In footsteps of Mumias Sugar, KCC.... Tea agency offers farmers poisoned chalice
Tea farmers are just about to be swindled – and most likely, the barons who sit at the Kenya Tea Development Agency (KTDA) headquarters will do what some tycoons did to Kenya Seeds Company, Kenya Co-operative Creameries (KCC) and Kenya Planters Co-operative Union (KPCU) to take the farmers’ entities for a song.
That is unless they are not stopped.
Untangling the tea farmer from what the barons want to do will be Agriculture Cabinet Secretary Peter Munya’s last battle with the cartels.
Currently, they are in the process of legalising their mischief – and they have made it public. On Thursday, Chebut Tea Factory became the last to carry out elections that were not supervised by KTDA head office and which, might, herald a new dawn on the relationship between the farmers and the agency’s body, the Kenya Tea Development Management Service.
But as the elections were continuing, and in which KTDA-friendly directors were thrown out by farmers, some directors of KTDA Holdings Limited – the outfit which controls the age-old farmers’ assets, some of which belonged to the parastatal Kenya Tea Development Authority, decided to pass resolutions which would give new shares to individual farmers.
Sugar coated poison
On the face of it, the deal looks good. But this is the last bait – or if you like; the last dose of a sugar coated poison; a poisoned chalice.
Let me tell you a story.
Once upon a time, some clever people decided that the way to get control of Kenya largest sugar company, Mumias Sugar Company, which was being privatised, was by awarding shareholding to individual farmers rather than their entity, Mumias Outgrowers Company. They had support of politicians who thought this was a wise move and could earn them political mirage. Soon, when the shares were floated at the Nairobi Stocks Exchange, some brokers descended into Mumias villages and they took advantage of the poor farmers and bought the shares at as low as Sh2 down from the issue price of Sh6.2. Currently, just a handful of farmers can claim ownership of Mumias Sugar Company which has been run down. The farmers have no stake, can do nothing, and private entities now want to run Mumias.
And that is why I am worried.
KTDA Holdings directors have said that they will float the shares at the stock market and your guess is as good as mine. In 10 years, when the tradability of the shares will be lifted, according to KTDA, there will be a significant mop up of farmers’ shares by brokers. Keep this paragraph for future reference.
The move by KTDA is not informed by overnight love for the farmer. Nay. It is informed by the fear of just a few. They don’t want to let go the goose that lays the golden eggs. Since all the KTDA directors had either lost their seats at the factory-level, or had opted not to run, the HQ cartels decided in April to change the Articles of Association and create the new individual ownership category ostensibly “to enable the allotment of the company shares to individual farmers under a new category of shareholders known as Tea Farmers.” That is according to a KTDA press statement released on Sunday, May 23.
“Among the new changes include a seat on the board of KTDA Holdings directly elected by the shareholders include voting for all company directors on the floor at the Annual General Meeting,” said KTDA.
Weaken factory’s role
In essence, this will allow the KTDA directors, the same people who have impoverished tea farmers, a chance to run for directorship of KTDA and defeat efforts to streamline the tea sector. Further, the whole idea is to weaken the factory’s role in the management of KTDA by dividing the farmers.
The smallholder farmers will be the main losers since their voices at the headquarters level will be drowned by the big farmers – who had lost control, thanks to the one-grower, one-vote rule.
But the plot could be deeper than that and the story of the giant Kenya Co-operative Creameries (KCC) can help us here.
The story of KCC
In 1979, President Moi ordered KCC to start distributing free milk to primary schools as part of a government programme. To KCC, this deal was too good to be true. During the 1979/80 financial year, the government had set aside Sh169 million for the project and KCC officials — and members — saw a new boom. It would prove to be a mirage soon as the government started faltering in payments and cutting down the allocation to a meagre Sh20 million during the 1998/99 financial year.
