Thread by @Belive_Kinuthia

TRUTH ABOUT THE KISUMU MOLASSES PLANT AND ITS LINK TO ODINGAS.

Originally proposed in 1977 by the Madhvani Group as a joint venture with the Kenyan government to create jobs and generate revenue in a poor area, the Molasses Project looked to build a plant near Kisumu to produce alcohol and other products from raw molasses.

Work on the project began in 1981 but by 1983 the Kenyan Chemical and Food Corporation, the government’s special purpose vehicle set up to partner the Madhvani Group was insolvent and the Kenyan government was forced to stand by loan guarantees made.

Over the next 4 years various proposals were put forward to revive the project but all required funding from the Kenyan government which had adopted the firm policy that no funds were to be made available and any future revival would have to obtain external financial support

In 1986 President Moi at a rally in the Moi Stadium, Kisumu, that the Kisumu ‘Molasses Project’ was going to be revived and Dr Ouko, in whose constituency the plant was sited, would be placed in charge of its revival.

In early June 1987 Dr Robert Ouko was introduced in Nairobi to a Domenico Airaghi who told him that he was a director of ‘BAK Group’ a company that acted as consultants for private and government projects in Africa.

On 11th June 1987 Airaghi met with Dr Robert Ouko at his office and three days later, together with District Commissioner Mr Ali Sheike visited the Molasses project

On 6th August 1987 in a ‘Letter of Intent’ to Domenico Airaghi, Dr Ouko authorised the BAK group, an Italian company, to look for and obtain funding for the project and to nominate companies to undertake its completion.

The Kisumu Molasses Project seemed set well on course and it would not have escaped the notice of many local people that in February 1988 workers appeared at the site and began to clear the drains, water pump site and mend the factory’s fence.

In its interim report dated 17th Oct,1989,on the Kisumu Molasses Project and delivered to Minister for Industry, Dalmas Otieno, FC Schaffer stated that they did not find the project viable.  The revival efforts by which had commenced in June 1987 by the GoK finally ended there

The molasses plant, then properly called the Kenya Chemical & Food Corporation Ltd, had been inaugurated in 1977 and abandoned five years later, one of the costliest failures in Kenya’s industrial history.

The molasses plant, then properly called the Kenya Chemical & Food Corporation Ltd, had been inaugurated in 1977 and abandoned five years later, one of the costliest failures in Kenya’s industrial history.

The original proposal for the plant’s establishment had come from Nitin Madhvani, of the influential Madhvani family, investors in Kenya, Uganda and elsewhere, particularly in the sugar industry, of which molasses is a by-product.

The project was initially dealt with by three ministries – the ministry of finance under Mwai Kibaki and later under Prof George Saitoti, the ministry for commerce and industry under Eliud Mwamunga, and the ministry of foreign affairs under Dr Munyua Waiyaki.

Avon Ltd managing director Eric Onyango, giving evidence at the Ouko commission of inquiry, said Ouko had told him there were those among his Cabinet colleagues who favoured a different set of investors who would pay them “kickbacks”. Competition had become intense.

With Ouko’s death, the whole idea of reviving the Kisumu molasses plant was abandoned, and the physical structure of the plant fell into disrepair – a rusting skeleton standing.

It was apparently not until five years later that it was deemed safe to raise once again the issue of the molasses plant – and “all moveable assets” of the plant were advertised for sale on July 10, 1995.

Raila Odinga, like Ouko, believed the plant had a future, and he protested officially at the intention to dispose of the assets of the company piecemeal.

The sale did not proceed, but on March 8 of the following year, 1996, an advertisement again appeared in the Daily Nation newspaper, this time offering “For sale by public auction: All assets of Kisumu Molasses Factory”

Among the conditions of sale was “(b) IMPORTANT: First consideration will be taken for offer to purchase the whole plant in total .

Thereafter consideration for purchase of large combination of units and finally consideration of single item purchases.” The purchaser of the “whole plant or large items” was required to pay 25% of the purchase price by banker’s cheque immediately and the balance within 30 days.

The auction did not actually take place until June 3, on which day, Mr Odinga was present. Representing Spectre International Ltd, he bid shs.570 million for the “whole plant”.

This turned out to be the highest bid and it was accepted by the auctioneers on behalf of the receiver and the plant’s debenture holders, Kenya Commerical Bank (KCB).

A token deposit was paid in two cheques totalling shs.2million, with the balance of the 25 per cent to be paid upon official acceptance of the bid by the receiver and debenture holders.

M N Kanyi, of auctioneers Panama Rovers, wrote to Mr Odinga the following day and again two days later, on June 6, 1996, confirming that the bid had been accepted.

Kanyi returned the two cheques lodged and requested payment of the full 25 per cent, which amounted to shs.142,500,00, not later than June 14, with the balance to be paid by July 15, 1996.

The letter of June 6 included, however, a major caveat. While the advertised lot had described “the whole plant in total”Kanyi now stated in his opening paragraph that the shs.570 million “covers all the assets of the company, which,as stressed prior to the auction, exclude land”

Spectre’s board was taken aback by Kanyi’s remarks. It was difficult to see how a factory could be purchased sitting on thin air and it had naturally been assumed that the 240 acres of land on which the factory stood was part of the “whole plant in total” advertised for sale.

Spectre instructed its lawyers, Lumumba & Ojwang, to write to the auctioneers, which they did on June 7.

Panama asserted that joint receiver JK Muiruri, of Bellhouse Mwangi Ernst & Young, and the auctioneer had explained before the auction that the lot included plant and machinery but not land. The receiver also wrote to Spectre, emphasising that the land was not part of the sale.

On June 13, 1996, Mr Odinga wrote to the receiver saying that discussions about the land had been initiated with the government and “the matter is in the process of being resolved”. He asked for an extension of the time within which to pay the deposit.

Indeed, a change in the wording of the sale notice from the “all moveable assets” advertised on July 10, 1995, to “all assets of Kisumu Molasses Factory” and the “whole plant in total” on March 8, 1996, was significant.

The receiver replied to Mr Odinga the following day, June 14, 1996, granting the extension of the time within which the deposit had to be paid, with the price in full to be paid by December 16 that year.

The receiver expected the shs.142,500,000 deposit on September 16, 1996. Instead, on that date, Spectre International filed suit against the receiver, stating neglect to confirm prior to the sale that the land was not included.

At the hearing of the injunction suit, counsel for Spectre International Ltd cited the Collins English Dictionary with regard to the meaning of ‘plant’, the first meaning being: “The land, buildings and equipment used in carrying on an industrial, business or other undertaking"

In the absence of the land on which the factory stood, Spectre withdrew from its proposed purchase of the plant. The receiver then wrote to the second-highest bidder.

re wrote to Bellhouse Mwangi Ernst & Young on February 18, 1999, making an offer of shs. 120 million, 10 per cent to be paid on acceptance and the balance within 120 days. “We are in negotiation with the government over the land issues,” said Spectre’s letter.

In September 2001,government letters of allotment granted a total of 114.8 hectares of land for 99 years for total fees of shs. 3,699,750, which were paid by Spectre International on October 11, 2001.

As usual, however,the transfer of title was not effected until nearly two years later. This eventually occurred in 2003 (under the Narc government)by which time Spectre had also paid the commissioner of lands all the rent arrears relating to the land for the 20 years 1982 to 2003