The Pan Paper Story: Paper to Profit in Africa
Webuye, in western Kenya. In the early nineteen seventies, a paper mill was built here, on the bank of the Nzoia river.
By one forestry study’s count, it consumed about half a million cubic metres of pulpwood a year.
Most of that wood was grown on farms.
The mill stopped in two thousand and nine. In December twenty sixteen, it started again, under a new owner and a new name.
Today, the mill on that site makes its paper from waste paper.
When the new owner agreed to buy it, in twenty sixteen, its conditions included a licence from the Kenya Forest Service.
Five years later, the thirty-six-year licence it had asked for was still pending.
The Cabinet Secretary responsible said that a licence that long amounted to concessioning, and would need legislation.
We have found no later record of that licence.
WEBUYE
Its full name was Pan African Paper Mills. Kenya knew it as Pan Paper. It was a joint venture, and it had three principal partners.
The first was Orient Paper, part of India’s Birla group. Orient was the operating partner, and for decades it was the partner that ran the mill.
The second was the Kenyan government.
The third was the International Finance Corporation, the arm of the World Bank that lends to and invests in private companies.
The International Finance Corporation first invested in nineteen seventy four. Over the years it made nine loans and equity investments in the company, committing about fifteen million dollars. It stayed with the mill for the rest of its working life.
Development lenders stood beside the partners: the East African Development Bank, the Industrial and Commercial Development Corporation, the Development Bank of Kenya, and a trust arm of Barclays.
Who owned how much is not settled. The sources disagree on the shares, and we are not going to pick one. The state was one owner among several, in a mill that someone else ran.
The site was chosen for two things. The first was water, from the Nzoia, which runs past the town.
Paper making is thirsty work. A mill of this kind draws heavily on water to pulp and wash its fibre, and it sends water back into the river it drew from.
The second was fibre. Plantation forests stood nearby, and around them were farms where trees were grown to be cut and sold.
A forestry study, published through the African Forest Forum, put the mill’s appetite at about half a million cubic metres of pulpwood a year.
On top of that, it burned about a quarter of a million cubic metres of firewood.
Most of both came from farms. The mill’s raw material did not stand only in state forest. Much of it grew on private land, planted by farmers who sold to the mill.
Before it could make paper, the mill had to make pulp. Logs were stripped and chipped, and the chips were cooked down into fibre.
Everything after that depended on the lorries arriving.
The mill grew trees of its own as well. It ran nurseries at Webuye, at Kaptagat and at Ainabkoi.
Seedlings went from those beds out into the plantations, season after season.
By nineteen eighty nine, the same study records, Pan Paper had planted more than thirteen thousand hectares.
From that wood it made kraft paper, the strong brown paper of sacks and wrapping, along with newsprint and writing paper.
A document from the International Finance Corporation’s own ombudsman says the mill produced more than eighty per cent of Kenya’s paper.
Webuye grew up around it.
There was Panpaper High School, and Panpaper Primary. The schools carried the mill’s name.
There was a dispensary, a guest house and a cultural centre.
The mill employed well over a thousand people on permanent terms.
Look at what the mill stood on. Water from a river it did not own. Wood from farms and forests it did not own. Power bought from the national grid. And the working lives of a town.
For roughly thirty-five years, the mill was the centre of Webuye’s economy.
DISCONNECTED
On the first of February, two thousand and eight, two local organisations, RECONCILE and CEDEP, filed a complaint about the mill.
They filed it with the Compliance Advisor Ombudsman, the office that hears complaints about projects the International Finance Corporation has backed.
The complaint covered air, water, biodiversity, health, livelihoods, and the disclosure of information to the people who lived beside the mill.
Separately, researchers published a study of the mill’s effluent and of life in the Nzoia river. We have seen only its title, so we say nothing about what it found.
The ombudsman completed its assessment of the complaint in October two thousand and eight.
On the first of December, two thousand and eight, the company and the complainants signed an agreement to negotiate.
The people who lived beside the mill now had a process, and a seat at a table across from it.
In January two thousand and nine, Kenya Power disconnected the mill over an unpaid electricity bill.
The reporting gives the month, January. It gives no day, and we have not supplied one.
Operations stopped. The company could not pay its wages, and it could not pay its utilities.
An electricity bill. On the record, that is what stopped the largest paper maker in the country.