By this time, Moi had appointed his son, Raymond, as one of the KCC directors, and by 1996, the company had made a loss of Sh1.6 billion, was no longer paying farmers and was being cannibalised from within – through phony billings. Parliament was told that from 1993, several politically correct companies billed KCC for non-existent materials or inflated costs.
For instance, KCC would buy a bale of toilet paper at Sh445 when its actual cost was Sh150. From 1989 to 1996, Parliament was told, KCC never held any annual general meeting and as MPs was told, it was being led by the “son of a sacred cow”. As such, farmers went for years without pay and on August 5, 1999, KCC was placed under receivership under Mr Graham Shirlock of PriceWaterHouseCoopers.
According to some court papers, Moi had approached Kenya Commercial Bank to appoint a receiver manager and stop asset haemorrhage. He then proceeded to conceptualise a structure into which dairy farmers could then invest and revive their fortunes and appointed respected personalities, General Daudi Tonje, Kipchoge Keino, B. Nightingale and P. Low to restructure KCC.
Moi had negotiated to purchase KCC from KCB for a sum of Sh400 million, while value of its assets then was “in excess of Sh5 billion,” according to court papers.
Assume control
When it appeared that the restructuring of KCC might actually succeed, Moi summoned a city lawyer and demanded that (he) wished to underwrite the entire process and would want to assume control of the eventual company. Moi had negotiated to purchase KCC from KCB for a sum of Sh400 million, while value of its assets then was “in excess of Sh5 billion,” according to court papers.
In 2000, two new companies KCC (2000) Limited and KCC Holdings Limited were incorporated and they ostensibly bought KCC Limited from the receiver for Sh400 million. KCC Holdings purported to invite a private placement on KCC shares.
And this is where Moi registered a company and bought shares worth millions of shillings. Other barons also lined up.
When Mwai Kibaki came to power and started to rescue KCC, and wanted to compensate the farmer shareholders, he found that it was Moi – using proxies, and entities such as Kabarak High and Kabarak Limited - who were, together with some cronies, the real owners of the KCC Holdings Limited.
Mischief
What am I saying?
The distribution of the KTDA Holdings shares – at this late hour – is mischievous and could be as a result of realisation that the government might take over its assets within KTDA – which should be done – from the jaws of the current civil suit-loving carpetbaggers. As such, some people might be lining up for compensation just in case.
Every time KPCU shareholders complained about the running of the company, the directors would form a probe committee made up of cronies.
If you are in doubt, look at what transpired in KPCU which was once a solid institution. After it had been run down by cartels who never answered to the farmers, KPCU was finally put under receivership by KCB – the same institution which was part of the millers’ historical problems.
Every time KPCU shareholders complained about the running of the company, the directors would form a probe committee made up of cronies. By the time Kibaki took presidency, nobody seemed to know the financial status of KPCU – its assets and liabilities. Some of the powerful Kibaki allies were also part of the coffee mess, too.
In March 2001, KPCU was put “on notice” in a letter signed by Daniel Iriga, then the relationship manager with a threat: “Unless arrears are cleared…we will call up the entire debt and cancel the limits of your overdraft accounts.”
KPCU assets sold
Soon, the receivers arrived and started selling the KPCU assets. But something else happened. A city tycoon with deep pockets approached the bank and agreed to offset the loan in return he could get all the unallocated shares. He paid the loan and got control of KPCU and appointed his own managers.
And those are the people who had seized the farmers’ assets, worth billions of shillings, and had to be thrown out with the formation of New-KPCU to rescue the assets.
Finally, there is the case of Kenya Seeds – which I had highlighted a few months ago here. In order to dilute the government shareholding at Kenya Seeds, the managers had purported to float shares and which were purchased by the managing director and his family. He is still fighting in court to control Kenya Seeds Company together with its assets.
Thus, what KTDA is trying to do has a history. Once upon a time, Kanu purported to transfer KICC to itself and it took an executive order to get it back.
I will end this cry with the words of Edmund Burke: “The only thing necessary for the triumph of evil is for good men to do nothing.”
I have done my part. BY DAILY NATION
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