INVESTIGATIONS: How the death of death of Nzoia Outgrowers Company (Noco) was planned and executed

By County Splash Team

Bungoma

When farmers Outgrower Company collapsed, its employees lost jobs and cane farmers contracted by Nzoia Sugar Company were left on their own and at the mercy of sugar millers who would exploit them at will.

“Noco was brought down by powerful forces (sugar barons) that were against its existence so that they can sneak cheap sugar into the country. They wanted cane farmers to remain on their own so that they can be exploited and dictate prices of cane delivered to the factory,” said Jack Munialo, a cane farmer from Sikata.

Mr. Munialo said when Noco and Nzoia Sugar used to operate like Siamese twins, locals got jobs, cane farmers had money in their pockets and roads were opened up within the Nzoia sugar belt but now it has become relics of loss and poverty

“We (cane farmers) were able to take our children to good schools but that’s a thing of the past. Its Noco that ensured Nzoia sugar remained afloat and now it’s struggling. Its previous managers and those of Noco are responsible for this mess,” claimed Munialo.

Noco was established in 1991 through an Act of Parliament. It was charged with the sole responsibility of developing sugarcane and looking into the welfare of the farmers.

Noco and Nzoia Sugar Company (NSC) signed a Memorandum of Understanding (MoU) that would see the miller retain 15 per cent levy from every tonne of sugarcane delivered at the factory for crushing and have the money deposited on Noco bank account.

The arrangement was to introduce a revolving fund that Noco would lend out to the farmers at lower rates compared to what commercial banks would charge.

Noco received Sh347.297million loan from the defunct Kenya Sugar Board (KSB) – now Sugar Directorate in 1995 to help fund its operations including provision of subsidized fertilizer, seed cane, farm inputs, and expand area under sugarcane.

For almost a decade, Nzoia sugar and the Out grower company enjoyed cordial relationship until 1999 when trouble started.

It all started with Nzoia Sugar Company revising the levy fee charged on farmers proceeds from 15 per cent to a paltry 1percent in 1999 and withheld remittances to the Noco account.

A two year investigations by the County Splash News established that a breach in the Memorandum of Understanding (MoU) between the sister firms led to a serious financial dispute that would plunge Noco into financial crisis.

The farmer’s out-grower company filed a suit (HCC no. 312 of 1999) at the Bungoma Law Courts seeking orders from the court compelling Nzoia Sugar to pay Sh889 million they had deducted from farmers as retention levy, which had not been remitted to Noco’s books of account.

This is contained in an audit report by the Kenya Sugar Board that was released in 2011.

Noco won the case but the management of Nzoia sugar contested the ruling at the Court of Appeal in Eldoret (Civil Appeal no. 198 of 2005) which was dismissed on September 22, 2010.

The court ordered that the dues be paid but the ruling led to the ‘bitter divorce’ of Nzoia Sugar and Noco on November 22, 2010 after termination of an existing MoU signed in 1991.

Nzoia Sugar Company stopped deducting the 1 per cent sugar levy on cane delivered as well as not remitting deductions to Noco as a way of crippling the out grower institution financially vide its notice NSC/GAD/CS/21/2010.By that time, the debt had accrued to at least Sh889million

Pursuant to clause 14 of the agreement, notice is hereby given that the agreement between Nzoia Sugar Company and Nzoia Outgrowers company shall be terminated upon the lapse of 18 months from the date hereof,” reads part of the termination letter signed by Benson Khwatenge, then Company Secretary.

The letter was titled ‘Notice of termination of agreement between Nzoia Outgrowers Company Ltd and Nzoia Sugar relating to the Nzoia Outgrowers scheme dated October 11, 1991,”

In response to our queries, Nzoia sugar management dismissed the audit report saying they are not aware of it and therefore not privy to the contents of the audit report.

The management avers that what is raised in the report are mere allegations and misrepresentation of facts.

 “We stopped remitting Capital Levy to NOCO, as there was no legal agreement between NOCO and Nzoia Sugar Company to remit the levy.There was no legal agreement between the farmers and NOCO as well as a public outcry from our farmers who had rejected the idea of being deducted capital levy for NOCO,” reads in part a letter from Nzoia Sugar.

On court order, the they said the court ordered them to pay Noco members (cane farmers) a total of Sh.473.66million being arrears of the cane payment as at 30th June 1999 and another Sh42.27million as retention fund arrears as at 28th February,1999.

They said they were also ordered to pay another Sh27.03million to Noco,saying the money was a grant from the USAID to Noco dating back to September 1,1999 and Sh6.61million as the cost of the abrital proceedings including acrued interest.

The miller was to pay a total of Sh549.57million but by the time the court made the order, it had gained interest to a tune of Sh889million.

According to the management,  they complied with the court order and settled everything in May 2012 but no proof was provided to show that the said payments were made.“Nzoia Sugar Company does not owe Noco any money at all. It is in fact Noco that owes NSC,”

They said that they paid out the money and the matter was settled in May 2012 but documents in our possession shows that the management of the sugar miller and that of Noco entered into an out of court settlement and revised the amount downwards from Sh889million to Sh62million.

A down payment of Sh10million was made to Noco on May 14, 2012 and the then Noco Chairman Joash Wamang’oli received the money.

“That Noco gives Nzoia Sugar time to procure the relevant approvals on the payment of the Sh52million balance. That Noco and Nzoia Sugar hereby mark Bungoma court case HCC No. 312 of 1999 as fully settled,” reads part of the out of court agreement.

However, no one knows where the Sh10million down payment was taken to and whether the Sh52million balance was paid out or not.

Mr. Wamang’oli when reached for comments sided with the Nzoia Sugar Management saying Nzoia Sugar Company has no debt with Noco.

Until recently, Wamang’oli has been the Chairman of Nzoia Sugar board of directors but Agriculture Cabinet Secretary Peter Munya sacked his appointment and the entire board in order to pave the way for miller to be leased out. He is still a director at Noco to date.

“Noco had sued Nzoia Sugar Company for non-payment of farmers for cane delivered and the money which had been paid. Kingsley Mutali (then Noco General Manager) went to court demanding Sh889m which had no basis and wanted to put the sugar miller under receivership,” said Wamang’oli in an interview at his home with The Standard.

He added: “The Sh889million being demanded by Mr. Mutali was a hoax, the only money they owed us was Sh62million which was paid out. He was just being erroneous, sensational and malicious. Noco failed to appear during the judgement day and an order was issued reversing the earlier order made in Eldoret from Sh898.99million to Sh62million,”

But the current Noco Chairman Christopher Sifuna has maintained that Nzoia Sugar Company did not make any payments as ordered by the court according to their books of account.

“The arbitrary award by the Eldoret High Court of Sh889million was not paid. We also want the capital levy of Sh15million they have been deducting from the over 70, 000 farmers we have since 2010 and another Sh700million of cane delivered to Nzoia Sugar from 2017 to date. In short Noco wants from Nzoia Sugar at least Sh1.6billion.

Sifuna said they are planning to move to court to get orders to auction the company so that we they can recover their money.

Ends