Raila, molasses and the men from Pretoria

The Kisumu Molasses plant. While Tony Teixeira survived, Energem, which had a stake in the Kisumu molasses plant, went under in 2011. FILE PHOTO | NATION MEDIA GROUP

What you need to know:

  • Apparently, it was RAB Special Situations which had petitioned for the administration.
  • That left the Kisumu Molasses plant minus a major shareholder.
  • At one point, it could not pay its workers or service some debts.
  • It is an issue that is rarely discussed locally. But it was a lesson to the Odinga family.

The two men came from Pretoria.

One gave me his card and we went into a room — away from my newsroom desk.

It was mid-morning, August 2004. On my side was a lawyer, Mr Moses Kurgat.

I had just penned an investigative piece about Mr Tony Texeira, a South African Portuguese whose firm, Energem Resources, had just snapped 55 per cent stake in Oginga Odinga family’s molasses plant in Kisumu — a controversial purchase which was concluded during the days Raila Odinga’s National Development Party (NDP) had softened its stance towards President Moi and then ruling party Kanu.

The two wanted to know two things: where I got the Energem documents from and, secondly, whether they could have a look at them.

I pointed out that the documents were on their website and some were company tax filings. Apparently, as I came to learn later, somebody must have uploaded the documents to the public by mistake.

DOCUMENTS VANISHED

A day later, the documents vanished from the website.

Every time Raila Odinga is challenged about the purchase of the moribund molasses plant, formerly known as Kenya Food and Chemical Corporation Ltd, and every time he talks about his dalliance with Kanu, the narrative has been that he went to Kanu to demolish it from within, and that he bought the plant at an auction as the highest bidder — after Kenya Commercial Bank advertised its sale.

There was, of course, mischief on the sale price since somebody wanted the plant to be sold minus the land. Also, by the time the government offered it for sale, Raila was so much associated with the opposition that he faced lots of frustration from Kanu mandarins.

Then he started a “co-operation” with Kanu after the 1997 General Election and things went well after he was appointed Roads minister, too. But that is a story for another day.

How the Odingas brought a controversial investor into their newly acquired plant and how the investor went bankrupt has not been reported locally.

Today, with hindsight, had they done a proper background check, the Odingas would have stumbled on a lot of literature on Energem Resources Inc and its predecessor, the Vancouver-based Diamondworks Inc.

How much they knew of the following background is not known. It is a topic that Raila skips in his autobiography, perhaps for a reason.

Diamondworks had a notorious past in both Sierra Leone and Angola, where it was accused of using mercenaries to defend its mining blocks during the separate civil wars.

That is when the term “blood diamonds” became a common tag to the company.

Diamondworks was desperate to shed this image and it opted to rebrand and change its name.

That is how it became Energem Resources Inc., the company that the Odingas invited to invest in Kisumu.

At the head of Energem, as chairman, was Mr Brian Menell, and a management which included Mr Tony Texeira, as president and CEO, Sheikh Maktoum Juma al Maktoum (vice-chairman) and Mr Robert Rainey as chief financial officer.

We will come back to these people later.

STORIES ABOUT DIAMONDWORKS

Shortly after the re-launch, Mr Menell told the press that stories about Diamondworks’ past were now irrelevant: “There are some nice stories about the old Diamondworks, with mercenaries and stuff, but that’s all completely irrelevant and has no relationship with any aspects of Energem Resources.”

Legally, Energem was a new outfit, and could not be accused of inheriting the misdeeds of its predecessor. Maybe.

Had the Odingas looked deeper, they would have known about Diamondworks and its use of private security companies to continue exploiting diamond mines amid the raging civil wars in Africa.

A 1999 report by a Special Rapporteur on the use of mercenaries under the Human Rights Commission said that such use of private armies had the tendency of escalating conflicts and abuse of human rights.

One of these companies, operating in the 1990s, was Executive Outcomes, a South African private security firm which had signed agreements with the Sierra Leone and Angola governments to secure diamond mines.

In Angola, Diamondworks used the services of a private security company, Teleservice, and in a report it sent to Washington Securities and Exchange Commission, it named Teleservice Sociedade de Telecomunicacoes, Seguranca e Servicos, SARL (Teleservice) and Mambodji, as the private companies that offered it services against “vandalism, theft and civil commotion, with a 24-hour armed foot and mobile controls”.

That is how Diamondworks operated in Africa, and it cost the company $400,000 per month.

It was this aspect of protecting foreign company assets from “civil commotion” — and by armed foreign groups — that alarmed human rights advocates because of the ambiguity and lack of accountability displayed in the contracts.

“Nothing requires them to report their activities to the local population, to host governments or to the local governments of the countries they originate.

“Consequently, the possibility of recourse against these firms is very slim,” a report written by mining lobby groups to the Canadian government said.

“The impunity which these private companies enjoy, and the fact that they intervene in certain areas such as those concerning military and security issues normally reserved to the State, raise pressing concerns with regard to the extent of their power.”

Executive Outcomes, with hundreds of veterans from the apartheid-era army, had arrived in Sierra Leone in 1995. That was when rebel-leader Foday Sankoh’s Revolutionary United Front (RUF) guerillas were about 20km from the capital, Freetown, killing thousands and amputating limbs.

