Around the middle of last year, employees at Mitchell Cotts Freight Kenya Ltd, one of Kenya's largest logistics companies, received a surprising email. It indicated that those who wished to leave the company were free to do so.

Through a voluntary early retirement package, the company generously offered 31 days' pay for every year worked, including financial training from ICEA Lion, an affiliate of the firm's owners.

At that time, the restructuring was not entirely surprising, given that Kenya's economy had stagnated post-Covid-19, which had severely impacted the logistics business. Furthermore, a disruptive European war had exacerbated the situation.

However, beyond the economic challenges, local politics was shifting. Incumbent President Uhuru Kenyatta's choice, Raila Odinga, had lost to his estranged deputy, William Ruto. With the change in leadership came a shift in government priorities, significantly influencing which private companies would prosper.

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The new President adopted an openly aggressive stance, campaigning against political dynasties and their networks. He pledged to move port operations from Nairobi back to Mombasa, which threatened businesses like Mitchell Cotts Freight Kenya Ltd that provided storage for the Nairobi yard.

Today, the fortunes have changed. Mitchell Cotts is now capitalizing on the windfall from President William Ruto's multibillion-dollar food importation policy. The company has also been granted a new business line: handling 20 to 40 tonnes of miraa exports daily.

No miraa pickups in JKIA

"No miraa pickups will be allowed to access JKIA premises as discussed in the security meeting. The ready-for-carriage shipments will be redirected to Mitchell Cotts Transit Shed for screening and onward movement to the respective flights as per bookings and destinations, with all necessary health and security protocols observed,” a statement by Kenya Airports Authority chair Caleb Kositanny read.

Logistics giant Mitchell Cotts Freight Kenya Ltd has been granted a new business line: handling 20 to 40 tonnes of miraa exports daily following the latest ban on Miraa pickups at JKIA premises.

Mitchell Cotts had been one of the biggest beneficiaries of the Standard Gauge Railway (SGR), Kenya's most expensive infrastructure project, valued at Kes555 billion ($3.7 billion). The company had won a tender to provide peripheral storage facilities at the Inland Container Depot (ICD) in Nairobi.

 

When President Ruto made good on his promise to return all port operations from Nairobi and Naivasha Inland Container Depots (ICDs) to Mombasa, reversing one of the most controversial policies of the Jubilee administration, it meant the business was under threat.

 

The new President also sought to reverse the tax breaks received by NCBA, imposing a nearly billion tax claim on the bank owned partly by Mitchell Cotts shareholders.

 

The President's Finance Minister, Prof Njuguna Ndungu , pushed the taxman to make a Kes900 million claim for tax subsidies given to NIC and CBA banks during their merger into NCBA.

 

However, this decoupling did not take too long, as the strategic position held by the Ndegwa family business is indispensable.

 

During the new President's first months in office, he implemented a policy of duty-free importation of fertilizer, maize and sugar partly to reward political connections and address shortages caused by drought. Duty-free imports were also extended to edible oil, addressing price hikes resulting from global supply chain shocks and export bans by Indonesia.

 

Companies like Mitchell Cotts were in a strategic position to handle this lucrative business for state functionaries and their networks.

 

New crops (miraa) regulations

Miraa or “khat” as it is most commonly known in Kenya is grown intensively in the Nyambene Hills district of Kenya by the Tigania and Igembe, sub-tribes of the Ameru.

President William Ruto's government would soon need Mitchell Cotts again as he sought to streamline handling of Khat- Miraa meant for export a new source of income for the state.

 

Miraa exports to Somalia had been banned for two years and was only reopened in July 2022 after President Uhuru Kenyatta lobbied Somalia's President Hassan Mohamud, a Kenyan ally.

 

The deal proved very lucrative with exports to the Horn of Africa nearly doubling to Kes11.4 billion in the first half of 2023.

 

Although a multibillion-pound crop, Miraa has remained largely an informal export, classified as a drug by the National Authority for the Campaign Against Alcohol and Drug Abuse (NACADA).

 

From the moment it is picked from trees, in a process known locally as 'Utunga,' the crop is handled by hand. You can see young men moving quickly among the crop branches at dawn, picking the commodity. In the second stage, where the bad leaves are pruned off, the plucking of the unwanted leaves is also done by hand.

 

They are then transported to a loading bay, where, especially on hotter days, most of the Miraa is sprinkled with water to keep it cool and turgid, ensuring it stays fresh for its final destinations.

 

The Miraa is then packed into a fleet of pickups, each carrying at least 0.8 to 2 tonnes per trip. Generally, on a normal day, around 35 to 40 vehicles transport Miraa around the country. Depending on market conditions, Miraa crops can fetch between Kes240,000 and Kes600,000 per trip.

 

From the high-speed, thrillingly suspended pickups and lorries to the flashing of lights accompanied by endless hooting, Miraa, being a highly perishable product, needs to be delivered fresh to maintain its potency. Any delay can cause the leaves to wilt and lose their value. For that reason, drivers are under pressure to get the product to the market at full speed.

 

This handling and dangerous driving have given the government a reason to scrutinize the lucrative business. The government sought to overhaul the planting, transport, and handling of Miraa exports, also known as the 'Green Gold.'

 

Under the new Crops (Miraa) Regulations of 2023, developed by the Ministry of Agriculture, which will ban Miraa traders from transporting the crop in Toyota Proboxes, motorcycles, or pickup trucks.

 

Instead, the new regulation states that a vessel used for the transportation of Miraa shall be built and equipped to ensure the maintenance of optimal temperatures and hygiene to prevent damage, contamination, and spoilage of produce.

