The story of a plot to grab Kenya Seed Company

 

When the Daniel Toroitich arap Moi administration wanted to sell some of its parastatals, and at a throwaway price to select Kanu mandarins, one company offered a challenge due to its registration status.

Then an evil genius found a way out – and opted to wait.

Once upon a time, Kenya Seed Company used to be the number one supplier of quality seeds. 

It was doing roaring business supplying seeds to, among others, wheat, maize, sunflower and barley farmers and those in the horticulture sub-sector.

With its assets, acquired over years, this was a multibillion-shilling company; a sitting duck by Kanu’s corruption standards.

When the company was not put on the list of parastatals that were spared the privatisation hammer, many thought President Moi’s government had retained Kenya Seed for strategic purposes; and that it cared for farmers.

Most celebrated seed firms

During its halcyon days in 1979, Kenya Seed Company acquired Simpson and White Law, one of East Africa’s most celebrated seed firms and which was renamed Simlaw Seeds, a distributor of vegetable seeds as part of Agriculture Minister Jeremiah Nyaga’s vision to have the government have monopoly and manage supply.

Kenya Seed was one of the companies founded by large scale colonial-era farmers in a bid to safeguard the provision of quality seeds, which was the foundation of the agricultural economy.

It was during the reign of Bruce MacKenzie and Michael Blundel as ministers for Agriculture, just before independence, that discussions were opened on the future of Kenya Seed Company, which was hardly six years old.

While it had been incorporated under the Companies Act and by a small group of Kitale-based farmers, its potential for agriculture was enormous. 

By a special resolution in October 1960, members resolved to convert it into a public company limited by shares – and thus allowed more people to join.

Battleground

After independence, Mackenzie, now thought to have been a spy, had been retained by Jomo Kenyatta as Minister for Agriculture. 

He was also the chairman of the Agricultural Development Corporation (ADC), an institution that managed international loans provided by donors to purchase land vacated by British settlers.

ADC had been set up in 1965 and much of its earlier policies and actions were influenced by MacKenzie, who had been entrusted by the British government to manage the colonial transition. 

But ADC, as records indicate, was a battleground between MacKenzie and his Cabinet counterpart Jackson Angaine who was insisting that its right place was in the Ministry of Lands and Settlement, which he headed.

Whether MacKenzie was the mastermind of the settlers’ October 1960 decision to turn the private company into a public entity limited by shares is not clear. 

State corporation

But what we know is that it took place when he was Minister for Agriculture and that ADC bought shares when he was its chairman.

The entry of ADC, and later Kenya Farmers Association (KFA) , saw ADC – and over a period – hold about 53 per cent of the shares.

This would later create the many problems Kenya Seed Company has been going through of late. 

With the 53 per cent shares, Kenya Seed Company started operating like a parastatal, with the President appointing the chairman and the minister picking the board. 

By 2000, when Moi was about to end his final term, ADC operated under the State Corporations Act. That is when the plot to grab it took place. 

The Moi government, by error of omission or commission, had not done anything to convert Kenya Seed Company into a State corporation as provided in the State Corporations Act. 

'Private' company

It is a question that was always asked at the board – on whether Kenya Seed was a “private” Company under the Companies Act, or whether it was subject to the State Corporations Act by virtue of the 53 per cent shareholding by the government via ADC.

On December 15, 2000, an extra-ordinary general meeting was called to rubber stamp a proposal that would dilute the shareholding of ADC and eventually lock out the government from the firm.

The meeting agreed to float four million new shares to ostensibly raise capital and buy Elgons Downs farm in Endebess from Lands Ltd. 

And herein lies the problem. Lands Ltd was a subsidiary of ADC and had in 1960s and 1970s been given authority to hold all the parcels acquired by the corporation. 

The question that has never been answered is: Was a government owned entity selling land to itself?

Lands Ltd was also the custodian of all the abandoned farms which had been left by settlers who did not wish to sell – and left in a huff, or were pushed out.