No source we retrieved explains how a mill of this size came to be unable to pay its power bill. The record has the disconnection. It does not have the cause.
The Nation newspaper reported that the Indian management left about a month after the power went off. That is one outlet’s account, and we give it as that.
The partner that had run the mill for decades leaves the record there. No statement from Orient Paper or the Birla group about those months has been found.
In March two thousand and nine, the company went into receivership.
Receivership means that control of a company’s assets passes to someone appointed to recover what its creditors are owed.
Reports put its debts at the time anywhere from three to nine billion shillings. The sources do not agree, and we cannot say which is right.
In April, the International Finance Corporation gave up its claim against the company, a claim of thirty-six million dollars.
Three months earlier, the company had signed an agreement to talk with its neighbours. Now it was in receivership, and a lender that had been there since nineteen seventy four had let its claim go.
Between about twelve and fifteen hundred permanent workers lost their jobs.
Twelve to fifteen hundred jobs, in a town that had grown up around one employer.
The Panpaper schools, which had carried the mill’s name, shut with it.
So did the dispensary, the guest house and the cultural centre.
The ombudsman’s process continued for a few months more. An environmental audit, funded by the International Finance Corporation, went ahead in the second half of the year.
A workshop was held in November two thousand and nine. In December, the case was closed.
The agreement to negotiate had pointed toward a forum, where the mill and its neighbours would sit down together. That forum never happened. The company had closed.
Of everything cut in those months, it is the connection least remembered. A town’s own attempt to negotiate with the mill beside it, ended not by a ruling, but by a closure.
No source we found reports what the audit found, or what changed afterwards for the people who had complained.
TERMINAL DUES
Some of the people who walked out of the gate in two thousand and nine had worked at the mill for more than thirty years.
What they were owed had a name. Terminal dues. The arrears of pay, the holiday pay and the notice pay that fall due when a job ends.
It is a dry phrase for what a working life is owed when it ends.
It was not paid when the company went into receivership. It was not paid in the years that followed.
In twenty sixteen, a former nominated member of parliament, Patrick Wangamati, presented a public petition on the workers’ behalf.
In December of that year, as the mill restarted under new ownership, President Uhuru Kenyatta promised the former workers support.
In August twenty seventeen, the government expedited an ex gratia payment. It was three months’ pay, at thirty per cent of basic salary.
Three months of pay, at less than a third of basic salary, for people some of whom had given the mill three decades.
Ex gratia means a payment made as a gesture, without accepting that it is owed. It was not the terminal dues.
Between twenty nineteen and twenty twenty one, a parliamentary committee took up the case, and a request went to the Treasury.
In the Senate, Senator Wakoli raised the delay.
In five years, the case had passed through a petition, a President, a ministry, a committee, the Treasury and the Senate. None of them had paid the terminal dues.
In December twenty twenty one, the workers’ representatives put a number on what they said was owed. Six hundred and forty million shillings, in arrears.
Their representative, Francis Barasa Wakhungu, spoke to the Star. “Even worse,” he said, “the state has not paid us as promised.”
By then, the workers were not asking the mill. They were asking the state.
In September twenty twenty four, the ministry said that budget ceilings prevented it from paying two hundred and twenty-nine million shillings to the former workers.
Budget ceilings. That was the reason on the record, fifteen years after the layoffs.
It is an administrative phrase. It does not deny the debt. It says the debt did not fit.
Set the two figures side by side. The workers claimed six hundred and forty million. The government earmarked two hundred and twenty-nine million.
No source we found explains the gap. The record gives both numbers, and nothing that joins them.
Through all of it, this was the state’s debt. The promises came from government, and so did the payments that were made. The mill’s new owner does not appear in this part of the record.
The debt would outlast the sale of the mill, and two celebrations of its return.
And the workers themselves are missing from the record. No source we retrieved gives any former worker’s own account of those years.
Apart from their representative, not one of them is named in the reporting we found.
Nothing records what work they found afterwards, what hardship they carried, or how many of them died before any money came.
The casual workers, whose number is not reliably recorded, appear nowhere in the compensation reporting at all.
Nor does the record say whether any of the people laid off in two thousand and nine were taken on when the mill ran again.
