KWAL wins court extension barring S African partner from contract termination

State-owned alcoholic drinks maker Kenya Wine Agencies Limited has won a two-week extension to the stay orders barring its South African partner from terminating a 14-year old contract pending the hearing.

(Read: Partner pushes KWAL into survival war)

The High Court has directed that the high-stakes suit would be heard on August 13, to allow for Distell to file its response to an application filed last week by KWAL.

“Due to the urgency of the matter, I direct the application to be heard during the vacation. Parties to move the court under the vacation rules,” Judge Eric Ogolla has ruled.

“In the meantime the respondent (Distell) shall file their replying affidavit for the application date 25, interim orders are extended to the 13th August,” he said further.

Zul Alibhai, the advocate acting for Distell told the court that his client wished that the interim injunction obtained by Kwal be lifted as soon as possible to allow its subsidiary Distell Winemasters to start distribution of its products locally.

Zul Alibhai, the advocate acting for Distell told the court that his client wished that the interim injunction obtained last week by Kwal be lifted as soon as possible to allow its subsidiary Distell Winemasters to start distribution of its products locally.

Distell wants to sever links with the Kenyan firm on grounds of continued delay of a privatisation process it claims is frustrating its strategic plans.

KWAL on the hand, claims that cutting the distribution contract would lead to irreparable damages that cannot be compensated as more than 60 per cent of its profits are earned from the distribution of Distell’s brands.

KWAL also argues that it has invested heavily in the marketing of Distell’s brands locally and should therefore earn the long term benefits from the continued partnership with the South African firm.

Distell is the owner of flagship Viceroy and Amarula brands, which are exclusively sold by KWAL and has more recently been pushing for a stake in the Kenyan company when the State offloads its majority shareholding.

The South African company threw KWAL into a crisis with the issuance of a notice in June of intention to terminate the distribution contract it signed with the Kenyan firm in 1998.

Distell says its patience has been stretched to the limit by the Kenya government’s continued delay of KWAL’s privatisation that was to give it an ownership stake in the firm.

The Treasury has maintained that the absence of a board at the Privatisation Commission has made it impossible to start the process of selling part of the government’s 73.57 per cent stake in the alcoholic drinks firm, pleading with the South Africans for patience.

KWAL is the sole marketer of up to 80 of Distell’s brands in Kenya that account of 60 per cent of its profits and analysts say the exit of the South African firm would leave the Kenyan company a near shell that will be almost impossible to find a buyer for.

Under the partnership agreement signed with Distell, each partner is bound to give a three-month termination notice – and is what the South African firm did in May signalling its intention to sever links with the Kenyan firm in August.