Inside billionaires fight for Mumias Sugar deal


Mumias sugar company. FILE PHOTO | NMG

Businessman Julius Mwale has placed the highest bid of Sh27.6 billion for the leasing of Mumias Sugar, trouncing billionaire Rai family and steel tycoon Narendra Raval.

Tumaz and Tumaz enterprises, the company associated with the Mwale City investor topped the bids in its offer to run the troubled miller for 20 years.

Mr Raval, through his Devki Group, offered Sh8.4 billion while Rai under his West Kenya Sugar offered Sh3.5 billion.

According to the receiver-manager, Ponangipali Rao, a total of eight bidders submitted their bids to lease the troubled sugar factory.

The disclosure underlines months of the behind-the-scenes fight for the control of the once top miller by wealthy investors.

Under the leasing deal, the successful firm will run the plant and pay monthly fees to KCB —which is owed Sh545 million — for up to 15 years.

Mr Rao said the offers will be subjected to technical and financial evaluation ahead of picking the firm to lease Mumias Sugar.

“We opened the bids but technical and financial evaluation is pending before we declare the winner,” said the receiver in a phone interview.

Mumias, which used to be Kenya’s leading producer at more than 250,000 tonnes a year, was beset by poor management, heavy debts and years of mounting losses, prompting its closure.

The miller was in September 2019 placed under receivership by KCB Group to protect its assets and maintain its operations.

Its shares were then suspended from the Nairobi bourse, and the leasing deal will be keenly watched by shareholders, including the State with a 20 percent stake, and creditors who are owed over Sh11 billion.

Mr Mwale has unveiled a multi-billion shilling package that will lead to the upgrade of the rundown production plant and attract farmers back to cane production.

A former air force engineer, he is behind the so-called Mwale City that seeks to transform Lunza, a sleepy village in Kakamega County, into a ‘Silicon Valley’ worth at least Sh200 billion.

The viability, financing and progress of the investment have been questioned by many analysts amid court fights over unpaid contractor dues and regulatory approvals for the project.

Mr Mwale, 45, first rose to the public limelight in 2010 while describing himself as the President and Head of Strategy of US-based SBA Technologies Inc.

He tells the story of having fled to the US in 2000 seeking asylum after differing with some unnamed people in the air force over intellectual property rights.

A total of eight investors submitted their bids in a public effort to lease the troubled sugar factory, which is the same number that had made bids in the previous process.

The second-highest bidder was Kruman Finances, who wanted a 25 year-lease with Sh19.7 billion. Kruman Finances is associated with French and Turkish investors.

Transmara Group (Sarai) emerged third, having placed Sh11.5 billion for leasing of the ailing miller for a period of over 20 years.

Other bidders were Pandhal Industries with Sh9.7 billion over 20 years and Kibos Sugar with Sh8.8 billion.

A Mauritius-based company, Sucrie Des Mascarelgnes Ltd, also participated but did not disclose the value of its bid.

Mr Raval had in June pulled out of the Mumias bid after political leaders from western Kenya questioned the process of reviving the miller

The Devki Group owner was planning to inject Sh5 billion to bring the once giant miller into production.

Mr Raval, who made his initial fortune in the steel industry before moving to cement production, is betting on Kenya’s agriculture sector, and his first step was sugar milling.

In his quest for the sugar market, the steel tycoon was preparing for battle with billionaire Jaswant Rai, whose family controls half of the commodity’s sales in Kenya.

Rai family firms — West Kenya, Sukari Industries and Olepito — have taken the market previously occupied by Mumias with their Kabras sugar brand. At its peak, Mumias had more than 60 percent market share.

Mr Rai and Mr Raval were earlier locked in a bitter battle for the purchase of ARM Cement, which was previously controlled by the wealthy Paunrana firm before it was auctioned after crumbling over debt.

Mr Raval emerged top in the auction of the ARM Kenya assets.

The Rai family is also among 29 investors that had last year submitted bids for lease deals for the five State-owned sugar factories — Chemelil, Sony, Nzoia, Miwani and Muhoroni as part of reforms aimed at reviving the ailing sector. Two of the millers are in receivership.

Unlike the other State-owned sugar firms where the bidding was through public tendering the receiver-manager said the Mumias issue was handled through a private treaty between the investor and the bidders.

“Receiver was of the opinion that a private treaty is a much better option instead of public tendering. In addition, the private treaty will be less expensive, much faster and the receiver would be able to conclude the technical and financial assessments of the bidders in the shortest period,” said Mr Rao.

Mumias was in September 2019 placed under receivership by KCB Group to protect its assets and maintain its operations. The lender has been barred from auctioning the plant to secure assets used as security for other loans, prompting it to turn to the lease option.

Mumias owes Proparco Sh1.84 billion secured using the electricity generation plant, Ecobank Sh1.77 billion on the ethanol plant, and the Treasury Sh2.83 billion. Banks it owes more than Sh3 billion include KCB, NCBA and Stanbic Bank.