A Nairobi-based edible oil company has suffered a major setback after the High Court cleared Stanbic Bank Kenya to auction its nearly complete refinery, highlighting the tough choices local entrepreneurs face when projects run into financial headwinds.
In a ruling delivered last week, Justice A. Mabeya dismissed an application by Convex Commodity Merchants Limited and its sister company, Convex Commercial Logistics Limited, which sought to stop the forced sale of their Ksh 2 billion edible oil processing plant in Nairobi.
The plant — set up to tap into Kenya’s growing demand for locally refined edible oils — was meant to transform Convex’s business, which depends on oil for nearly a third of its trading revenues.
But a mix of COVID-19 disruptions, cost overruns, and what the owners claim were delayed loan disbursements left the project incomplete and the company deep in debt.
Facing default on loans totaling over Ksh 2 billion, the company argued that auctioning the plant would destroy years of work and hundreds of potential jobs.
They told the court they had lined up rescue financing worth Ksh 500 million from the Kenya Development Corporation (KDC) and an additional USD 18 million from a US-based financier, Ethos Asset Management. But that plan hinged on Stanbic halting its recovery action.
“This refinery means livelihoods — not just for our team, but for farmers, suppliers, and the local community,” said one of the company’s directors, James Waithaka, in court papers. “A public auction will kill everything.”
The company also claimed the bank undervalued the asset by more than half. While Axis Real Estate valued the property at about Ksh 1.7 billion, the bank’s own advisers, Turner and Townsend, had previously placed its worth at Ksh 5.4 billion when it was still under construction.
Stanbic Bank, however, maintained that the company had repeatedly defaulted and that it was entitled to recover its money under Kenya’s land laws. Garam Investments Auctioneers, acting on the bank’s instructions, had already served the required notices and was set to proceed with the auction.
In his ruling, Justice Mabeya sympathised with the company’s situation but said courts cannot rescue borrowers who fail to meet their obligations.
“When you charge property as security, you accept that it may be sold if you don’t pay,” the judge wrote, adding that the law does not allow courts to rewrite contracts or force banks to advance more money.
The decision means that unless the company can strike a last-minute deal to clear the debt, its edible oil dream could be sold to the highest bidder. The company now faces the grim prospect of losing an investment it spent years building — a cautionary tale for local manufacturers struggling to stay afloat amid tight credit and economic shocks.
The edible oil sector, long dominated by a few large players, has seen rising interest from local firms hoping to boost local refining capacity and cut reliance on imports. But big-ticket projects like this show the high stakes — and the high risks — involved.
For now, dozens of workers, contractors, and farmers who supply oil seeds to Convex will be watching anxiously to see if a lifeline can be found before the auction hammer falls.
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