The wealthy Rai family has bought the massive Dominion Farms in Siaya County’s Yala Swamp after its American owner lost a vicious political fight in the region.
The purchase adds to a string of firms that the Rai business empire has acquired and raises its clout further as one of the most dominant businesses in the western Kenya region.
But the sale ends a 17-year-old dream of the outspoken American investor Calvin Burgess, who wanted to turn the venture into Africa’s biggest rice farm.
The sale comes three years after Mr Burgess claimed his multibillion-shilling investment was under siege from opposition party politicians sanctioned by ODM leader Raila Odinga. Mr Odinga denied the allegations through his handlers numerous times.
Mr Burgess flew to Kenya in September 2002 with the ambition of putting up the single largest rice farm on the continent. But after years of working his dreams in the Nyanza region, he came out one morning seeking the protection of Inspector-General of Police Joseph Boinnet and Interior Principal Secretary Karanja Kibicho, asking them to deploy security officers to the farm to protect him from “hired goons”.
He also sensationally accused some members of the Odinga family of pressing the firm to become a dealer in a prime location in Kisumu, and after he gave in, his alleged tormentors took the rice and had not paid for it five years later. All these claims were dismissed by the Odingas and politicians in the region.
But it marked a turning point for the firm and was the beginning of the end of what was billed as Nyanza’s biggest agricultural investment. From here, it went downhill.
A gazette notice dated January 13 says that Dominion Farms Ltd will transfer its business at its premises known as Dominion Farms, located on a 3,700-hectare tract in the Yala Swamp in Siaya County, subject to some unspecified conditions, to Lake Agro Ltd, and the transferee will carry on the business at the same premises.
A search at the company registry by the Sunday Nation revealed that Lake Agro is owned by three members of the Rai family empire — Jaswant Singh Rai, Tejveer Singh Rai, and Onkar Singh Rai — who each own one share in the company.
The three are also directors of Lake Agro, now the new owner of Dominion Farms, whose registered physical address is at Apollo Centre on Ring Road in Nairobi.
The Rais did not respond to our email questions on what exactly they plan to grow on the farm after its acquisition, how much they plan to invest in this new venture and how much they bought the venture for, as well as how they will handle the debts owed by the company, especially to employees.
But the Gazette notice indicated that the Rais will only inherit the good part of the business and leave the American investor to foot all the debts.
“All debts or liabilities due and owing by the Transferor in respect of up to the date of transfer as set out above shall be received and paid by the Transferor. The Transferee is not assuming nor will it intend to assume any liabilities whatsoever incurred by the Transferor in the business up to the date of transfer,” the notice reads in part.
It is not clear how much the Rais paid for the deal but it could run into billions of shillings given the investment the American had pumped in to drain about 40 percent of the Yala swamp. As of January 2017, Mr Burgess is estimated to jave invested over Sh2.3 billion and had brought in equipment worth Sh400 million.
He had also built a dam to irrigate the rice fields and spent over 15 years draining the swamp.
Trouble started in early 2017 when Mr Burgess claimed that Mr Odinga, his family members and political associates had been trying to extort money from him.
Mr Burgess linked his troubles to his decision to reject requests to bankroll Mr Odinga’s Orange Democratic Movement (ODM) party, which resorted to frustrating his investments in the farm that stretches from Bondo to Siaya.
Mr Odinga has never publicly responded directly to these allegations in person, but his political handlers have several times denied them and even threatened to slap Mr Burgess with a libel suit.
At the height of the controversy in February 2017, Burgess asked for state protection. Several months later, he threw in the towel and suspended operations in November of the same year. This left over 350 employees jobless.
It is estimated that the investor owes the employees about Sh350million and another Sh1 billion is owed to suppliers as arrears.
The ground for the transfer was set last year when members of the Siaya County Assembly in January 2019 tabled for debate the request by Dominion Farms to transfer its lease to Lake Agro.
The other trouble for the firm came in 2018 when Yala Swamp residents took it to the National Land Commission for taking more land than it initially should have taken. NLC allowed their petition and asked the Ministry of Lands and the Siaya County government to resurvey the swamp to determine the acreage under Dominion Farms.
“The Commission further recommends that if there is excess land, it should be restored to the affected communities and ownership documents prepared for the community,” NLC ruled.
The company also fell out with the community, which accused it of destroying the environment and not honouring its promises of building schools and hospitals as part of its corporate social responsibility plan.
When the firm made the application to the National Environment Management Authority (Nema) in 2015 to be allowed to use the swamp, Dominion Farms had initially proposed to establish a sugarcane plantation and put up a processing mill on 5,000 acres in the flood plain of the River Yala Siaya and Bondo sub-counties.
The plantation was to depend entirely on rain as a source of water and no irrigation was required. Community members were to be allowed to cultivate sugarcane on their own farms and sell them to Dominion. The proposed sugarcane processing mill was to have a sugarcane receiving section or yard and processing, packaging, storage and power-generation sections.
It is not yet clear if the Rais will be looking at reviving this dream given their interests in the sugar industry.
Dominion is now the latest acquisition by the Rai group, whose business fortunes have blossomed in the past decade. The Rais have also become acquirers of firms in distress, having acquired Webuye Pan Paper Mills for just Sh900 million and renamed it Rai Paper.
Pan Paper was valued at Sh18 billion when it was put into receivership, but seven years later, it ended up being sold for a song. This means that for every Sh20 Pan Paper was worth, the new owners paid Sh1.
Pan Paper started its operations at almost the same time Indian billionaire Tarlochan Singh Rai and his four sons were starting a small timber company in Kenya.
Four decades later, the Rais had built their timber business into a family empire called the Rai Group, which had enough money to buy it out and go after struggling companies.
Rai Paper Ltd is now fully owned by Jaswant Singh Rai, who is also the chairman of West Kenya Sugar Company, which makes Kabras Sugar.
Jaswant also recently made a bid for ARM Cement, which was also under financial distress, but was beaten to it by another billionaire, Narendra Raval.
Tevjeer Singh Rai is the managing director of West Kenya Sugar Company, based in Kakamega County, and has taken advantage of the exit of Mumias Sugar to become the biggest sugar miller in Kenya.
The family also has interests in agroforestry, farming, saw milling, wheat farming, edible oils and fats, as well as sugar and cement sectors. Rai Group has a presence in Kenya, Uganda, Tanzania and Malawi.
Some of the companies they have interests in include Rai Holdings Ltd, Rai Cement, Rai Products, T.S. Rai Ltd and West Kenya Sugar Company.
But the cash cow for the family is Kabras Sugar, which is produced and packaged in western Kenya. The firm says over 60,000 small-scale farmers in the western region, including Kakamega and Busia, supply it with cane.
It became a darling of many cane growers after it started paying farmers on a weekly basis at a time when rivals were taking months to pay. This saw many farmers, including those that had been contracted by Mumias Sugar Company, switch to selling their cane to the Rais at a great cost to the competitors.