In late November twenty twenty five, the government reported that two hundred and twenty-nine million shillings had been secured. The paperwork, it said, was done. The money was to be wired.
That was roughly sixteen years after the layoffs. Two months later, the ministry said six hundred and fifty-two former employees had been paid. Papers for six hundred and ninety-seven more were still being cleared. Some payments had been held back because bank accounts had been closed. We have found no later count.
The government said the money was for one thousand three hundred and forty-nine families.
CONDITIONS OF SALE
The mill, meanwhile, stood idle. It would stand idle for seven years. The mill that had made most of Kenya’s paper made none at all.
In twenty twelve, the government put money into an attempt to revive it. Reports differ on how much. The mill did not restart.
The machines stayed under the roof, and nothing moved through them.
Between the power cut and the sale there were seven years, a failed government revival, and no buyer on the record until twenty sixteen.
In April twenty sixteen, the government agreed to sell Pan Paper to the Rai Group, for nine hundred million shillings.
The Rai Group is the family conglomerate of its chairman, Jaswant Singh Rai. Its interests include sugar, timber, oils and property.
There were two bids. One came from the Rai Group. The other came from Raiply, a timber company the Rai family had founded in nineteen seventy one. Both bids came from companies of the same family.
Two business publications report that six investors from Congo and Egypt had expressed interest. None of them bid.
The Standard’s headline set the price against a much larger number. Eighteen billion shillings, it said, sold off for nine hundred million.
Business Today’s headline said the mill had been sold for a song, to an Eldoret timber merchant.
Those are headlines. They are not the findings of any inquiry we have been able to find.
The basis of that eighteen billion was never published, and we have found no independent valuation of the mill.
There is a counter view. After seven idle years, the mill was a distressed asset, worth what a buyer would pay for it. That view is plausible. It is also unproven.
The record supports neither view over the other, and we are not going to choose between them.
At the time, analysts asked a different question. The buyer was, among other things, a timber merchant. Did he want to make paper? Or did he want access to subsidised forest timber, and to land?
It was a fair question to put to a buyer who dealt in timber. It is still a question, not an answer.
His motive is not on the record. He has given no account that our research found, and we will not supply one for him.
The buyer set three conditions.
The first was a licence from the Kenya Forest Service, which manages the country’s public forests.
The second was titles to the land, from the National Land Commission, which manages public land.
The third was the transfer of the documents.
RAI PAPER
In December twenty sixteen, the mill at Webuye started again.
President Uhuru Kenyatta oversaw the restart. It was a state occasion, for a privately owned mill.
It no longer traded as Pan Paper. It was Rai Paper now. The new name belonged to a new owner, a private one, in a mill the state had once part owned.
Reports of its first workforce differ. One puts it at about two hundred and eighty. Another says about five hundred. Either way, it was a few hundred people.
In November twenty twenty one, a second paper machine began operating. Business Daily’s headline put its cost at five hundred million shillings.
By September twenty twenty five, the company was publishing figures of its own.
It says the mill makes twenty-seven thousand six hundred tonnes of paper a year.
We have no figure for the old mill’s tonnage to set beside that one, so we cannot tell you how the two compare.
It says it employs four hundred and forty people, and that seventy-six per cent of them are under thirty-five.
It says it has invested more than a billion shillings in repairs and machinery since twenty sixteen, and paid three hundred and sixty-two million shillings in taxes.
Every one of those numbers is the company’s own. No source we found reports on wages, contracts, unions or safety at the mill.
The company also says it has paid Kenya Power seven hundred and fifty-four million shillings. The utility that disconnected the old mill supplies the new one, and is paid.
Rai also announced a thirty kilometre power line from its sugar factory in Kakamega. The plan was reported around twenty twenty or twenty twenty one, under Kenya’s Energy Act of twenty nineteen.
No source we found confirms that the line was built.
The mill is smaller than the one that closed. Four hundred and forty jobs, where there had been between about twelve and fifteen hundred.
About a third of the jobs came back.
In August twenty twenty one, the Star wrote about Webuye.
It reported a town roaring back to life, with the revival of its paper mill. After seven silent years, paper was being made in Webuye again.
CONCESSIONING
Rai Paper makes kraft paper from recycled waste paper. It is the product the old mill was known for, made from a different thing.
Old cartons and used paper go in at one end of the mill. Brown paper comes out at the other.
