Mumias Sugar new CEO has task cut out

By Grace Wekesa

Peter Kebati has been the man on the till at the giant Mumias Sugar Company (MSC) — watching over more than Sh20 billion the miller generates annually in revenues.

A career accountant, Kebati has been the company’s finance director for nine years. But he assumes the reins of power at MSC as chief executive from July 1.

Kebati replaces Dr Evans Kidero who was the first Kenyan to take over the management of the firm as chief executive eight years ago.

Kidero’s appointment followed the expiry of a management contract of the British firm, Booker Tate, with the government, which then was the largest shareholder in MSC that was by then a parastatal.

Booker Tate had managed MSC since its establishment in 1976 with virtually all of its chief executives being British or of European descent.

Booker Tate helped transition Mumias from rolling mills to diffuser technology. The installation cost the miller a whopping Sh5 billion and saw the firm more than double its production.

Sugar deficit

As he prepares to take office, Kebati is well aware of the challenges he has to deal with. Key is the need to plug the perennial sugar deficit in the country. The country faces a deficit of more than 200, 000 tonnes per year.

"We hope to increase our annual output to feed the country’s perpetually starved market," said the incoming chief executive.

"Of course at the core of our business is the need to find a solution to the thorny question of cane development to increase and maintain sufficient annual sugarcane supplies to the company," Kebati says.

Already, MSC has invested Sh2.5 billion in cane development to more than 104,000 farmers and supporting a community of over a million in four counties.

But the challenge is more than just ensuring steady supply of raw materials. Currently, there is a vicious war in the sugar sector over raw materials as new millers prey on ready sugarcane developed by other millers.

Kebati will certainly be scratching his balding head over this issue for a long time.

He, however, will not necessarily be starting on a new slate. As Kidero departs, to his credit he leaves behind a wealth of projects.

The miller has invested heavily in product diversification. Some of these products have since seen Mumias Sugar churn out ethanol.

In 2009, MSC started production of its own electricity. The surplus is fed into the national greed — helping to perk up revenue streams.

Power production

In the financial year ended June 2011, for instance, the miller earned Sh353 million or 2.2 per cent of total revenues for its sale of 86,717 megawatts to Kenya Power.

Under Kidero’s watch, the miller also successfully transitioned from being a State corporation to a private shareholding company listed at the Nairobi Securities Exchange.

The Sh436 million water bottling plant kicks off production this month while the Sh4 billion ethanol facility commences operations on June 1.

The company’s strategic location in the western Kenya gives it critical strategic advantage to market its bottled water products and ethanol not only to neighbouring counties, but also across the border into Uganda with coming of the East African Customs Union.

Kebati will therefore be looking to consolidate these achievements, up-scaling some of these projects as well as completing ongoing ones.

"My focus will be to consolidate the gains from our sugar business and complete the diversification into the new business lines," Kebati said.

"We estimate that net revenues from water and ethanol will contribute five per cent and 10 per cent of total annual revenue respectively in the coming years," he added.

Kebati says the venture into the new business lines is built around the company’s sugar production processes through value addition, a move that is expected to allow for cheaper production and higher margins.

The company generates electricity from bagasse – remnants of sugarcane – while ethanol will be produced from molasses, a by-product of sugar production.

He says Mumias expects to produce 22 million litres of ethanol per year targeting alcoholic beverage manufacturers, among other industries.