The wrong move that left sugarcane farmers in Mumias defenceless

The collapse of Mumias Sugar Outgrowers Company (Moco) was perhaps the greatest silencing of farmers’ voices in the sugar belt.

Experts now acknowledge that the miseries facing sugarcane farmers in Mumias started when their organisation collapsed in 2008 — a victim of mischief, chicanery and theft.

Before it died, Moco was the voice of the farmers and represented their grievances to the factory and fought for their rights.

Since it went under, they have been left without a representative.

Through Moco, farmers were the biggest shareholders at Mumias. It held the share certificate in their trust.

However, all hell broke loose when they were duped into pulling their shares out of Moco and owning them individually.

“All of us had just one certificate. Over time, some stupid argument started that a share certificate should be given to each individual farmer. So everyone got their share certificate,” says James Sakwa, who was a member of Moco and a farmer in Butere.

It all started in 1998, when the farmers were persuaded to register a new company, Moco (1998) Ltd, to hold their shareholding in Mumias.

Initially, Moco had been established by an Act of Parliament as a trustee for sugarcane farmers.

The new company had 16,839,118 shares and was supposed to offer land preparation, transportation of cane and artificial insemination services in the Mumias sugar belt.

How a public company was converted to a private company was not clear, and attempts by current local MP Benjamin Washiali to get answers in Parliament have not been fruitful.

When it was founded in 1975, Moco was managed as part of Mumias Sugar Company, with the government appointing its top officials.

The outgrowers elected their own directors – but had little say.

That anomaly gave government-appointed officials more say in a company that they had no interest in. Moco soon became a cash cow.

FARMERS PROTECTOR
In 2001, farmers were given 20 per cent preferential shares as Mumias went through its first initial public offering (IPO).

As the share price dipped, a well-planned scheme by unscrupulous share traders was mooted to acquire the shares from the farmers at a very low price and then sell them at the Nairobi Stock Exchange (now Nairobi Securities Exchange) at an exorbitant price.

“Some people showed up and told us that you see, this share certificate is just a piece of paper. You don’t need it. Each share is equivalent to one shilling so give me your certificate and I give you Sh3,000 for the 3,000 shares you hold,” says a former official of Moco, who claims that politicians had a hand in this.

For Mr Sakwa, the traders were not to blame but rather the leadership.

“The fault is on the leadership that was there then, which failed to give direction,” says the farmer.

Before Moco (1998) Ltd collapsed, farmers owned up to 33 per cent of Mumias shares.

This made them the majority shareholders. But when they sold their rights, the government remained the sole, organised majority shareholder, with a stake of 20 per cent.

Farmers interviewed by the Nation said they lost a platform where they could have their problems addressed within a short time.

Moco (1998) Ltd used to trade with Mumias and most of the services that are today outsourced used to be handled by the defunct organisation.

Moco enabled farmers to earn dividends. In essence, they earned from the cane and also from the shares they held.

“When Moco was there, it was a great way of communicating with the farmers,” says Mumias CEO Johnston Eroll, who still believes that it is important for farmers to have a representative at the factory who will champion their rights.

Moco would retain 15 per cent of farmers’ proceeds and use it to acquire shares in Mumias.

“Very few peasant farmers bought shares directly by way of cash,” says Mr Sakwa, who owns 20 acres of cane.

In addition, the organisation could supply farmers with the farm inputs at affordable rates and the growers could also get advance payment, loans for which they were charged 11 per cent interest, compared with about 23 per cent that Mumias charges now.

THE GENESIS
The original Moco was an experiment forced on the farmers by donors and the Treasury.

The idea was to form a company that would create a buffer zone between the farmers and Mumias.

The failure of sugar cooperatives in Chemelil forced the government to form an outgrowers body.

“I regret to say that the outgrowers are uncooperative. In one meeting … none of the 48 outgrowers showed up. In view of this poor response, I see no point of wasting our time,” said S.M. Muchoki, the western provincial cooperative officer, in a 1971 letter to J. Muthama, the then commissioner of cooperatives.

This turn of events worried the Mumias Investors Bookers Agricultural Holding, who foresaw trouble if the farmers were disorganised.

In a letter to the ministry of Agriculture, Bookers project manager M.N. Lucie-Smith suggested that the freehold land owners need “a great deal of indoctrination” to accept the cooperatives.

Initially, it had been thought since the 22 locations that had been covered by the outgrowers scheme were mostly occupied by the Wanga and touching on the Marama and Butsotso, this would favour the emergence of a strong cooperative because of clan links.

“It is going to be mutual and fraternal,” a report on the feasibility of Mumias cooperatives had said. But it worked the other way.

The Treasury, then under Finance minister Mwai Kibaki, started pushing for an outgrowers’ organisation — rather than a cooperative.

The move created animosity between Mr Muthama and the Treasury.

In a protest letter he wrote to the the permanent secretary for Agriculture, Joe Kibe, Mr Muthama dismissed the outgrowers' organisation, saying it would not work, as it had failed before.

While Mumias claims that Moco owes it Sh2.6 billion relating to a Sh190 million loan advanced in 1994, Moco claims that it repaid the money in full in 1996.

In its annual reports, Mumias Sugar still retains the loans as unpaid. More than 40 years later, the outgrowers organisation is dead.

“In our view this type of organisation is not a new innovation as it has been tried in Muhoroni Sugar Settlement without success … the proposed Outgrower Organization will be viewed by the local people to be investors or at best government tool rather than outgrowers representative.”

COMPLAINT FILED

He then added a rider: “I doubt if those people who propose it intend it to be (an outgrowers’ representative).”

Another cooperatives technocrat, J. Laban Murungi, then an assistant commissioner for co-operatives, suggested in a different letter to Mr Muthama that rather than set up an outgrowers organisation “which will never work”, the funds should be used to set up a strong cooperative.

Moco accuses Mumias Sugar of making a false entry into its audit books and claims that an internal audit report dated 2007 indicates that Mumias Sugar allegedly took Sh2.6 billion from Moco accounts and declared it as part of its profits.

Moco later filed a complaint with the anti-corruption commission asking the agency to conduct a probe into the conduct of Deloitte & Touche as the external auditors at Mumias, who ought to have pointed out the above irregularities.

The matter of the Sh2.6 billion is currently under arbitration as farmers' link to their factory remains dead.