Sarrai Group starts work in Mumias despite court order

The Ugandan company that won the multibillion shilling leasing tender for Mumias Sugar has started work in earnest at the sugar miller despite a court order suspending the takeover.

The Sarrai Group, which plans to revive the ailing miller has been on the ground since December 24 undertaking different activities at the firm, including a number of meetings with management.

The court last week stopped the receiver manager from continuing with the leasing until the case filed by Tumaz and Tumaz, a firm owned by Butere-based investor Julius Mwale, is determined.

In its submission to the court, Javier Georgiadis and Sylvester Law LPP representing Tumaz, had requested the court to quash the decision of the receiver manager awarding the contract to Sarrai on December 22, 2021.

Tumaz and Tumaz had requested a stay order against the first respondent (receiver manager Ponangipalli Venkata Ramana Rao), his servants, agents, principal and employees from executing any lease agreement or contract in respect to the leasing and operation of the assets of Mumias Sugar Company Limited.

Kruman-Finances and Tumaz & Tumaz, the two firms that placed the highest financial bids for the lease contract last month protested the move by KCB receiver manager to award the tender, arguing evaluations on technical capacity should have been done by a third party.

The two argued that Sarrai Group –which runs three sugar factories in Uganda-- was least qualified to be awarded on grounds that it was not the highest bidder.

The Sarrai Group moved to court on Monday to have the order quashed but the court did not grant them their wish, arguing that the ruling made on December 29, 2021 still stands until the matter is ruled later this month.

Justice Antony Ndung’u asked the conglomerate to file its submissions for the hearing of the main case. The court battle has emerged as the latest threat to revival of the miller should the matter drag on for months.

The Sarrai Group management met with the Kenya Power officials last week in a bid to have the utility firm restore electricity to the facility. Electricity at the factory was disconnected over a year ago on the back of huge bills.

On Monday, the investor met with the engineers at the firm to discuss the ways of acquiring new spare parts to revive the milling plant.

The new investor has already serviced tractors and has started ploughing the 4,000 acres nuclear farm in readiness for planting cane.

The move marks clearest indication that the miller will soon roar back to life after three years of no milling as farmers stopped supplying cane due to non-payment.

Mumias, which was at one point the biggest sugar manufacturer in the country, has been on its knees for the last three years following a major financial crisis and competition for cane.

Reviving the company has remained a major political issue in Western Kenya. Hundreds of thousands of farmers depend on the company and it is a major employer in the region.

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.

Kruman-Finances, which was the second highest bidder, wanted a 25-year lease with Sh19.7 billion offer. The firm, which is associated with French and Turkish investors, had proposed a 15 percent free shareholding to national and county governments during the restructuring of the company and post-restructuring after 20 years before an Initial Public Offering (IPO).

Mr Mwale had placed the highest bid of Sh27.6 billion.