 

President Ruto also aimed to extend his taxing reach into the cash flow through the Crops (Miraa) Regulations, imposing a levy on Miraa products destined for export based on Free on Board value at a rate of two percent.

 

On October 2, President Ruto's ally, the former Soy MP Caleb Kositanny, banned Miraa and avocado traders from accessing JKIA, diverting them to Mitchell Cotts.

 

Another SGR Dynasty

 

Read Also: The story on Mohamed Jaffer: The man who brought East Africa’s roadside chapatis

 

And it's not just Mitchell Cotts; where President William Ruto is finding his predecessors allies important. Grain Bulk Holding Limited, another beneficiary of the SGR, witnessed a similar transformation.

 

Initially, there were differences between Mohamed Jaffer, the owner of Grain Bulk Holding Limited, and the Kenya Kwanza regime when they came to power.

 

Last year, President William Ruto launched an LPG gas plant owned by rival businessman, Tanzanian billionaire Rostam Aziz. However, things changed as the government sought to lower the cost of basic commodities.

 

Grain Industries Limited, affiliated with Mr. Jaffer, significantly reduced prices of Umi and Ajab maize, in line with the government's objective of lowering unga prices. President Ruto even officiated the launch of Grain Bulk Handlers Limited in Nairobi County.

 

During the event, Mr. Jaffer expressed support for the government's policies and offered to donate KES. 100 million to the President's Hustler Fund, which would be funded by corporates. Additionally, Mr. Jaffer proposed the idea of creating a fund and a bond from corporates to empower small-scale entrepreneurs across the country.

 

As the new regime aligned with the SGR dynasties, Mitchell Cotts' fortunes began to look up. According to the company's posts on LinkedIn, it has expanded, completing a cold storage facility in Tatu City and installing a new X-Ray imaging system at its Air Cargo Terminal facility in Jomo Kenyatta International Airport.

 

Potential security threats

 

The state-of-the-art XRAY CENTRE 180-180-DV will enable the company to offer faster screening, capturing multiple angles of cargo items simultaneously, providing exceptional image clarity and precision. This allows them to identify potential security threats more effectively and handle a high volume of small packages or palletized (UDL) freight.

 

“The XRAY CENTRE 180-180-DV is one of a kind in East and Central Africa, enhancing our screening process to drive efficiency for customers exporting air cargo through our transit shed (owned and operated by Mitchell Cotts Group),” the firm said.

 

Meanwhile, NCBA Group, in which the Ndegwas hold the leading stake at 14.94 percent, has announced plans to buy an additional 66.67 percent in AIG Kenya Insurance Company Limited from an American multinational.

 

ICEA Lion Asset Management Limited, which is majority-owned by the family, is also in the process of buying out retail investors in property fund ILAM Fahari I-Reit, in a deal valued at Sh402.4 million.

 

Both Mitchell Cotts Freight Kenya Ltd and NCBA belonged to the Ndegwa family, one of Kenya's wealthiest families.

 

The scion of the family, former Central Bank of Kenya Governor Phillip Ndegwa, is reputed to be the first Kenyan to make a  billion shillings. He went on to build one of the most successful family businesses in the country that has spanned generations and political changes, making it one of the few families that can lay claim to a local dynasty.

According to people familiar with Mr Ndegwa, he opted to buy shares in private companies unlike his Makerere compatriots who went straight into government and accumulating land. He is also said to have created the culture of letting professionals run his companies and he ensured the practice was passed on to his children who got hands on experience working under these professional managers.

 

His sons, James Ndegwa and Andrew Ndegwa, have built on his success, expanding the multibillion-dollar business empire, including First Chartered Securities Ltd, ICEA Asset Management Ltd, NCBA Group, and Unga Group, spanning banking, milling, insurance, and real estate.

 

Due to their size and strategic position in Kenya's economy, the family has tended to benefit from political changes and has even been accused of using these links to advance their interests.

 

Mr James Ndegwa, the chairman of First Chartered Securities Ltd, the holding company for many of the firms associated with the late Philip Ndegwa family, was appointed as the chair of Kenya's capital markets by former President Uhuru Kenyatta in 2015.

 

Merger between NIC and CBA

 

Since Mr Ndegwa's appointment in April 2015, businesses in which his family has an interest initiated or completed several mergers and acquisitions that were approved by the regulator he presided over. These included the merger between NIC Group and President Kenyatta's family bank, CBA Group, creating the Nairobi Securities Exchange-listed NCBA Group. The merger received a tax break, confirming the benefits of these links.

 

In 2018, the family, which owns Unga Group, pushed for Delaware-based conglomerate Seaboard to buy out minority shareholders in a failed bid to delist Unga Group from the NSE.

 

While Mr Ndegwa was chair, his companies, including NAS Holdings, in which the family is a shareholder, sold the troubled Ennsvalley Bakery business to Unga Group for Kes535 million in two transactions between 2016 and 2017.

 

Former CMA's chief executive, Paul Muthaura, who oversaw the Ndegwas' transactions, left the regulator to join ICEA Lion General Insurance, another company partly owned by the family, as the chief operating officer.

 

This did not go unnoticed, and when he was reappointed to head CMA in March 28, 2018, activist Okiya Omtatah challenged his position as the CMA chairman, accusing him of conflict of interest to the “extent that he is a public official who regulates his private businesses.”

 

Mr Ndegwa, however, completed his tenure and left in 2021.

 

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