KISERO: Blocking Portland Cement from selling its land will surely kill it - Daily Nation
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Blocking Portland Cement from selling its land will surely kill it

Wednesday July 18 2018

 East Africa Portland Cement

Workers loading bags of cement at East Africa Portland Cement at the Athi River factory. PHOTO | FILE | NATION | MEDIA GROUP 

By JAINDI KISERO
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If the government does not move quickly, publicly listed East Africa Portland Cement — the oldest cement factory in the country — could shut its doors in a matter of months.

This is the gist of a recent confidential letter by the board of the troubled firm to the government which I recently came across.

If a quick decision is not made, the livelihoods of 1,300 citizens of this country who are employed by the company may find themselves jobless.

But I don’t understand why a quick decision can’t be made because Portland Cement has not asked for a government bail-out.

All that the board has requested for is an approval to sell 6,000 acres of fully mined land that it owns in Athi River, Machakos County.

Why is this otherwise sensible proposal being blocked? I can only speculate. I see the hidden hand of powerful individuals pulling strings behind the scenes to have a say in the sale and alienation of the land.

POLITICAL ELITE

The political elite in this country is just too obsessed with land deals. Until the land sharks see a clear path of making money for their own selves in the sale of the Portland Cement land, I don’t see any approvals coming soon. It does not matter to them that people risk losing their jobs.

Early this year, the company appeared to have found the best chance of selling part of the land.

In January, the Kenya Railways Corporation offered to lease or purchase 900 acres.
The railways parastatal planned to construct a bulk terminal and transhipment facilities for the standard gauge railway (SGR) on the land.

Consequently, a committee of six was established by the Ministry of Transport and Infrastructure to steer the negotiations.

The National Land Commission (NLC) was invited to value the property and determine whether it could be acquired on a compulsory acquisition basis through either leasing or outright purchase. As it turned out, the NLC came out with a valuation of Sh5.2 billion, which Kenya Railways agreed to pay in five instalments.

PRIVATE VALUERS

The board of Portland Cement decided to engage four private valuers to conduct independent valuations, which did not differ with those of the NLC in any significant way.

But with negotiations at an advanced stage and the parties planning to commit, the principal secretary in the Ministry of Trade fired off a letter on May 21, informing the parties that the sale of the land to Kenya Railways be put on hold pending a decision by the Cabinet.

The very same day, the Cabinet Secretary for Industry, Trade and Co-operatives wrote to Kenya Commercial Bank requesting it to continue providing facilities to Portland Cement pending a bailout by the government.

However, what has complicated the situation is the fact that KCB has shown reluctance to comply with the request by the Trade ministry.

Indeed, Portland Cement is already heavily indebted to KCB, owing the bank a whopping Sh4.2 billion for loans and overdraft facilities acquired more than 10 years ago.

ASSETS

Furthermore, KCB holds a debenture over all assets of Portland Cement — the implication being that the company is unable to engage with any other financial institution for refinancing of its operations or even to repay the KCB loans.

According to the law, a parastatal is an entity in which the government owns at least 50 per cent of shares.

The shareholding of Portland Cement is as follows: Lafarge Group of France 41 per cent, National Social Security Fund (NSSF) 27 per cent, The National Treasury 25 per cent and minority shareholders 5.9 per cent.

Clearly, the government does not own a 50 per cent stake in Portland Cement. The only reason the State claims majority control in the company is the practice of lumping the NSSF with what the government owns.

PARASTATAL REFORMS

But as the Presidential Task Force on parastatal reforms of 2014 clearly argued, the NSSF does not belong to the government.

Indeed, the presidential task force made it clear that the practice of assuming ownership of the NSSF — and, in the process, allow the government to meddle in the governance of private companies — was improper.

I don’t know what it will take to disabuse the government of the notion that Portland Cement is a parastatal. Once this basic fact sinks in, the government will realise that it is wrong to stop the cement manufacturer from selling its own land.

The Cabinet should not have a say in the affairs of a publicly listed company in which the government is (supposedly) a minority shareholder.