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The state finds a buyer for a Sh15 billion stake in Portland Cement
Friday, July 14, 2023
Ministry of Commerce and Industry Principal Secretary Juma Magwana. photo | Denis Onsongo | NMG
The government has found a vengeful buyer for a 30 per cent stake in East African Portland Cement Company (EAPCC) for Sh15 billion in a deal likely to spark a new battle for control of the cement company facing bankruptcy.
Principal Industry Secretary (PS) Juma Mukhwana told the National Assembly that the Ministry of Investment, Industry and Commerce has approved a transformation plan which will see the strategic investor buy 30 percent of the company’s shares.
PS said the deal is now awaiting approval only by President William Ruto.
We were scheduled to meet the President yesterday (Wednesday), but the meeting was postponed to next week. We have accepted a proposal between the National Treasury, the National Social Security Fund (NSSF) and Lafarge that we get a strategic investor to buy a 30 per cent stake in EAPCC, Dr Mokhwana said.
“The strategic partner will also bring in funds, new blood and management style as we move to turn the company around.”
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Dr Mokhwana, who did not disclose the new buyer, said the proposal would see the Treasury, NSSF and France’s Lafarge give up part of their shares to create a 30 percent stake for the new investor.
The government, through the Treasury, owns 25 percent of the shares, the National Social Security Fund controls 27 percent, Lafarge 42 percent and other Kenyans six percent of the Nairobi-listed cement manufacturer.
However, Lafarge, whose representative attended the same meeting, expressed its surprise at the government’s proposal, which requires it to give up part of its stake to the new investor.
“We are not aware that we will be giving away the shares,” said Jeffrey Ndogwa, a representative of Lafarge who arrived in the country on Thursday to attend the tripartite meeting of the National Assembly’s Public Investment Committee on Trade and Energy Affairs.
The committee chaired by Pokot South MP David Pkosing asked the government to resolve the dispute with other shareholders before making a final proposal.
“I agree that we need to get our house in order. We all agree that the primary business is cement production. The EAPCC has idle land, and as a government, we are eager to bring life back to Portland,” said Dr. Mokhwana.
PS said the government will go back to the drawing board and come up with a comprehensive plan on how to get rid of broken assets, pay off debts and revive the company.
“We suggest that you give us some time. We will have a workshop to bring our members together and come back on August 17 with a comprehensive plan and agreed draft Cabinet memorandum on the EAPCC work plan,” Dr. Mokhwana said.
Mr Pkosing asked Dr Mukhwana to coordinate a meeting that would bring together the Treasury, NSSF and Lafarge.
You will take the lead and coordinate all stakeholders. We want a final decision on August 17th, either EAPCC sells its land, bails out the treasury, or we liquidate the company.”
The parliamentary committee had invited the Treasury, the State Department for Industry, NSSF and Lafarge to discuss the future of the cash-strapped EAPCC.
“We have invited you here to this round table to get a permanent solution because EAPCC is dead and exists only on paper. This company is part government owned but it is dying.”
The meeting followed a report by Auditor General Nancy Gathungu who revealed that EAPCC’s current liabilities exceeded current assets by Sh13.8 billion in the year to June 2022.
EAPCC had been looking to offload some of its extensive land holdings in the Athi River to fund a restructuring of its balance sheet, primarily to pay down debt and plug a working capital shortfall.
Oliver Kiropai, managing director of EAPCC, told the committee it was seeking Sh20 billion to pay off a debt worth NIS 13 billion and use the balance to revive the company’s once profitable operations.
Dr Mokhwana said a six-point plan to solve the problems facing EAPCC has been approved by the State Department for Industry and will be presented to President Ruto next week.
He said the survey and issuance of title deeds to settle properties already occupied by squatters would start after the suspension imposed by the new administration was lifted.
Dr Mokhwana said another proposal to be put to the president next week is to settle the sale of 907 illegally encroached acres valued at around Sh5 billion.
We have agreed to sell 4,272 acres. The management of EAPCC said it has spoken to the Ministry of Housing who has an investor ready for affordable housing,” said Dr. Mokhwana.
Kirobay told members of parliament that the area of 4,272 acres allocated for affordable housing is valued at about 25 billion shekels.
Another 1,000 acres will be gazetted as an Export Promotion Zone (EPZ) where the investor would actually like to set up industrial sheds.
Another 1,000 acres was proposed for Ujenzi Park – a one-stop shop for building materials such as paints, nails and iron sheets – with 400 sheds.
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The remainder of the land will be used to build a clinker plant and mine raw materials.
A South African company has already undertaken a feasibility study while the Treasury is working on a public-private partnership (PPP) for the new plant to be jointly owned with EAPCC.
NSSF CEO David Cross and Lafarge’s Ndugwa accepted the proposal to dispose of part of the EAPCC land to change the company’s trajectory.
“We agree with the proposal. Ultimately, the board and management of the company will make their decision. It is important and we suggest that the proposal be put forward by management and the board will be coordinated with that,” said Mr. Ndugwa.
For his part, Cross said the Social Security Fund wanted a solution that would give value to its members.
“We agree to get rid of the dormant assets,” he said.
EAPCC told parliament in April that it needed the cash to retire Sh4.5 billion in government debt, Sh2 billion in union and employee benefits, Sh1.3 billion in tax arrears, Sh1.2 billion for factory renovations and Sh1,195 billion for retirement. A loan from JICA and a cement tax of Sh450 million owed to the government.
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