Revealed: Why Kabras Sugar was Denied Lease to Revive and Run Ailing Mumias Sugar

“It is strange and impractical for the 6th plaintiff (West Kenya) who is unable to settle a claim of Ksh 507,488,511 to allege that, at the time of submitting the bids to the company which is just one year after the admission of its precarious financial situation, it was capable of injecting Ksh36 billion into revival of the Company (Mumias),” county attorney Vivianne Mmbaka said in an affidavit filed by West Kenya millers.

It has been argued in court that, despite being the highest bidders to lease the ailing Mumias sugar company. West Kenya Sugar Company has no capacity to offer Ksh. 37Billion lease fee as it had stated. In 2021 during the Covid-19 pandemic, West Kenya millers had pledged at the Employment and Labour Relations Court, that, it had suffered huge losses and was on the verge of its collapse. These were related to a lawsuit filed by its former employees demanding for their arrears of around Ksh. 900 million.

Having been the backbone of western Kenya’s economy, Mumias Sugar Co. LTD collapsed around 2018 due to poor management which led to accrued debts owed to farmers, creditors, suppliers, employees, and KPLC.

Kenya Commercial Bank, being its largest local creditor, had secured rights to operate the ailing millers and protect the company assets under receivership conditions in September 2019. Pongangipalli Venkata Ramana Rao alias PVR Rao was appointed as receiver-manager by KCB.

In August 2021, Mr. Rao re-advertised the lease deal of around Ksh. 15,000,000 after the initial advertised bidding process was rejected by the Kenyan senate, due to lack of due process as stipulated by the 2010 Kenyan Constitution.

The Public Procurement and Disposal Act No. 3 of 2005 (PPDA), and the Public Procurement and Disposal Regulations, 2006 (PPDR), envisages transparency standards in all stages of public procurement, from invitations and access to public bids, tender opening, evaluation of bids and disclosure of evaluation criteria, information on the results of specific procurement transactions and availability of review mechanisms for decisions involving tenders and prompt and impartial resolution of disputes.

Several companies, both local and international, submitted their bids to take over Mumias sugar. Sarrai Group, a Ugandan-based conglomerate with diverse and inter-related agro-manufacturing companies across East and Southern Africa, was awarded a 20-year lease for assets of Mumias Sugar Company in December 2021.

However, Kenyan-based West Kenya Sugar Company has been battling in court with receiver-manager, Mr. Rao, protesting as to why the lease was awarded to the Ugandan firm despite West Kenya offering a higher bid of Ksh. 36 billion compared to Sarrai’s Ksh.17 billion. Nevertheless, this has been argued to be a sibling rivalry, since Sarrai , the CEO of Sarrai Group, is a sibling to Rai Sigh, who owns the Western Kenya-based millers.

On 14th February, Mr. Rao explained to the court why he bypassed West Kenya and awarded the tender to the Sarrai group, as follows:

  1. West Kenya had no sound plan; West Kenya failed to present detail investment plan proposed in the the lease making it difficult to assess wether the lease will be effective.
  2. West Kenya failed to confirm the availability of funds; It failed to provide a letter from the Bankers confirming the availability of the funds set out in their bid.
  3. Interest of conflict; West Kenya had a factory 36km East and another 35km Northwest of MSCL despite their early declaration  in document that they didn’t have an conflict, they were harvesting 50% of sugarcane in MSCl. area.
  4. Court cases pitting West  Kenya against MSCl were more than 100 cases over a span of 13 yrs that were all against either an employee or a competitor.

The final verdict is expected to be ruled on 16th of February.