Chemelil on brink of collapse over Sh300m debt

Chemelil Sugar Company is on the brink of collapse after farmers stopped supplying it with cane.

The company owes farmers Sh300m, a debt that has accrued since 2014. The dwindling fortunes at the miller are a bad sign for sugarcane farmers in the Nyando sugar belt given that Miwani Sugar Compan has been out of operation for the last decade.

Operations at the region’s other miller, Muhoroni Sugar Factory, are wanting.

Most farmers have diverted their cane to West Kenya and Kibos Sugar factories after claiming that the management of Chemelil had declined to negotiate a debt settlement. The farmers who pitched tent at the factory compound on Wednesda last week demanding for their money, have now turned to the Government for help.

As the battle over the payment persists, workers at the factory may soon be laid off as the few tonnes of cane from the factory’s nuclear farmers cannot sustain the operations of the factory.

The company is now crushing at an average of four days a week.

According to Gakwamba Farmers Cooperative Society, which manages the farmers funds for the factory, the miller is facing a financial crisis, which may see it collapse in the next few months.

Secretary Atyang Atyang said the factory did not pay farmers for their March and April 2014 supply, as well as for the months of August and December 2015.

No Hope

There is no hope of receiving any payment in 2016 as the factory’s operations have not been stable since the beginning of the year.

“In December 2015, the cheques that were issued bounced, and we have not been able to sit down with the factory management to discuss the way forward. They have been avoiding us, and we suspect it is deliberate,” said Mr Atyang.

Atyang partly attributed the factory’s financial crisis to the Government’s failure to honour its promise to bail out the company, which he said has a debt of over Sh2 billion.

According to the pledge, Chemelil was to benefit from Sh1.9 billion from the Sh59 billion bailout given to all sugar factories across the country.

Treasury is yet to implement the pledge, and suppliers are threatening to sue the company over the huge debt. He said the factory requires another Sh2 billion for maintenance, as the output of the old crushing machines has drastically reduced, leading to big losses.

“The machines need major maintenance, because, even if money is pumped into the rotten machines, we will still lose money. There must be major discussion on this matter if we are to save the factory and the farmers,” added Atyang.

Sources close to the management hinted that Kenya Power, Kenya Revenue Authority, National Hospital Insurance Fund (NHIF) and the National Social Security Fund (NSSF) will soon be seeking millions in accrued debt.

As at last week, all machines were not operational.