Mumias Sugar deal sets Rai family siblings up for 'sweet' rivalry

The billionaire Rai family may be headed for a fresh business rivalry after one of its Uganda-based siblings bagged a mega contract to manage part of Mumias Sugar Company’s operations. 

The award of the contract to Sarrai Group of Uganda pits its owner, Sabi Rai, in direct rivalry with his cousin, Jaswant Rai who already runs three sugar firms in Kenya including West Kenya, Sukari Industries, and Olepito Sugar. 

Jaswant is the son of tycoon Tarlochan Singh Rai who died on December 28, 2010 in Mumbai, India. Sabi’s father was Tarlochan’s brother. They however run their businesses separately. 

Sarrai Group is a Ugandan conglomerate consisting of different agro-manufacturing companies, which run three sugar factories in Uganda, producing about 170,000 tonnes of sugar annually. It also has operations in Malawi. 

In Uganda, Sarrai runs Kinyara, Hoima, and Kiryandongo sugar factories, with over 20,000 hectares of its nucleus estates, and a total installed capacity of 19,000 TCD (tonnes crushed per day). 

“Although the lessee is not in sugar production in Kenya, he has a proven track record of running three sugar factories, a distillery, and power generation in Uganda and is committed to commence rehabilitation of assets immediately to ensure the revival of operations within the shortest period,” Ponangipali Rao, the receiver-manager of Mumias said on Wednesday when he announced award of the deal to Sarrai. 

Bid documents show Sarrai Group undertook to pay a graduated monthly lease amount over the 20-year management of the Mumias Sugar plant. The amounts range from Sh19.5 million per month at the beginning to Sh28 million per month at the end of the lease period. Four of the other bidders had put in higher monthly lease commitments but Sarrai Group appears to have put in a more superior technical proposal. 

Other bidders included Pandal Industries, West Kenya Sugar, New Mumias Sugar/Devki Group, Kibos Sugar, KE International, Kruman Finances and Frederick Coombes/Sucriere Des Mascareigmes Ltd. 

Biggest miller in Kenya

The bid for the Mumias lease deal had attracted eight investors who expressed interest in reviving the firm, which was once the biggest miller in Kenya. 

Mumias, which used to produce more than 250,000 tonnes a year, was sunk by poor management, heavy debts, and years of mounting losses, prompting its closure. 

The miller owes Proparco Sh1.84 billion secured using its electricity generation plant, Ecobank Sh1.77 billion secured on the ethanol plant, and the Treasury Sh2.83 billion. It owes more than Sh3 billion to banks including KCB, NCBA, and Stanbic Bank.

Pan-African lender Ecobank and French development financier Proparco in November seized the prime assets of Mumias Sugar Company from KCB Group. Ecobank filed a notice on November 29 with the Attorney-General’s office indicating it had hired Harveen Gadhoke as its receiver manager in a forcible takeover of Mumias Sugar’s ethanol plant.

Proparco, in what appeared like a coordinated fashion, filed a similar notice on the same day, claiming rights to the sugar miller’s power generation plant.

The two plants together with Mumias Sugar’s milling unit have been under a KCB-appointed receiver manager.

The miller was in September 2019 placed under receivership by KCB Group to protect its assets and maintain its operations. 

A schedule released by the receiver-manager had revealed that businessman Julius Mwale has placed the highest bid of Sh27.6 billion for the leasing of Mumias Sugar, trouncing billionaire Rai family and steel tycoon Narendra Raval. 

Tumaz and Tumaz enterprises, the company associated with the Mwale City investor topped the bids in its offer to run the troubled miller for 20 years. 

Rai family's vast estate

The second-highest bidder was Kruman Finances, who wanted a 25 year-lease with Sh19.7 billion. Kruman Finances is associated with French and Turkish investors.

Transmara Group (Sarrai) emerged third, having placed Sh11.5 billion for leasing of the ailing miller for over 20 years. 

Other bidders were Pandhal Industries with Sh9.7 billion over 20 years and Kibos Sugar with Sh8.8 billion. 

A Mauritius-based company, Sucrie Des Mascarelgnes Ltd, also participated but did not disclose the value of its bid. 

The award of the Mumias contract to Sarrai comes amid a fight for the control of the multibillion estate of the Rai family. The feud involves a will that is dated December 17, 1999, allegedly left behind by the patriarch Tarlochan. 

The widow, Sarjij Kaur Rai had teamed up with her sons- Jasbir and Iqbal objecting to the will and plans by Jaswat to get the court’s permission to administer the multi-billion-shilling business that spreads across East Africa, Malawi, India, and London. Sarjaj had started giving evidence before High Court Judge Aggrey Muchelule but died early this year.

The family is believed to have had close ties with the ruling elite of the Moi, Kibaki, and Kenyatta administrations, and has interests in cement production (Rai Cement), edible oils and soaps (Menengai Oil Refineries), sawmilling (Timsales, RaiPly, and Webuye Panpaper), wheat farming, horticulture, sugar industry (West Kenya, which owns Kabras Sugar) and real estate (Tulip Properties).

Last year, the family acquired Dominion Farms in Siaya County's Yala Swamp after its American owner lost a vicious political fight in the region.