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How Rai Nearly Took Control of Kenya’s Sugar Production

Business mogul Jaswant Singh Rai could easily have controlled more than 50 per cent of the sugar milling market had his firm won a concession to run Mumias Sugar factory when Receiver Manager Ponangipalli Venkata Rao asked companies to bid to run the ailing miller.

West Kenya, which bid Sh3.5 billion was locked out at the technical stage, because it is believed to control 43 per cent of the cane crushing capacity and could have submitted a spoiler bid to destroy Mumias Sugar.

According to reports by the Agriculture and Food Authority, Jaswant and the Rai Group owns several millers including West Kenya, Sukari Industries, Kabras Sugar and Olepito Sugar.

A total of eight bidders submitted bids in a public effort to lease the troubled sugar factory, with Tumaz and Tumaz Enterprises, a company associated with Mwale City investor Julius Mwale topping the bids with Sh27.6 billion.

Kruman Finances came second with a bid of Sh19.7 billion. Sarrai Group, Pandhal Industries and Kibos Sugar were the other bidders. However, assets of the ailing sugar company were eventually leased to Uganda-based conglomerate Sarrai Group. The group also belongs to Jaswant Rai’s sibling, which means the fruit did not drop far from the tree.

Sarrai Group is owned by Sarbjit Singh Rai who is part of the billionaire Rai family, which among other installations, owns sugar and plywood businesses in Uganda and Malawi.

In his submission, the Receiver Manager said: “Although the lessee is not in sugar production in Kenya, he has a proven track record of running three sugar factories, a distillery and power generation in Uganda and is committed to commence rehabilitation of assets immediately to ensure revival of operations within the shortest period.”

While questions abound whether the Competition Authority of Kenya would have allowed Jaswant to run the miller- which would have had financial ramifications on the price of sugar- the business mogul is now on the spot.

With President William Ruto promising to reform the sector by declaring that he would personally deal with sugar cartels, pressure for private millers is now palpable.

While on a tour of Bungoma County, the President vowed to dismantle cartels that he accused of sabotaging the government’s plan to revive the ailing sector.

He issued a warning to unnamed individuals to withdraw court cases or face jail, remarks that have elicited mixed reactions from Kenyans, with some supporting his efforts to revive the sector, while others expressing concern over his choice of words.

Last year, West Kenya went to court to challenge the lease to Sarrai Group, bringing out sibling rivalry. Sarrai Group faces legal challenges from other parties, including a petitioner who wants the court to stop its operation at Mumias Sugar, alleging that the group took advantage of a stay order to remove equipment from the factory.

The group also faces protests from Mumias Sugar workers, who allege that it is importing workers from Uganda and delaying their salaries.

On his part, Jaswant claimed he placed the highest bid though the Receiver Manager awarded the deal to his younger brother Sarbi, who runs Sarrai Group.

The Ugandan firm won the multi-billion-shillings leasing tender despite a court order suspending the takeover. According to Jaswant, Sarrai Group has no track record of sugar production in Kenya and that it is vandalising and stripping away Mumias’ assets. He also accused Rao of violating the Competition Act 2010 by allowing Sarrai Group to dominate Kenya’s sugar industry.

But this may now be in the past, with the President having been categorical that he will not entertain court cases over property that belongs to Mwananchi.

“We will not entertain any court cases. They should withdraw the cases or go themselves. I told them there are only three things. If they want to cause trouble, either they leave the country or I will take them to jail or they go to heaven,” Ruto said.

Following the stern warning by the Head of State private sugar millers that he would not relent in regulating the industry to revive government-owned companies, Rai has filed notice at the Court of Appeal to withdraw the Mumias sugar case.

The government recently announced its intention to write-off Sh117 billion debt owed by Chemelil, Muhoroni, Miwani, Nzoia and Sony, which includes loans and tax penalties.

The debt-write off is expected to help revive the sub-sector and improve its competitiveness. It is part of a larger plan that includes leasing the millers to expedite their rehabilitation and expansion, merging some of the companies and enhancing the profitability of sugar farming.

“I promise the people of this country that I will write-off all debts amounting to Sh117 billion facing our factories. We have passed in our cabinet meeting to write off the debts and the matter is before the National Assembly. I know in the next few weeks the legislators will have to write-off the debts as a first step so that I can plan well on the issue of sugarcane, Ruto said.

Source: People Daily