Mumias Sugar Company sent home more than 800 workers on Wednesday after the limping miller stopped operations due to lack of raw materials.
The financially crippled firm was producing ethanol after milling of sugar stalled over two years ago. It was doing close to 150,000 litres in two shifts, boosted by the high demand for alcohol needed in the production of hand sanitiser.
The receiver manager appointed by the Kenya Commercial Bank (KCB), Ponangipalli Venkata Ramana, told staff a shortage of molasses had forced them to close shop indefinitely.
The miller had been relying on raw materials from private factories in the region, such as Butali Sugar Mills, Nzoia Sugar Company and the Busia Sugar Factory.
The shortage is reportedly linked to traders who have been selling molasses to firms in Uganda, where they fetch up to Sh20,000 per tonne compared to Sh10,000 locally.
Other reports attributed the shutdown to challenges involving the management of the revenue generated from the sale of over a million litres of ethanol over the past 19 months.
“We usually ensure that we have a minimum of 3,000 tonnes of molasses before we start ethanol production,” said an employee.
“We have been away for close to a month. We have been asked to stay away but there has been no communication on whether we will keep our jobs or not.”
The miller has been struggling with debts, ageing equipment and cane shortage despite a Sh3.6 billion government bailout.
Mumias’ loans stood at Sh12.5 billion as of June 2018. It owed Ecobank Kenya Sh2 billion, French development finance institution Proparco Sh1.9 billion and Commercial Bank of Africa Sh401 million.
Other creditors are the Treasury (Sh3.1 billion) and Kenya Sugar Board (Sh1.6 billion). Mumias was also operating on bank overdrafts worth Sh2.7 billion from various lenders.
A fortnight ago, Kakamega Governor Wycliffe Oparanya inspected the factory with a team from KCB and a ‘potential investor’.
“My instructions were to take him (investor) around the factory so that he does due diligence and make a decision,” said Mumias lawyer, Patrick Mutuli.
According to the Sugar Task Force report, which was presented to President Kenyatta in February last year, the miller is indebted to the tune of Sh20 billion.
The government promised to act on all the recommendations but there has been a delay in the implementation of the report.
The county government plans to advance loans to farmers to ensure adequate raw material is available for delivery to the miller when operations resume.
Private millers have in the past been competing for cane, leading to conflicts and shortage of raw material.