Floatation of shares

While the flotation of the shares was supposed to be approved by the Minister for Agriculture – since the government was a major shareholder – this did not happen. 

By this time, Kenya Seed Company, like many of the Moi-era parastatals, had been run down and its officers were being accused in Parliament of smuggling seeds. More so, they had an expensive bank overdraft.

Initially, it had been agreed at the board that they would seek the approval of the government to float the shares. That was resolved during the 193rd board meeting on November 3, 1999.

It is now known that some Kenya Seed Company insiders wanted to use this opportunity to grab the parastatal – as some Nyayo mandarins had previously done – and that is why it was agreed that the shares would be sold by “private placement”.

Whoever controlled Kenya Seed Company would control the country’s agriculture.

As part of the mischief, some board members reasoned that the shares held by ADC and KFA would not be affected. 

Cartels

What was to be affected – and this was not highlighted – was the shareholding.

When the plot was put in place, hawk-eyed Permanent Secretary at the Treasury Mwangazi Mwachofi wrote to Head of Public Service Richard Leakey on April 12, 2000. 

Mr Mwachofi was part of the “dream team” that had been brought in by President Moi to help clean up his government of cartels and revive the economy with the backing of donor agencies.

The PS in his letter said he had “serious reservations on the proposal to issue new shares by private placement”.

“In the spirit of transparency, it is necessary to offer the opportunity to invest in Kenya Seed Company to interested Kenyans. It is also necessary to expose the process to the scrutiny and accountability required by the Nairobi Stock Exchange. It will be unfortunate if the proposed issue of new shares is seen as an attempt by a small group of existing shareholders to secretly expand their shareholding at very generous terms without giving the rest of the Kenyans an opportunity to acquire shares,” he wrote. 

The insiders had also valued every share at Sh20.

Criminal charges

“It is curious and very unusual. Issuing new shares at Sh20 would most likely allow the existing and some privileged new shareholders to acquire the new shares at substantially below their fair market value. Clearly, this would be unfair to the rest of the Kenyans,” Mr Mwachofi’s letter added. 

What was happening at Kenya Seed was that the privatisation of the company was being done by managers who did not want outsiders to participate.

Though Kenya Seed was asked to revert to the government on the matter, a June 2000 board meeting resolved to proceed with the floatation after endorsement by the December 15, 1999 meeting. 

The letter by the government on July, 17, 2000 supporting the sale with reservations against private placement was ignored.

Mr Nathaniel Tum had been Kenya Seed Company MD for about two decades. 

When the sale was floated, he took about 67 per cent of the subscribed 3,370,000 new shares valued at more than Sh90 million together with his three children and a company in which he and his wife were shareholders!

What followed were incessant wars between the government and the new shareholders. 

Criminal charges were preferred against Mr Tum as the government pushed back to control Kenya Seed Company.

Lack of evidence

It was during this tussle between Agriculture Minister Kipruto arap Kirwa and Kenya Seed that arsonists destroyed the company’s headquarters in Kitale – described by the minister as “an act of high treason...very unfortunate and painful to think about”.

Some people appeared in court but were freed for “lack of evidence”. 

More so, Mr Tum attempted to institute defamation charges against newspapers and lost the case when the High Court held that this was “a matter of public importance…and clearly this was an issue of public notoriety”.

Fast forward to Willy Bett’s tenure as Cabinet Secretary for Agriculture. He appointed Mr Tum a Kenya Seed Company director. 

Though his tenure has lapsed, Mr Tum leads a faction of Kenya Seed Company directors.

Last year, the group called for a virtual AGM to ostensibly replace chief executive Azariah Soi whose tenure was coming to an end.

But Agriculture Cabinet Secretary Peter Munya dismissed the meeting. 

“There is no board in place to have called the meeting,” the minister said. 

When a country’s supply of quality seeds is compromised by cartels, politicos and people who do not care about farmers, the end result is poor harvest and continued importation of food.