What’s happening at the cement firm is part of government’s shenanigans

Tuesday January 17 2012

 

By JAINDI KISERO [email protected]

We have our own version of Occupy Wall Street at East African Portland Cement Company. It’s complete outrage.

The fight for the company’s control has been parochialised, with power-seekers resorting to enlisting ignorant peasants and youths to fight a battle of power-seeking elites.

The mines for the raw materials are situated in Maasailand. The factory is in Ukambani.

So, the peasants are led to cherish the illusion that by occupying the company’s premises in Athi River, they are standing for the rights of their tribesmen.

Meanwhile, production has stalled and man-hours wasted. The French company and the single-largest shareholder, Larfarge, has found itself in a quandary – reduced to playing an unwitting pawn in the war between the Ministry of Industrialisation and the company’s board.

The root cause of this dispute is persistence by the ministry in the mistaken belief that the government owns the National Social Security Fund (NSSF) and therefore must dictate everything that goes on at Portland.

Let me explain. Currently, the government owns 25.3 per cent shares in Portland, the NSSF 27 per cent, Lafarge 41 per cent, and the remainder by small shareholders at the Nairobi Securities Exchange.

Thus, Portland does not qualify to be a parastatal in the meaning of the State Corporations Act.

It has been branded a State corporation merely because the government has confiscated the shares of the workers’ body in Portland, and lumped them together with its own.

The controversy we are witnessing right now has come about because NSSF had indicated it was reducing its stake in Portland, a move that would alter the balance of power in Portland’s boardroom to favour the French.

Industrialisation minister Amason Kingi would not have it. He was not prepared to cede control of this critical source of patronage.

Under the State Corporations Act, the minister appoints the managing director. After consultation with the Office of the President, he has the liberty to cram the board of Portland with his cronies.

The truth is that beyond the fiduciary responsibility to the contributors of the NSSF, the State has no say in the workers’ body.

If the government does not stop behaving as if it owns the NSSF, the State will soon find itself in court, sued by a public-spirited pensioner.

The NSSF must run like any other retirement scheme. While other retirement benefits schemes mint hundreds of millions in capital gains year in, year out, the NSSF is made to hold onto Portland shares merely because ministers and permanent secretaries want a place with opportunities for jobs for the boys?

When in 2005, the NSSF sold part of its stake in Kenya Power to TransCentury Ltd, a similar dispute arose.

The government suddenly found itself in the minority as it had relied on the NSSF’s stake to exert control.

When the management of Kenya Power attempted to proclaim the company’s new status as a private company, the Ministry of Energy hit the roof, arguing that the major projects were financed by the State.

In the case of Portland, they are arguing the company owes millions to the government in respect of a loan which the government borrowed on its behalf from Japan.

Where on earth does a loan give you a right to vote in an annual general meeting of a publicly-listed company?

That loan was not acquired transparently. Part of it was used to buy equipment for the defunct Voice of Kenya.

Right now, a lawyer is in court with the Treasury claiming a massive Sh324 million on the grounds that he had been instructed to prepare a debenture and instruments to secure the government’s position with respect to the loan.

For years, Portland has been struggling to liquidate this opaquely procured debt from its books in vain.

The long-term solution to the current controversy is the following: let us have a fresh look at the State Corporations Act.

This legislation represents arbitrary power, allowing ministers to meddle in affairs even of listed companies. It should go.