How Mumias plans to spend Sh1b bailout and raise more money

Debts owed to cane farmers contracted to Mumias Sugar Company will be paid first before the company embarks on renovation, firm’s managing director Coutts Otolo has announced.

The sugar miller owes farmers Sh600 million. This follows the Government’s release of Sh1 billion bailout for the company, which was staring at closure due to lack of funds to run operations.

“We are going to pay farmers first. Part of the balance will be used to buy spare parts for renovations to enhance cane crushing capacity,” said Mr Otolo.

Facing serious financial crunch, the company failed to pay farmers on time. This became worse when the company stopped supplying electricity to Kenya Power. The miller has the capacity to produce and supply 24 megawatts of power to the national power grid.

The Government blames the crisis on former managers. Acting Agriculture Cabinet Secretary Adan Mohamed blamed the former management for the financial woes facing the company, warning that the Government would pursue and prosecute them.

“Mumias Sugar had major issues with its governance making it hard to meet its financial obligations. We have many options to revive the company and the Government has decided to work with lenders to achieve long term sustainability,” said Mohamed.

However, Sh1 billion is not enough to resuscitate the country’s biggest sugar miller since it needs at least Sh10 billion to enhance its operations and performance.

According to Mohamed and Otolo, the Sh1 billion was urgently needed to rescue the company from collapse. The company is expected to raise between Sh3 to Sh4 billion through a rights issue.

“The company needs more funds. We expect it to raise at least Sh3 billion through the rights issue to modernise and return it to normal performance,” Mohamed said.

Cane poaching

Otolo said the Government has agreed to underwrite the rights issue to help the company raise more funds. Farmers contracted had earlier asked the company management to give more emphasis on their payment.

Bishop Beneah Salala of Anglican Church of Kenya (ACK) Mumias Diocese, said farmers have been marginalised asking the company to pay their accrued debts first. “I laud the Government’s move to release Sh1 billion towards Mumias bailout. Debts owed to farmers, transporters, cane harvesters among other creditors should be given priority. Farmers’ confidence in the company should be restored by being paid on time,” Bishop Salala said.

“Mumias Sugar Company is essential for the economic growth of this region and the whole country. More than 500,000 families rely on the company,” Joseph Barasa, a farmer allied to the company said the Sh1 billion bailout will salvage the company from collapse.

“The Government’s move will particularly restore the company’s confidence in its more than 50,000 contracted farmers who have not been paid their dues for months,” said Barasa.

He said delay to pay farmers has led them to sell their cane to other sugar millers, fueling the cane poaching crisis.

“If farmers are paid on time then cane poaching will be reduced, this will save Mumias which has invested a lot in cane farming,” he said.