THE DEARTH OF INDUSTRIALIZATION IN “WESTERN PROVINCE”
The chorus has been sung for eons. That the former western province is a sleeping giant economically is no secret.
From run down factories to poor investment decisions, the four counties Kakamega, Busia, Vihiga and Bungoma are a far cry of what was in the early 70s running upto 2000s
Key factories namely, Mumias Sugar and Pan Paper Mills have become moribund. Numerous attempts to revive Mumias Sugar have turned into an embarrassment of sorts. Local leaders are busy pursuing personal interests at the expense of the local populace.
Every electioneering year, presidential candidates and other aspirants use the revival of Mumias Sugar and Panpaper as enticement to gain votes in the vote-rich Mulembe Nation. At the end of elections, nobody remembers their pronouncements and cartels get back to work.
Mumias Sugar Company Limited, locally known as MUSCO was founded in 1971 and experienced rapid growth for years. The sugar miller helped a relatively remote area with poor communication grow and develop an active market economy.
Money circulated in abundance and many residents of the larger western province lived a comfortable life. Moreso those in Kakamega County, which was the bedrock of sugarcane farming.
The company was under the stewardship of a British Firm, Booker Tate contracted by the national government. Up until early 2000s, MUSCO was among the most profitable and best run corporate firm in East and Central Africa.
After rapid growth that saw the firm diversify into commercial power generation as well as the establishment of a robust nationwide distribution network for sales and marketing, Mumias Sugar was listed on the Nairobi Stock Exchange in 2001 after being converted into a public company with the government of Kenya as the major shareholder with 20% of the total shares.
Shortly after privatization, the new NARC Government terminated Booker Tate Ltd’s contract after a working relationship spanning decades. Years later it was to be realized that the contract termination was a tragic blunder by the government. The British Firm had worked their socks off in putting MUSCO at the very top of the corporate world. Owing to their neutrality, political interference and the existence of cartels was unheard of.
Dr. Evans Kidero was appointed as the first Kenyan CEO shortly after Booker Tate LTD were shown the door. Kidero, an experienced team leader owing to his days as the MD, Nation Media Group moved quick to stamp his management style. He moved the company’s headquarters to Nairobi in a bid to give the Mumias-based company a national outlook. The company diversified into mineral water business besides the production and sale of electricity to the Kenya Power and Lightning Company. Things were looking good with the shares at NSE doing well.
In 2008, signs of a company in doldrums started showing. Senior Managers at the Mumias Out-Growers Company (MOCO) resigned en masse after disagreements with MUSCO’s top management over farmer payments. MOCO, a brainchild of Mumias Sugar was established in 1977 to act as an intermediary between farmers and the company under the guise of most farmers being illiterate. Farmer payments as well as distribution of cane seedlings and other farm inputs was being done through MOCO.
It later emerged that the managers who quit were pushed to exit so as to pave way for looting by cartels and rogue company staff. Wanton theft began at MUSCO around this time.
In 2012, the company began producing lesser sugar and in turn realizing lower profits. A government-commissioned audit by KPMG unravelled financial and procedural irregularities that led to the loss of over Ksh. 1 Billion. Senior Managers were relieved off their duties but the damage had already been done
The miller, who controlled over 50% of the sugar market was in a dire situation by the time Dr. Kidero left the company and was replaced by Peter Kebati in July 2012. Kebati, an insider having served as the Company Finance Director for 9 years inherited a sinking ship. Company employees who earned handsomely began to experience salary delays. Allowances were stopped and farmers’ payments delayed and were staggered unlike before. The debtors’ list grew by the minute.
The reasons behind the rapid collapse of the company were complex to the naked eye. Many farmers and employees thought it was just a case of delayed release of funds or another simple reason. What they did not know was that senior management and cartels at Mumias Sugar and Mumias Out-Growers Company (MOCO) were milking the miller dry each passing day.
The cartels used to approve fake farmer payment lists from MUSCO and drew money from bank accounts illegally, leaving MOCO to grasp with a disappointed lot of farmers. They were told to wait, the illiterate ones were lied to that their money was being held in Nairobi at the stock market. It didn’t take long before MOCO collapsed. Frustrated farmers in their droves uprooted sugarcane and opted for maize and other crops farming.
In 2015, the government stepped in and replaced Peter Kebati with Errol Johnson, an Australian expatriate to help steady a shell of a company. The new CEO was at the helm when the National Treasury pumped over Ksh. 5 Billion into MUSCO. Things didn’t work, and in 2017, Mr. Johnson who was on a whopping Ksh. 3.4 million per month salary went on leave in his home country never to come back. He sighted frustrations and lack of government goodwill to revive the company. The Miller was on her death bed and in 2018, sugar milling operations ground to a halt after it was placed under receivership by their largest debtor, Kenya Commercial Bank.
Lives were shuttered, some lives have since been lost, assets at the once pride of Mumias and the larger Western Province are dilapidated and in a sorry state. The firm’s expansive 8,700-acre sugar estate is now a forest, with some unscrupulous brokers leasing few patches of the land to unsuspecting maize farmers.
According to a report given by the receiver manager in July 2020, Mumias Sugar has an asset base of Ksh. 15.7 Billion and liabilities totalling to Ksh. 30.1 Billion, hence a negative figure of Ksh. 15. 6 net assets and owner’s equity.
Various efforts to resuscitate the company by Kenya Commercial Bank, are yet to bear fruits and there seems to be no end in sight.
The case wasn’t any different with Pan African Paper Mills, christened Pan Paper Webuye . The paper factory that was a major source of development within Webuye town and its environs was established in 1972.
