Muhoroni Sugar owes contracted farmers, KRA millions of shillings

Muhoroni sugar company which has been closed indefinitely and reposesed by Kenya Revenue Authority (KRA) . (Collins Oduor, Standard)

The Sugar Directorate is scheduled to open talks with the Kenya Revenue Authority (KRA) over the recovery of a Sh1 billion debt owed by Muhoroni Sugar Company, which has since temporarily shut down.

Muhoroni joint-receiver manager Asa Okoth said they were banking on the scheduled break in operations to push for a suspension of debt collection by the taxman to allow the company use its working capital to recover from operational difficulties.

Last week, KRA directed the miller’s trading partners to make all payments into its accounts in a tax recovery onslaught that would have crippled the company whose optimal monthly turnover stood at Sh4 million.

Mr Okoth, however, said the closure was not a result of the tax demand from KRA.

“The shutdown had nothing to do with the KRA directive, it was a scheduled maintenance that only happened to have coincided with the move by KRA. We have, however, asked our debenture holder to use this time to negotiate with the taxman,” he explained.

Although Muhoroni is in a protected receivership, it is only shielded from trade debts. The taxman has been raiding the firm’s accounts to recover tax cash accumulated since the firm was put under receivership in 2001.

The receiver manager said the firm was facing an acute cane shortage and would soon close down if KRA did not stop collecting its debts once operations resume.

Muhoroni is further seeking a bailout to fulfill a scheduled partial maintenance exercise, which is expected to cost Sh150 million. A complete overhaul of the worn-out factory would cost Sh500 million, according to Okoth.

It needs a further Sh570 million to clear debts owed to sugarcane farmers and factory workers.

The manager was optimistic, once efficient, the miller would be able to continually service its debts.

The sugar firm’s closure a week ago has left more than 10,000 farmers and nearly 6,000 workers staring at poverty, a situation that has been exacerbated by the dwindling fortunes of Chemelil Sugar Company, 11 kilometres away.

Investigations by The Standard confirmed claims by Okoth that a crippling cane shortage was partly to blame for the miller’s woes.

At the height of its troubles, the miller was using 20 tonnes of cane to produce one tonne of sugar as it crushed premature cane, with juice content at least 30 per cent lower than the recommended level.

An optimal milling conversion ratio is between eight and 10 tonnes of cane to a tonne of sugar.

Although the firm has contracted over 16,000 farmers, cane poaching by  private millers that have not invested in cane development has left it with little stocks to crush.

“The situation is so bad that they don’t even wait for the cane to mature,” said Okoth.

The inefficiency was also due to worn out equipment and lack of maintenance. The last comprehensive routine maintenance was done four years ago.