Bagasse, the fibre left over when sugarcane is crushed, is named as another possible source.
The company’s own account, reported in twenty twenty five by the Serrari Group, is that the logging ban removed its traditional supply of wood.
The mill was built to consume about half a million cubic metres of pulpwood a year. The mill on the same site runs on waste paper because that wood was not available to it.
Pulpwood is grown. Waste paper is gathered. A mill that runs on one is a different business from a mill that runs on the other.
Nothing in the record presents the switch as a decision anyone made to modernise. On the record, it is a constraint. Waste paper is what the mill uses because the forest is out of reach.
In October twenty twenty five, the President lifted the logging ban for mature trees. A month later, the Speaker of the National Assembly said this was expected to speed the mill’s return to full operations. We have found no record of any of that wood reaching the mill.
The buyer’s first condition in twenty sixteen had been a forest licence. It asked for one lasting thirty-six years.
On the sixteenth of May, twenty twenty one, Business Daily reported that the thirty-six-year licence was still pending.
The Cabinet Secretary, Betty Maina, said that a licence that long amounted to concessioning, and that it would require legislation.
Concessioning means handing a private company long-term control of a public resource.
In other words, the ministry’s view was that no official could grant it alone. The forest law already allowed concessions. In twenty twenty five, rules were published to put them into practice, with a limit of thirty years.
She also said that the royalties owed to the Kenya Forest Service had to be paid before the mill could operate under any licence.
The licence was not refused on the record. In twenty eighteen, the competition regulator had advised against giving the mill exclusive rights to state plantations, and proposed a smaller reserved area. In twenty twenty one, the licence was still pending. The first condition the buyer set in twenty sixteen was still unmet five years later, and its status since is not in any source we retrieved.
That leaves the state in an unusual place in this story. When the mill was built, the state was one of its owners. It sold the mill. It kept the forest. For sixteen years it owed the workers.
The waste paper has to come from somewhere. The company says more than three thousand young people collect it.
Where the old mill’s fibre came off farms and plantations, the new mill’s comes out of offices, shops and homes, as paper someone has finished with.
The collection network is a company claim. No independent source says who these collectors are, what they earn, or who else buys from them.
The old supply chain ran through farms that no source followed. The new one runs through collectors that no source has followed either.
And there were the farmers. The old mill took its half a million cubic metres of pulpwood mostly from farms.
No source records what happened to those growers when the mill closed, or what the forest licence question means for them now.
They supplied most of the old mill’s wood, and they are among the least visible people in its record.
In September twenty twenty five, Rai announced a three billion shilling plan. The target is seventy-four thousand one hundred tonnes a year.
That is more than two and a half times what the company says the mill makes now.
The roadmap includes newsprint, tissue and specialised packaging.
Whether the plan is being carried out is not reported.
Unless the forest question changes, that target rests on waste paper, and on the people who collect it.
The Rai Group is privately held. No revenue, profit or debt figures are public. Nothing on the record says whether Rai Paper makes money.
Without accounts, the plan’s arithmetic cannot be checked from outside.
The mill runs.
It found another fibre, and for nearly a decade it has kept making paper in Webuye.
The mill once ran nurseries, at Webuye, at Kaptagat and at Ainabkoi.
By nineteen eighty nine, the mill had put more than thirteen thousand hectares of trees into the ground. On farms around it, people grew pulpwood, and the mill bought it.
The river is still there. So is the town, and the grid, and a mill making paper.
The mill those trees were planted for makes its paper today from waste paper.
Whether it will ever be allowed back to a forest is still open. So is the question of the terms, and of who would grow the trees.
The trees were planted for one mill. Another one runs there now. This is Asili Africa. Every empire has an origin. See you on the next one.
Key Takeaways
- WEBUYE. Its full name was Pan African Paper Mills.
- TERMINAL DUES. Some of the people who walked out of the gate in two thousand and nine had worked at the mill for more than thirty years.
- CONDITIONS OF SALE. The mill, meanwhile, stood idle.
- CONCESSIONING. Rai Paper makes kraft paper from recycled waste paper.
In this series: State Assets
What does a state do with a company it owns?
- Mumias Sugar
- Pan Paper (this episode)
- Ethiopian Airlines
- Kenya Airways
- Precision Air
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