Yes, all should benefit from and contribute to economic growth
What you need to know:
- KBL is perhaps the oldest of the indigenous companies and brands in Kenya.
- Between 1996 and 1997, it was decided that KBL should build a brewery in Tanzania to effectively engage South African Breweries (its then main rival) in “Beer Wars 1”.
- Diageo’s expatriate leadership stripped KBL of its key assets.
- The land on which Garden City sits was once KBL’s. Profits were transferred to London.
My conscience was pricked when I read the article, “Involving the poor in business to beat poverty”, written by Kenya Breweries Ltd Managing Director Jane Karuku and published in the Nation of July 27.
As a patriotic citizen concerned at the manner in which the takeover of KBL by a foreign entity resulted in Kenyans being wrenched from their economic livelihoods in a fashion diametrically opposed to what Ms Karuku sought to portray, I think the article should not go unanswered.
Ms Karuku painted a rosy picture of how KBL integrated the idea of inclusive business in Kenya, whereby all groups in society contribute to and benefit from economic growth. The reality is quite different.
KBL is perhaps the oldest of the indigenous companies and brands in Kenya.
In 1972, it offered the largest public issue in Kenya’s history, reportedly oversubscribed by 500,000 shares. It increased its shareholders to 23,000.
In its heyday, KBL was the quintessential giant, boasting 100 per cent local shareholding and a workforce of more than 3,500 employees.
It had operational breweries in Mombasa and Kisumu, with an additional one earmarked for Nyeri.
Also supported were the farming communities involved in barley growing in Narok, Nakuru, Uasin Gishu, and Timau.
(Read more: Brewer cries foul on high retail prices)
Between 1996 and 1997, it was decided that KBL should build a brewery in Tanzania to effectively engage South African Breweries (its then main rival) in “Beer Wars 1”.
The funding for that project was to come from a rights issue. But stockbrokers who complained that the offer price was way above the actual trading price led a successful boycott of the said rights issue.
Guinness, which then held a 25 per cent shareholding in the company, was appointed “buyer of last resort”.
The boycott thus paved the way for Guinness to increase its stake to 50.3 per cent of the shares and consequently assume majority shareholding.
The entry of Diageo (via a takeover of Guinness) trashed the hard work the stalwarts of Kenya’s economic independence had done in establishing an indigenous industrial and manufacturing base and harnessing it for the benefit of local people.
Diageo’s expatriate leadership stripped KBL of its key assets.
Whereas pre-Diageo, KBL had thriving breweries in Mombasa and Kisumu supplying the outlying areas with its products and essentially guaranteeing that a substantial portion of the surrounding communities was engaged in gainful employment, the two breweries were shut down and sold.
The land on which Garden City sits was once KBL’s. Profits were transferred to London.
Indigenous distributors, some of whom had been with KBL for up to 50 years, started folding as their margins were squeezed.
The distributorships became economically unviable. This was the last frontier of indigenous participation in KBL after Diageo took control.
The distributors oversee businesses, which, in some cases achieve a turnover of more than Sh3 billion but only offer a profit of less than Sh30 million a year.
No viable business has such a poor profit ratio. The distributors recently came together to ask for equity in the manner Diageo is operating in Kenya.
They reckon the KBL wealth should be shared equitably with indigenous stakeholders.
KBL, currently retaining a paltry 700 employees, is a pale shadow of its former self.
With no major assets save for the tiny land on which its Ruaraka brewery stands, it is even doubtful whether it has the gravitas to survive the looming “Beer Wars 2” that has been predicted by Vincent Achuka, writing in the Sunday Nation of June 19, 2016 (“Beer wars afoot as global firms set up shop”).
We may very well be witnessing the demise of the beer business, as we know it.
That would be a tragic end to an iconic indigenous brand.
It is important to protect this national heritage by ensuring that KBL grows and that its local representation is boosted.
Indigenous stakeholders, including distributors, also ought to be protected to guarantee local value in the chain.
Mr Onditi is an advocate of the High Court of Kenya. [email protected].
