Cash-strapped South Nyanza Sugar Company (Sony Sugar) in Migori County has closed down for maintenance after its milling machine broke down.
The firm shut for eight weeks amid protests from workers who are claiming Sh1 billion in unpaid wages for the last 13 months after the factory’s production and financial performance declined.
Sony Managing Director Stephen Ligawa said the company would stop milling and close down until mid July.
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“We consulted with the board of directors and agreed to close down in the meantime and carry out maintenance on the broken parts of the plant,” he said.
The closure comes at a time when the factory has been experiencing an acute shortage of raw materials, with many farmers opting to deliver cane to private millers in the area.
Mr Ligawa said they have been facing production challenges leading to massive losses that did not merit going on with crushing cane.
Last week, he said the factory has to accumulate cane for two to three days before it could mill sugar for sale.
Even then, the miller operated at a big loss because the cost of production was higher than the expected return.
“Production had become unsustainable for us. If we accumulate cane per week, we mill about 3,000 to 4,000 tonnes of cane. This is way below the expected 10,000 tonnes,” the MD said.
In addition, the cost of fuel to run the turbines of the factory’s steam engine was taking almost all the money made in weekly sales.
“It is based on these considerations that the board and management team found it viable to close and repair the obsolete parts of the machine,” Ligawa said.
Sony Sugar has also found it increasingly difficult to sustain payments to its workers.
Its labour costs run to about Sh110 million a month, including statutory deductions such for social security and health insurance, as well as pension and Sacco contributions.
“This payment has not been possible to effect in the last 13 months. We have only been paying workers some allowances, but this also has proven unsustainable,’’ Ligawa said.
The factory was last maintained five years ago, and since then its production efficiency has dipped by about 85 per cent, killing the hopes that cane farmers had at the time of its inception in the 70s.
While it is supposed to produce 3,000 tonnes of cane per day, it only generates about 600 tonnes, which cannot meet its running and overhead costs.
“Today, we hardly meet the production target. We have to accumulate cane at least for two or three days to make about 600 to 700 tonnes. This is below par,” Ligawa said.
Adding to the problems are delayed payments to farmers, who have shifted delivery of cane to other sugar millers.
Sony has been taking months to pay cane farmers, while neighbouring private millers Sukari Industries and Transmara pay within two weeks.
Although, Sony offers a better price of Sh4,310 per tonne of cane compared to Sh2,800 and Sh2,600 offered by Transmara and Sukari, respectively, farmers still opt for the latter due to prompt payment.
On Sunday, Ligawa said they owe farmers about Sh560 million for cane delivered to the factory since November last year.
Farmers are demanding that the arrears be offset to help them cope with the effects of the coronavirus pandemic.
“We want Sony management to offset the payments in bits to enable us to also overcome our financial challenges,” said Kenya National Federation of Sugarcane Farmers Secretary General Ezra Okoth.
Also owed are suppliers to the firm who are demanding Sh300 million for goods and services delivered to the factory to sustain its daily operations.
Sony Sugar is one of the millers marked for privatisation by the government.