South Nyanza Sugar Company (Sony) made a paltry Sh82.7 million profit on sales of sugar imports worth Sh3.3 billion after irregularly passing its importation licence to a third party.
A joint Parliamentary committee investigating the importation of sugar during the 2017 duty waiver window Wednesday heard that Sony Sugar did not import any bag of sugar but used its licence to facilitate a third party-Holbud Limited- to import 50,500 metric tons of brown sugar.
All the sugar was repackaged and sold by the importer directly after it docked at the Mombasa port.
The consignment brought in by London-based Holbud limited was by law required to have been transported to Sony sugar which was the consignee.
Holbud, run by Hasnain Roshanali Merali, brought in the consignment on behalf of six other buyback firms using Sony Sugar’s license.
Legal Notice 9801 that was issued by the Treasury prohibited Sony Sugar or any other miller allowed to import sugar during the duty free window of October to December 2017 to pass its import license to a third party.
Bernard Otieno, the managing director, told MPs that Sony Sugar applied for a licence to import 90,000 metric tonnes of sugar to bridge production shortfall during the 2016/17 and 2017/18 financial year.
He said the sugar directorate granted it license to import only 50,000 tons, which the company went ahead to procure from Holbud, a firm that already had the consignment.
“The truth is that we were looking to make a little profit. We never spent any money on imports, port charges, warehousing, repackaging and distribution,” Mr Otieno said.
Mr Otieno, who failed to table the import license told the Agriculture and Trade committee that Sony is technically insolvent and had no capacity to finance or fund the sugar importation.
“This was a joint undertaking between Sony and Holbud. The board and management realised that Sony had no money to import, pay VAT among other charges in Mombasa.
“This was sugar that somebody consigned to us. We were not buying sugar as Sony,” he said.
MPs put Mr Otieno to task on allegations that Sony was used as a conduit to facilitate sugar barons to import sugar after the duty free window closed.
“You put lives of Kenyans at risk based on sugar you didn’t see whether it was brown, white or yellow. You were used as conduit for tax evasion.” Said the Busia Women MP Florence Mutua.
MP Simba Arati said Sony received a license to import sugar on September 17, 2017 when the window was closed on September 13, 2013. He claimed the consignment left Brazil in November 2017 and arrived in Mombasa in December way after the window granted for millers closed.
Mr Otieno said the issue of tax was litigated in court where it was found that Holbud imported the consignment within the duty free window.
The committee co-chaired by Kanini Kega and Mohamed Haji has retreated to Mombasa to compile its report that will be tabled on Tuesday.