The multi-million Kigali Cement plant will tomorrow, Tuesday, once again go under the hammer, after bidders previously failed to raise the minimum amount going by the plant’s market value.
The struggling plant, located in Gitikinyoni area of Nyarugenge District, is owned by Kigali Cement Company.
On Monday last week, Athi River Mining Cement Limited, the majority shareholder in Kigali Cement Company, for the second time, secured an injunction postponing the auction because none of the bidders raised the minimum sum.
“The only bid was Rwf100,000,000, and it was rejected because it was far lower than the 70% of the Rwf1,270,889,000, the market value of the plant,” Kigali Professional Bailiffs Association tweeted on Monday last week.
Kigali Cement plant is being auctioned in order to pay its creditor, Rwanda Enterprise Investment Company (REIC), some Rwf600 million.
According to Aloys Bizimana, a court bailiff in charge of auctioning the plant, the sale is as a result of the court in a case between Kigali Cement Company (KCC) and REIC have been battling since for years.
The plant being auctioned belongs to KCC, a subsidiary of Athi River Mining (ARM) Cement Ltd, a Kenyan cement manufacturing firm. REIC has, however, been a shareholding company in Kigali Cement since 2008.
The two parties have been in courts since 2013 until 2016 when the court made the final verdict.
Sources say ARM Cement, the majority shareholders, have been financially struggling to pay the debt.
The firm was suspended last month from trading on Nairobi Securities Exchange following a move in which the once Kenya’s second-largest cement producer was put into administration, under PricewaterhouseCoopers.
ARM Cement reportedly failed to make provisions for debts worth 21.5 billion Kenyan shillings ($213 million) owed by subsidiary Maweni Limestone Limited which had not been serviced in a long time.
The battle the firm is fighting in Rwanda is ostensibly the same the Group has been fighting elsewhere it operates, including in Tanzania.
ARM Cement acquired a stake in Kigali Cement Company in 2010, but this made headlines in 2014 after they took over the management of the company.
According to sources familiar with the company, ARM bought 37 per cent of the stake which gave the Group the full management of the firm.
In 2012, the negotiations by private shareholders to sell all the shares started after the firm started to struggle financially. The process was completed in 2014.
“Since 2010, ARM has been struggling to run the Kigali Cement subsidiary due to management inefficiencies from the time they acquired the plant and dividends to shareholders begun shrinking,” a source told this paper.
The source added that officials who had been sent by ARM to run the Kigali Cement Company continued to run “unclear” operations behind the backs of private shareholders.
According to the shareholders’ agreement signed between the two parties in 2008, REIC had committed to invest $482,307 in Kigali Cement, of which $337,608 would be repaid in a period of 60 months at 10 per cent interest, and $144,669 would be equity investment.
In the agreement, REIC would particularly provide the initial amount of $68,189 for construction purposes, and $346,000 to purchase equipment, and later provide $68,118 as working capital.
But Kigali Cement Company claims REIC failed to provide technical assistance to the firm which made it impossible for them to generate their target of Rwf100 million annually.
The court, however, found that there was no basis that the lack of technical assistance led to the downfall of the operations of the company and failure to pay their creditor.
Similarly, it indicates that Kigali Cement doesn’t deny the fact that REIC provided $20,000 as technical assistance that had been previously agreed.
The court ordered Kigali Cement in 2016 to pay a total of Rwf631,343,139 to REIC.