Court row could stall sale of five State sugar firms

The planned sale of five State-owned sugar companies could be derailed after the Transition Authority (TA) board said it would seek to have the auction blocked in court.

TA chairman Kinuthia Wamwangi said on Wednesday the board on Monday gave him the nod to stop the sale of the five sugar firms, saying the Privatisation Commission overlooked the agency’s input in the plan to dispose of the millers.

“We are going to put an injunction so that the bidding process can be halted, the Constitution must be respected in regard to the transfer of assets,” said Mr Wamwangi.

“We are completely opposed to the manner in which the commission has gone about calling for bids.” TA’s lawyer, Mogaka and Company Associates, is expected in court today to seek an injunction.

The government last week invited investors keen on buying a 51 per cent stake in Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies to bid. The sale is expected to be concluded by mid next year, but risks being declared invalid should TA succeeds in its court bid.

READ: Govt seeks bidders for five state-owned sugar millers

Section 35 of the Transition Authority Act states that government assets and liabilities should not be transferred during the transition period without the approval of the authority. The transition period ends three years after the first General Election under the current Constitution that took effect in 2010.

This means TA has the mandate over transfer of government assets until March, putting the sale at risk of being stopped by the authority or a petitioner. 

The Privatisation Commission, which is guiding the sale, says the office of the Attorney-General said it was exempted from article 35 of the TA Act.

The commission says it’s not selling assets but new shares to strategic investors. The legal hitch looks set to complicate further the sale given that county governments where the sugar factories are based have opposed the distribution of the millers’ shares.

Twenty-four per cent ownership of the mills will be reserved for farmers and employees. The government will sell the remaining 25 per cent stake in the five sugar companies in an initial public offering once the factories are profitable. Muhoroni and Miwani are under receivership.