Kenyatta family firm buying into Uganda dairy raises debate

What you need to know:

Reliable information shows that two years before SALL’s 10-year lease expiration date, the company approached the Ministry of Finance pleading for an extension of their lease to 50 years. However, it is alleged they were instead given a 40-year extension and now have sold off the shares.
According to reliable sources, Brookside has already taken management of SALL, Uganda’s biggest processors of dairy products.

The sale of Sameer Agriculture Livestock limited (SALL) shares to Brookside— Kenya’s giant dairy owned by the Kenyatta family, has generated a lot of debate in the political circles with many calling for Cabinet’s response.

This matter, according to a government source that preferred to speak on anonymity due to the sensitivity of the matter, said the sale of SALL’s stake has been flagged on the Cabinet agenda.

However, when Daily Monitor contacted the Secretary to Cabinet, Mr John Mitala, he could not disclose whether this matter was on the agenda. The Minister of Finance, Mr Matia Kasaija, could not divulge information referring the newspaper to State minister for Privatisation Aston Kajara, who also declined to comment referring the matter to his boss, Mr Kasaija.

This deal, signed about a month ago, saw SALL sell off its 16,000 shares to Brookside at Ush200,000 ($67) each share; thus bringing the total deal to Ush3.2 billion ($1.06 million).

Reliable information show that two-years before SALL’s 10-year lease expiration date; they approached the Ministry of Finance pleading for an extension of their lease to 50 years. However, it is alleged they were instead given a 40-year-extension and now have sold off the shares.

Because of this, the Finance ministry is in the spotlight for purportedly extending SALL’s lease.

State minister for Animal Industry which directly deals with the dairy sub-sector, Mr Bright Rwamirama, when contacted about this deal, said: “I have not received an official communication and I was not consulted but only got a briefing from ministry of Finance about the extension of their lease,” Mr Rwamirama noted.

The minister was disheartened about SALL’s selling of shares when they had just received the extension of the lease.

Mr Rwamirama said: “Brookside being a giant n Kenya is likely to create monopoly, yet we don’t allow it. I don’t know whether we shall manage with the remaining small players.”

According to reliable sources, Brookside has already taken management of SALL, Uganda’s biggest processors of dairy products.

Information from the cattle corridor of South Western Uganda indicates that Brookside agencies have already introduced themselves to the farmers about the change of management.

SALL - a joint venture company established by the Sameer Group of Kenya in conjunction with RJ Corp of India- took over the former government parastatal Uganda Dairy Corporation in August 2006 and this lease was supposed to expire next year (2016).

Uganda Investment Authority (UIA), as the licensing body when contacted on this development, said they were not aware about this deal.

Ms Sheila Mugyenzi, UIA’s deputy director communications, said: “We have no information about this deal and we too learnt about this from the press.”

However, Ms Mugyenzi said ideally when companies take independent decisions to sell their shares, UIA is not involved unless if the business wants to change a licence.

Ministry of Finance public relations officer Jim Mugunga in an interview with Daily Monitor, said: “We were formally informed by Brookside of their taking over operations in the Dairy Corporation.”

He said Brookside further informed them that they will ensure the objectives of the company are fulfilled.

Initially, when government privatised Fresh Dairy to SALL in 2006, they paid $500,000 (Ush1.5 billion as of today’s exchange conversion). They undertook to improve the plant, establishing a powder milk plant and further adding value to the milk.

With about two-years left to the expiry of the 10-year lease, a lot must have been invested for a company to cost Ush3 billion ($1 million), according to some economic experts.

Ideally, when a company transacts, there are respective taxes paid to government such as income tax.

URA Assistant Commissioner Domestic Taxes, Mr John Mayanja, said when such a transaction is completed, declaration of taxes is done when the accounting date matures which is about 12 months from the day of transaction.

When the company does the transaction, it should notify URA within 21 days.

“After the 21 days, we sent in a team to the company to establish and assess the facts about the contract and we are now studying the contract to establish the respective taxes,” Mr Mayanja said.

Efforts to reach Brookside’s spokesperson in Nairobi, Mr Wilson Ogot, on his mobile number were futile. He did not reply our phone calls and e-mails.