After transforming the sleepy town of Webuye in Bungoma County into a busy industrial hub and leading to tremendous growth and improved lives for decades, the machines at the factory were switched off in 2009 after a receiver manager also came calling.
The IFC gave a loan of Ksh. 5 Billion meant to go towards expansion and installation of new production plants. This loan ran into arrears. By the time of shutting down, the company owed over Ksh. 7 Billion. The loans, coupled with an accrued electricity bill running into millions of shillings, cheap paper imports and extremely high costs of operations led to the collapse of a once vibrant company that employed thousands of Kenyans both directly and indirectly.
The economic fortunes of Webuye Town and to a large extend Bungoma County dwindled and poverty levels rose to unimaginable levels.
In 2016, the national government privatized the paper miller in a bid to revive it. The billionaire Rai family worn the bid to take over Pan Paper in a process marred with underhand dealings and irregularities. An accusing finger by the receiver manager was pointed at the Ministry of Industrialization. Rai paid a mere Ksh. 900 million for a company that was valued at Ksh. 18 Billion by the time it went under.
The revival is yet to kick into top gear. The new owners are still grappling with rehabilitating run down and vandalized machines as well as an acute lack of raw materials as the government is yet to grant them the necessary licenses to authorize exploration of forests for raw materials. More challenges lay ahead.
The fall of these two Western Kenya giants speaks volumes of how the region lacks committed and astute leadership. Political interests have taken center stage. Cartels dealing in cheap and illegal sugar imports are busy frustrating revival attempts of the sugar miller. On the other hand, lack of initiative by the government, both county and national to support revival efforts is bedeviling the rebirth of Webuye Pan Paper.
Hard questions ought to be asked of our leaders. What needs to be done to revive collapsed industries as well as establish more income generating initiatives to improve the economy of the Western Region?
In the case of the now renamed Rai Paper Mills, local political leadership and other stakeholders need to be more proactive and lead the way. Ever since the Webuye- based company went down, attempts to revive it have not been accompanied by extensive tree planting initiatives. Where then do we get raw materials in the long term? If any of the stakeholders from Bungoma County dreaming of empowering his people then they need to lead this process, even as Rai soils its hands to bring back the factory to its feet. The government on the other hand should be proactive to help the new owners acquire necessary licenses and also ensure that the turnaround process is founded on sustainable forest and environmental management programmes.
Secondly, the number of colleges in the larger Western belt with fallow land that would be used for research on the next generation of premium breeds of trees for paper production are numerous. It would be prudent therefore to enjoin learning institutions in the growth of commercial forests which would in turn generate income to the institutions. With a ready and reliable source of raw materials, the company will thrive knowing it has support and goodwill from the community.
Rai Paper Mills needs to take a step back and re-establish relationships with auxiliary businesses that were dependent on Pan Paper. This will help to enjoin the surrounding community in revival efforts and revitalize the entire Bungoma County’s economy. Further partnerships with the Kenya Forest Research Institute (KEFRI) and other international NGOs like AgroVio should be established.
In the sad case of Mumias Sugar Company, the blame for the failed attempts of revival lay squarely at the feet of the National Government, stakeholders and local political leaders. The government is lethargic in investigating and bringing to book the people who stole from the miller; while on the other hand, politicians are busy working in cohorts with cartels to frustrate revival efforts. The former pride of Wangaland can be back to its feet if there is political goodwill and meaningful leadership. Real stakeholders need to stamp their authority and speak up against political thuggery. True stakeholders need to work with KCB to negotiate with potential investors and draw up realistic and achievable targets and work plans.
For us to bring back MUSCO, confidence building must start with working on reviving the nucleus estate, getting farmers to plant new variety seed cane that mature faster to help reduce the deficit gaps on the market.
For an investor to successfully revive the company, he needs to solve the problem from its root cause, and that is; a whole lot of disgruntled farmers who were betrayed by the then management of the company. Farmers who survived the suffering that came with the collapse of the miller need to be told how their monies owed by the previous regime shall be paid. They need bankable reassurance that it is okay and worthwhile again to go back to sugarcane planting. At the moment farmers feel cheated because the privatization transition from Booker Tate LTD to Dr. Kidero was only smooth on paper. It later spelt doom to the farmers and the entire community.
Once an investor is in place, the region’s county governments have a major role to play since agriculture is a devolved function. Farmers can be offered agricultural extension services and education on the revival plans.
Technology can be used to manage end to end operations to eliminate corruption cartels and resource pilferage as witnessed in the last days before the collapse.
We need to give the revival of these factories a long term strategy; we similarly need to think through a continuum process so that those sad events of 2009 and 2018 don’t befall us again.
In Busia County, the once vibrant cotton and tobacco industries are no more. Not much effort is being put in to bring back these major income earners and sources of livelihoods for thousands of residents. This is an area that the county government should explore and revive.
Similarly, gold mining in Kakamega and Vihiga counties needs modernization and elimination of selfish middle men and brokers so that miners get true value for their sweat. The government needs to operationalize a regulation framework established in the year 2016 to the growth of this untapped potential.
In a move seen as a benchmark for other counties, Kakamega County Governor Wycliffe Oparanya recently launched the Kakamega Fish Processing Plant that has capacity to process upto 30 metric tons of fish in a day. Kakamega County has a high potential for aquaculture that should be explored vigorously.
More has to be done by all County Governments to propel the region to greater economic heights. The region currently sits atop of the list of consumers and last where producers and suppliers converge.
Political leaders as well as other stakeholders in the region have to take the mantle and sign post the populace towards economic emancipation.
Wake up people!!!