President William Ruto was visibly angry as he addressed a gathering in Busia County last Sunday. In ethnically-divided Kenya, it is not politically correct to publicly utter a word such as ‘muhindi’ – the slang and colloquialism mostly used by ordinary folks to generalise and profile members of Kenya’s 46th tribe as greedy capitalists. In the society we live in today, the more woke and politically correct thing for the President is to pose as a leader who is at ease with demographic diversity.
Yet, the fact that the President had chosen to drop all pretence of political correctness while addressing the fate of Mumias Sugar Company did not surprise some of us who have been keenly following the saga surrounding the company since the factory was closed four years ago.
The fact that the President’s remarks were being made in the backdrop of media reports that a big player in the Mumias saga, the billionaire businessman, Jaswant Rai, had been abducted in Nairobi, made it more sensational. Warned the President: “We shall make plans for it (Mumias) and not entertain any more court cases. They must withdraw them all. I have told them that the issues are three: If they attempt to bring problems, they shall have to either leave the country, get into prison, or travel to heaven.”
More anger, more fortitude, and more dropping of pretences on the part of the President is what will rescue Mumias from the clutches and tight grip of the powerful and hugely influential nexus of cartels that seems to have tentacles and supporters in nearly all centres of power within the government.
As I have argued in these columns before, political will from the very top is what will save Mumias. It is instructive that Mumias is now the subject of criminal investigations. Although the details are still scant, indications are that the Economic Crimes Unit of the Directorate of Criminal Investigations (DCI) have questioned the CEO of Victoria Commercial Bank, Mr Yogesh Pattni on allegations of possible money laundering. How did Victoria Bank pop up in the scene in the first place? Through belated complex and hurriedly orchestrated transactions between a group of Nairobi-based banks and lawyers involving assignment and substitution of secured debt assets between the local banks.
Endless disputes
Here is a bit of background. Initially, Mumias had three secured creditors, namely, KCB, Ecobank and the French entity, Proparco. KCB, the senior lender, had securities on the whole factory and the land. Ecobank had a separate fixed charge on the ethanol plant that is located within the factory, while Proparco had a fixed charge on the co-generation power plant – also situated within the company.
In September 2010, the three lenders signed an interlenders agreement committing to amicable consultations before making any move on Mumias. As it turned out, this commitment was not obeyed by the parties.
In May 2021, and before Mumias was put under receivership- KCB wrote to both Proparco and Ecobank offering to buy the loans from them at a discounted rate. The parties both refused to sell.
This is that point where the circus started. Bang in the middle of the receivership and during the time when the appointed receiver had made a decision to lease the company to the Sarrai Group, Victoria Commercial Bank quietly purchased the loans held by Proparco and Ecobank. It then quickly flipped the loans to a company incorporated in British Virgin Island – the world’s most popular tax haven – known as Vertox Resources Ltd.
We are all now waiting with baited breath to find out whether the investigations by the DCI will reveal the details of the transactions that led to Vertox popping up. The debt to Proparco as at March 31, 2021, was US$23.8 million, which it offered to sell to KCB at a 15 per cent discount. Is Victoria Bank’s balance sheet big enough? How about the issue of single borrower limits? From what I gather, the DCI is following a report on money movements compiled by the Financial Reporting Centre – the anti- money laundering entity.
The first move by Vertox after it entered the fray was to appoint a parallel receiver for both the ethanol and co-generation plants. The stage had been set for total confusion and unending court cases. The predicament of what until the other day was a systemic player and anchor of a supply chain benefitting millions of households living in the Western part of Kenya had been reduced to unending and sterile court battles over creditor claims on the ethanol and cogeneration plants.
At one stage, and in the din of the endless disputes, Vertox filed proceedings seeking to wind up Mumias altogether. Is it not the height of irony that the very existence of Mumias was at this point left at the mercy of a foreign entity with anonymous owners? President Ruto is right to be angry. The court cases must go. Period.