Will Ugandan sugar mogul finally breathe life into ailing Mumias?

Uganda-based conglomerate Sarrai Group has been tapped to run Kenya’s biggest but ailing sugar miller in what now puts sugar production in the two countries in the hands of the Rai family.

Sarrai Group secured a 20-year lease for assets of Mumias Sugar Company and consequently the mandate to revive the collapsed miller, having emerged winner of the bidding that lasted over four months.

The deal comes as Kenya and Uganda are engrossed in trade squabbles featuring sugar, maize, milk and poultry products. But delegations of the two countries met on Monday in Nairobi to iron out differences, and the outcome remains to be seen. After the meeting, Uganda said it had agreed with Kenya to delay retaliatory measures on agricultural produce bans.

Mumias Sugar Company’s court-appointed administrator Ponangipali Rao said the lease to Sarrai Group is in the interest of all stakeholders and will not include the ethanol and the cogen plants, which were last month seized from KCB Group by Ecobank and French development financier, Proparco, over $17.82 million and $16.93 million debts respectively.

The Ugandan conglomerate, which is associated with Kenyan businessman Sarbi Singh Rai, placed the third-highest bid of $102.5 million in the lease battle, with the receiver managers rejecting the highest bid of $246.01 million by Kenyan businessman Julius Mwale.

Private treaty

The second-highest bidder was Kruman Finances, who sought a 25 year-lease with $175.59 million. Kruman Finances is associated with French and Turkish investors.

“The receiver was of the opinion that a private treaty is a much better option instead of public tendering. In addition, the private treaty will be less expensive, much faster and the receiver would be able to conclude the technical and financial assessments of the bidders in the shortest period,” said Mr Rao.

Mr Rai, the group’s chairman, said immediate focus will be rehabilitation of the machinery.

“We will also be seeking to engage outgrowers and an experienced workforce to ensure that there is an effective collaboration to revive the factory,” he added. “At its peak, Mumias Sugar was the most respected sugar company not only in Kenya but the entire region. We shall use all our experience and resources to make sure that we revive the firm, and take it back to the heights it once enjoyed.”

Mr Rai, a Kenyan, runs the Uganda-based conglomerate of diverse and inter-related agro-manufacturing companies in Uganda, Kenya and Malawi.

In Uganda, he owns Kinyara Sugar, Hoima Sugar and Kiryandongo Sugar, with a total installed capacity of 19,000 tonnes crushed per day, producing over 170,000 tonnes of sugar every year — with a forecast to grow this to 250,000 tonnes of sugar next year.

The group has 20,000 hectares of its own nucleus estates in Uganda.

The firm also produces edible oils and soaps through Tasco Industries in Uganda and plywood through Nile Plywoods and Nile Fiber Board in Uganda and Comply Industries Kenya.

Sarrai Group has also invested in cement manufacturing in Kenya through Rai Cement and produces mattresses through Vitafoam Uganda.

The Mumias deal effectively puts the multibillion Kenya and Uganda sugar business in the Rai family.

Sarbi’s siblings, through West Kenya Sugar — under the watch of Jaswant Rai —offered $31.19 million for the Mumias leasehold underlining infighting in the billionaire Rai family.

For Sarbi, the Mumias Sugar deal sets the stage for market share war with Jaswant, whose family controls half of the commodity’s sales in Kenya. Rai family firms — West Kenya, Sukari Industries and Olepito — have taken the market previously held by Mumias with their Kabras Sugar brand.

At its peak, Mumias had more than 60 percent market share.

Keen shareholders

The miller was in September 2019 placed under receivership by KCB Group to protect its assets and maintain operations. Its shares were the same month suspended from the Nairobi bourse, and the leasing deal will be keenly watched by shareholders, including the State with a 20 percent stake, and creditors who are owed more than $98.04 million.

Mr Rao said the multinational was best placed to revive operations of the ailing miller, owing to its expertise in the field, as shown by its performance in Uganda.

The cross-border sugar trade deal will be keenly watched given the recent hostilities between Kampala and Nairobi over trade, with sugar topping the list of disagreements.