DIAMOND MINES

The South African’s guns-for-hire company managed to seize lucrative diamond mines from Sankoh and these were handed over to President Ahmed Tejan Kabbah’s government and then to Canadian company Branch Energy, which was 100 per cent owned by Diamondworks.

Part of the taxes and the income from these mines was used to finance the war and secure continued rule of President Kabbah.

The Washington Post nicknamed them “Soldiers of Fortune” as it warned that “foreign firms were fuelling wars for natural resources that recalled the 19th century ‘Scramble for Africa’ by European Imperial Powers.”

For its part, RUF was backed by former Liberian President Charles Taylor — now in jail for his role in financing the Sierra Leone war.

While both Branch Energy and Executive Outcomes were alleged by Jane’s Intelligence Review to be related through cross-ownership, this was denied.

What is, however, not in dispute is that Branch Energy was acquired by Diamondworks, later Energem, before it bought shares in the Odinga family’s molasses plant.

Media reports said Executive Outcomes, Sandline International (another security company) and Diamondworks shared the same office block in London, but Diamondworks shareholder Tony Buckingham denied ever registering both Sandline and Executive Outcomes or having any executive say within. But Sandline International acknowledges on their website that Mr Buckingham offered consulting services to them.

That is the Diamondworks company that morphed into Energem Resources Inc — whose 100 per cent Guernsey-registered Energem International Limited bought a 55 per cent stake in Odinga family’s Spectre International after making money from diamond sales and other minerals in Africa.

Energem had loads of cash and wanted to turn the Kisumu venture into a “world-class facility”, according to its initial press statements. It had just listed at the Toronto Stocks Exchange and, in the new Kenyan venture, the locals, through Kisumu Development Trust, owned 5 per cent of the company, while the Odinga family held the extra 40 per cent stake. Documents filed at the Toronto Stock Exchange listed Oakland Holdings Ltd as the owner of the 40 per cent stake.

With several companies in Zambia, Malawi, Nigeria and South Africa, Energem took everyone by surprise. In 2007, it listed at the London Stock Exchange AIM (Alternative Investment Market) segment under the initials ENM.

It told would-be shareholders that it was engaged in manufacturing and sales in China, ethanol production in Kenya, Nigeria and Malawi and was involved in refined oil distribution.

In Malawi, Energem was the one promoting jatropha plantations — now abandoned.

GOOD RETURNS

By gaining London AIM’s listing, Energem looked like it would be able to offer its shareholders some good returns.

But then, the Sunday Times of London busted the company as “the same firm that became embroiled in the blood diamonds scandals of the 1990s in which illegally traded diamonds were used to finance civil wars in Africa.”

Things started going south.

In 2009, Energem was forced to delist from the Toronto Exchange after it was told it did not qualify under Exchange rules to list as a mining issuer, having relinquished its last mine in 2007.

That year, Energem’s Teixeira was deeply involved in building his other hobby: Grand Prix racing.

He had in 2007 taken over Australia’s A1 Grand Prix, an upstart rival to Formula One, backed by some £200 million from UK’s RAB Capital, hoping to hold what he billed as the “World Cup of Motor Racing”.

By that time he had brought on board the 20-something-year-old Sheikh Maktoum Hasher Maktoum, a young member of Dubai’s ruling family. He was a relative of Energem’s vice-president.

The hope was to break into the US market and Sheikh Maktoum was quoted saying the enterprise could be worth £2 billion on its second year.

The idea was simple: have similar cars and have nations sponsor their drivers to race.

Both Teixeira and his Energem chairman, Mr Brian Menell, bought into the idea, hoping to get good returns after they sold an IPO and earned millions from television sponsorship worldwide.

But then Sheikh Maktoum left and Mr Teixeira ran out of cash, and creditors were on his back demanding more than £300 million.

The Telegraph reported that Mr Teixeira had “personally promised” Australian Sports minister Phil Reeves that he would bring some 20 racing cars powered by Ferrari engines into the race, with national teams from all over the world.

The minister had bought into the idea and the government part-financed the promise.

What followed, after the planned Australian Grand Prix failed, was a litany of court cases against A1 Holding companies — the one organising the races — and it also brought down the Teixeira-led Energem Resources Inc, which had lent the racing companies $54 million.

While RAB Capital was forced later to write down the entire amount it had given A1 Holdings, the later was put under investigation by UK’s Serious Fraud Office.

To recover part of the money, the liquidators for A1GP Operations, the UK subsidiary of A1 Holdings Ltd, started auctioning intellectual property rights to the A1 Grand Prix Series, logos, spare parts and brands.

While Tony Teixeira survived, Energem, which had a stake in the Kisumu molasses plant, went under in 2011.

A report in the Daily Telegraph said the energy company did not inform its shareholders that it had gone into bankruptcy since it could not recover the $54 million owed by Teixeira firms.

Apparently, it was RAB Special Situations which had petitioned for the administration. That left the Kisumu Molasses plant minus a major shareholder.

At one point, it could not pay its workers or service some debts.

It is an issue that is rarely discussed locally. But it was a lesson to the Odinga family.

[email protected]; @johnkamau1

Mr Kamau is a senior writer with Nation Media Group