Mumias Sugar Company chairman Dan Ameyo with CEO Errol Johnston during the annual general meeting in Kisumu on December 9 last year /MAURICE ALAL
A letter by the immediate former Mumias Sugar CEO, Errol Johnston, has linked Deputy President William Ruto to his decision to flee Kenya.
Addressed to the chairman of the Board, Kennedy Mulwa, and copied to all senior managers, Johnston explained how government officials, including Treasury PS Kamau Thugge, frustrated efforts to revive the sugar company and even obstructed banks from negotiating with Mumias. Johnston quit on May 24 while away on leave in his home country of Australia.
In his three-page letter, Johnston claimed that Ruto visited Mumias on May 6 and publicly gave the chairman two weeks “to remove the so-called corrupt manager from MSC”.
As a result of a public meeting held on May 8 in Mumias town, Johnston said, the company chairman asked the residents to hand in their complaints, which would form the basis for the removal of the CEO and lead to other senior company chiefs being fired.
“Having been sent newspaper articles as a result of the DP’s statement, I had a very heated discussion with the chairman on Sunday night May 14. I realised that the meeting had set in motion a witch-hunt to denigrate and blame the current chiefs and myself for the crisis at MSC and asked the chairman directly were we to be removed in disgrace on instruction of the DP,” Johnston added.
Ruto’s spokesman David Mugonyi yesterday declined to respond to the contents of the letter.
“This is a NASA-sponsored story,” he said in a text message to the Star.
Last evening, Mulwa confirmed that he was aware of the letter but said it was not addressed to him.
“He tried to bypass the board and wrote the letter to the chief officers. But his allegations are baseless. He should not drag the DP into the affairs of Mumias,” said Mulwa.
He defended the government’s actions, saying it had done its best to resuscitate the company.
“The government is not the main shareholder of the company. It has done its best and we are grateful. When the money is as much as what we had been promised it is released in tranches,” he said.
Mulwa said the board had decided not to renew Johnston’s contract long before he fled the country.
“Mumias is now undergoing major restructuring and will be back to its glory days in not so long,” he added.
Johnston claimed that Mulwa told him that to get Sh239 million pledged by the government, a Sh10 million “fee” would be required to facilitate the release.
“I explained to him that the bailout fund was fully audited by KPMG and that was impossible. He pressed for a week and finally asked for Sh5 million which again I could not accede to,” he claims.
He says the chairman gave the list of the people who would benefit from the money and they were all politicians.
“Clearly the management team under my stewardship would be an obstruction to payment of such a fee,” he says.
Johnston in his letter accused chairman Mulwa of stage-managing the allegations, but said the chairman replied to him that he was helpless as he was following instructions from the Deputy President.
Johnston says he took issue with the chairman, and questioned him about why he would not just let the company managers resign with dignity and get their terminal benefits “without attempting to destroy their careers”.
“I told him if that happened, I would be bound to enter into an argument through the media. He said he couldn't correct stories in the press due to the DP being involved,” Johnston said in his letter.
On May 13, while touring Kakamega, Ruto expressed disappointment that the government’s previous bailout of the troubled miller had been unsuccessful and blamed incompetent management. He asked chairman Mulwa to move with speed and effect restructuring at management level, as some managers, who have been at the helm for decades, were misappropriating funds.
“The management at Mumias has for years been the impediment. We have pumped immense resources and cash that unfortunately did not benefit or reach the farmers as intended. Those responsible should go home,” he said.
Johnston took over at Mumias in August 2015 for the second time, having been at the helm of the sugar miller between 1998 and 2001.
His re-appointment followed a Sh1 billion state bailout to clear arrears to cane farmers. President Kenyatta, who authorised the bailout, had ordered investigation and prosecution of top managers who had run down the once-giant firm, which controlled more than 60 per cent of the sugar market share.
Johnston had listed winning back cane farmers through “prompt payment of their dues” as his priority when he was officially unveiled on August 14. He took over after the company had hired eight senior managers in June 2015 to replace those sent home over corruption allegations.
But in his letter, Johnston said his efforts to revive the company were frustrated by the failure by the Treasury to release all Sh3 billion promised and on time.
“The strangulation of the company financially, despite there being no sound reason to the contrary, GoK withheld readily available finances at critical times, and was obstructive with the banks in negotiations,” he said.
“The structural collapse of the regulated sugar industry, the full effects which are yet to hit home, but in the meantime opened up MSC cane lands to other millers. This effect will be long felt as the instability in the industry has led to dramatic decline in cane development, while milling capacity remains at double the available cane,” stated Johnston.
Johnston also did not have kind words for the Ministry of Finance.
He said that in January last year, the Treasury was required to release Sh2 billion meant for maintenance to be carried out “with full complement of spares in April and May”.
“I had a top level meeting with Treasury early January and [PS Kamau] Thugge assured the chairman and myself that the funds were immediately available and that the procedures would take days to complete. I wrote to Thugge reiterating that the funds had to be released before the end of January. I did not receive a reply but what followed were delays apparently for the want of completion of paperwork brought to the board,” he further stated.
The company, he said, was forced to abandon the maintenance for the fourth time in a row.
“It was at this time that I began to believe that if the funds were readily available from the first tranche release, the GoK was not serious about recovering MSC. At this time, the downward spiral of MSC’s fortunes would gather momentum as we had not rehabilitated the factory,” he said.
In August last year, Treasury CS Henry Rotich unilaterally declared that zoning be abandoned and Johnson says this gave license to the cane poachers to increase their activity.
He says by September last year, when they saw the situation was deteriorating to an extent that they needed to stop the company's operations, he and his management asked the board and banks to raise Sh790 million “so that they could have a timely stop to allow cane to mature and do some more work on the factory to improve efficiency”.
“The banks refused and the board dithered and eventually by default we put the future crop in jeopardy, by continuing the operation. By the time, the then chairman Dan Ameyo had resigned, Sh239 million had not been disbursed,” he says.
Johnson says the new chairman Mulwa took over towards the end of January and he promised to obtain the last tranche of Sh239 million in two weeks. It however took six weeks and, by that time, farmers had stopped delivering cane.