Columnists

Why sugar is do or die for oligarchs

mumias

Entrance gate at Mumias sugar company. PHOTO | ISAAC WALE | NMG

The latest news I have gathered on the controversy surrounding the raging court battle over the Mumias Sugar Company leasing process is a transaction whereby a new lender has suddenly jumped into the fray by purchasing loans secured by the ethanol plant and the co-gen plant.

The effect of this latest manoeuvre is that rights and securities over these two key assets have been handed to a new lender.

This new and confounding development begs several questions. First, what value would a lender worth its salt see in purchasing the loans of assets under administration?

Considering that both the ethanol plant and the co-generation plant cannot run without the sugar mill, does it really make sense to take control of these assets when the fate of the company itself remains uncertain?

It is like buying the kitchen of a big house standing on a larger property that belongs to a third party. It is a cynical manoeuvre, if you ask me, because these two plants cannot run right now. The power purchase agreement between Mumias and Kenya Power lapsed four years ago.

It seems to me that we are going to see more vicious tactics and hostile manoeuvring especially from some of the lenders holding securities and rights over the ethanol and co-gen plants.

The multiplicity of cases surrounding the transaction are a sign that the oligarchs fighting over the company are treating the contest as I do-or-die affair.

A tiny elite of oligarchs maintains a stranglehold over the sugar supply chain in this country. This tiny group has tentacles and interests stretching from milling, imports, warehousing, and trading business.

Indeed, the fight over Mumias is just but a new flare-up in persistent battles between oligarchs. The scramble for sugarcane by millers has especially been messy.

In the former Western Province, Mumias and West Kenya have for a long time been involved in bruising battles over control of sugarcane zones.

In the Rift Valley, we witnessed battles between West Kenya and Nzoia Sugar. In South Nyanza, the Awendo-based miller Sony Sugar has been facing a twin offensive from two younger and nimbler plants, Sukarri and Transmara.

In the Nyando Belt, Muhoroni and Chemelil have had to fight it out with Kibos Sugar.

Have you looked at the list of names of companies that are bidding to take over the State-owned mills under the proposed leasing programme? Does it surprise that the very same oligarchs fighting over Mumias feature prominently on that list?

The sugar business is highly lucrative. The events in the build-up to the 2017 elections serve to illustrate just how sugar is a do-or-die affair for the oligarchs.

In May 2017, the government put out a gazette notice that opened a window for duty-free imports. It ended up opening the floodgates for imports of dirty Brazilian sugar into the country.

In excess of 450,000 tons of raw, semi-processed, and health-uncertified sugar was imported into the country and sold to ordinary shoppers.

If you tracked the statistics from Customs Department, you saw that local millers accounted for the largest quantities of the dirty stuff that was brought in.

And, how did we end up importing large quantities of semi-processed Brazilian sugar in the first place?

This is a pertinent question because, at the time we were allowing imports of the sub-standard sugar, there was plenty of brown sugar within Comesa that was ready to be imported into the country under preferential terms stipulated in the treaties and protocols of the trading bloc.

The powerful oligarchs influenced the government to ignore the Comesa route because raw Brazilian sugar offered bigger margins.

The stuff was moved by conveyor belts directly into ship-holds and put straight into 50kg bags, poured onto the quayside, loaded into open trucks, dumped on warehouse floors and then bagged straight for the Kenyan market place.

To date, nobody has been held to account for the mess. As we approach the elections, it should not surprise if a duty-free import window is announced.