo’s term was informed by the poor performance of Portland, which is Kenya’s second biggest cement maker after Bamburi.
“EAPCC is a parastatal which is key to Kenya’s industrialisation agenda. The company is not performing as it should,” said Dr Songa.
Mr Karbolo immediately sought refuge at the courts, saying the President had overstepped his mandate in sending him home yet there was a court order in place saying the composition of the Portland board should be left as it is.
High Court judge Mumbi Ngugi Monday issued orders quashing President Kenyatta’s gazette notice appointing Mr Lay and ruled that Mr Karbolo continue as chairman of the EAPCC until the case is concluded.
“The gazette notice No. 821 of February 7 appointing Mr William Lay as a director and chairman of EAPCC is hereby forthwith stayed pending the hearing and determination of this application,” Justice Ngugi ruled.
The biggest losers in the ongoing Portland Cement wars are the shareholders who have missed out on the Sh0.75 dividend that was to be paid on January 20 and the continued erosion of the company’s share price at the Nairobi bourse, which closed Monday’s trading at Sh70 compared to a high of Sh92 last year.
Mr Karbolo was first appointed to replace Benson Ndeta as chair of the Portland board in November 2008 for a three-year term which was renewed in 2011.
Mr Kenyatta is likely to be bogged down in the ongoing Portland wars, going by then president Mwai Kibaki’s failed attempt last year to remove Mr Karbolo, managing director Kephar Tande and Lafarge directors Titus Naikuni and lawyer Hamish Keith.
The High Court revoked the sackings and reinstated the four, in a legal battle that saw Attorney-General Githu Muigai state that that neither the government nor the State-controlled NSSF has controlling rights needed for EAPCC to be a parastatal.
The Treasury directly owns 25 per cent of EAPCC and has always teamed up with the National Social Security Fund (NSSF) which holds 27 per cent to position the cement firm as a State corporation.
Lafarge, the world’s largest cement manufacturer, owns a 41.7 per cent stake at EAPCC and controls 58.6 per cent stake in rival Bamburi Cement.
Had it succeeded, Mr Kenyatta’s decision to fire Mr Karbolo would have tilted the Portland board in favour of the government, which has been trying to take control of the cement firm’s boardroom dominated by Lafarge-allied directors.
The President appears to have been emboldened by the competition watchdog’s recent findings that Lafarge’s sizeable shareholding in Bamburi and Portland gives it more than half of Kenya’s cement market and amounts to monopolistic behaviour and undue concentration of economic power.
This is the second time the government is fronting Mr Lay to take charge of Portland Cement after the initial attempt at last year’s annual general meeting flopped.
Successive Trade and Industrialisation ministers had tried to dictate matters at Portland Cement – through sacking of board members and attempting to appoint a new managing director.
The script leading to the current stalemate at EAPCC started in October last year when Industrialisation secretary Adan Mohamed differed with the board’s push to grant Mr Tande a fresh three-year term.
Mr Mohamed is yet to gazette the appointment of Mr Tande, whose second term at Portland began on November 16.
The battle went a notch higher in December when Dr Songa and NSSF executive Gideon Kyengo stormed out of the shareholders’ meeting and immediately fired a letter to the CMA, protesting the manner in which the AGM was conducted.
