Chase off vultures, reopen Mumias

If — through a very bad accident — I became a dictator of this country, I would use the few days, or even hours, between the times I am in power and my dethronement and assassination to decree the immediate re opening of Mumias Sugar Company. I would immediately disperse all those vultures currently circling that critical company.

Is it not the height of irony that the predicament and fate of what, until the other day, was a systemic player and anchor of a supply chain benefiting millions of households living the western region of Kenya has been reduced to unending and sterile court battles over creditor claims on the ethanol and cogeneration plants?

The fate of the company and of the ordinary sugar farmer is now in the hands of Nairobi’s litigation aristocracy comprised of a brigade of elite lawyers representing dozens of creditors with interlocking interests in the matter. They have launched a firing squad of court cases and are engaged in weaponised litigation meant to wear down the insolvency process through protracted litigation, the ultimate intention of which is to wind up Mumias.

Make no mistake: I’m not suggesting that the creditors don’t have a right to pursue their claims. But when we reach a place where whether or not to reopen a company so important to farmers as Mumias has to be decided on disagreements and legalistic disputes over equal treatment of creditor claims, we have to re-examine our collective conscience and ask ourselves hard questions about our priorities as a society. 

Debts can be repaid. But the revival of Mumias is about livelihood options for the ordinary farmer and the hundreds of thousands of businesses across the supply chain it supports. In the financial sector, companies anchoring an extensive ecosystem such as Mumias are called systemically significant financial institution or by the acronym ‘sifis’. When they fall into problems, the state bails them out just the way Kenya Airways is being revived.

Anonymous owners

Isn’t it a pity that the very existence of Mumias is at the mercy of a foreign entity with anonymous owners? I refer to Vartox Resources Ltd, which has lodged a case in the High Court to wind up the sugar miller. 

Last week, I went to the companies’ registry to find out the identity of this creditor. I wanted to know how it came to marshal the audacity to seek to kill Mumias. Whether the debt it is owed is so big as to warrant extermination of Mumias from existence. I wanted to establish the names of the actual beneficial owners of this entity.

I was not able to pierce through the corporate veil because Vartox is incorporated in British Virgin Island—the world’s most popular tax haven. The territory is famous for offering cheap and simple shell companies that allow their owners to avoid registering their names in public.

Where did Vartox pop up from in the first place? Court records show that the company is a product of belated complex and hurriedly orchestrated transactions between a group of Nairobi-based banks involving assignment and substitution of non-performing assets between the local banks.

It’s those complex transactions that ended up in the British Virgin Island company being belatedly brought in to step into the shoes of the original secured creditors of the ethanol and cogeneration factories. The timing of the entry of Vartox into the scene — bang in the middle of the process of procuring the leasing of Mumias — has widely been interpreted as a tactical manoeuvre by parties fighting off the leasing contract.

Ordinary sugar farmer

Observers are waiting with bated breath to hear what the courts will say about whether the purchase of loans adjudged as non-performing assets is a proper thing under Central Bank of Kenya’s prudential regulations. 

Let us also wait to hear what the courts will say about the legality of the deeds of assignment, especially in view of the disagreements that have arisen between the original creditors of Mumias, who had signed an inter-lenders agreement before Vartox popped up.

Clearly, we’re headed for multiple and protracted litigation because this court battle involves parties who are adept at dilatory tactics and have, for many years, excelled at what legal wonks call ‘forum shopping’—the endless filing of cases upon cases in different locations. 

I’ve lost count of the number of cases in court over this matter. The number of lawyers and legal firms involved is simply mind-boggling. The Bench and the Bar are entitled to earn a living but not at such an unbearable cost to the ordinary sugar farmer in western Kenya. 

If we leave the fate of Mumias’ reopening to lawyers and judges, nothing will move. All we will see are more orchestrated creditor holdouts. The equipment will keep rotting away. In the PanPaper case, such noisy and litigious creditors were eliminated by the government paying out short-term lenders. 

Let’s get Mumias out of the courts. The factory should be reopened. Now.

[email protected]