Troubled Mumias receives Sh500 million from Treasury

Mumias Sugar Company Board Chairman Kennedy Ngumbau Mulwa(left) flanked by new Managing Director Nashon Aseka(right) during their board meeting at the miller on June 15th, 2017. (Photo: Chrispen Sechere/Standard).

Struggling sugar miller, Mumias Sugar Company has received Sh500 million from the Government to help it deal with a biting cash crunch that has seen it remain closed for over three months.

The cash-strapped miller, which has not paid staff for more than four months now, is also unable to pay duty for a spare part it imported to help it complete its factory maintenance to allow it resume operations next month.

But the Sh500 million is a drop in the Ocean given that it has salary arrears of more than Sh250 million to date. Currently, the firm has a monthly staff bill of about Sh68 million.

Its new chief executive officer, Nahashon Aseka, said in an interview with The Standard last week that the firm needs at least Sh5.2 billion to jump-start its operations.

Insiders said Mumias shut down three months ago under the pretense that it was closed for maintenance but its main problem was lack of cash. The previous bailouts from the Government have been swallowed up in paying the mountain of farmers’ debt that continues to accrue.

The situation has not been helped by the unreliable disbursements from Treasury, which often come a little too late or in amounts that are not sufficient to deal with its problems.

Mr Aseka took over mid last month, to find a company that was on its knees that could neither pay its staff or suppliers and had lost nearly all the goodwill it had from its lenders to get a fresh debt to revive it.

“The situation of the company is dire. We require a lot of goodwill and assistance to get back to normal,” Aseka said. The man who took over the miller recently said the downfall of the miller began at least 10 years ago. He said the miller is currently paying for the pain it caused its farmers over the years that has contributed to its current cane shortage that is threatening to cripple the miller.

CEO never returned

“This is the biggest cane shortage we have ever experienced and we were late in starting to deal with the problems. Sugarcane is a very bulky commodity and we do not have the luxury of sourcing for it in all parts of the country,” he said.

Mr Aseka is the fourth managing director at Mumias since the exit of Dr Evans Kidero in 2012 to contest for the Nairobi governor seat. Kidero was succeeded by finance manager Peter Kebati, who paved the way for Mr Coutts Otolo. The board then replaced Mr Otolo with former MD Erroll Johnson who went on leave and never returned.

One of the immediate tasks of the new boss is to find ways of cutting down its wage bill and switching on the machines to start crushing cane. Aseka said due to the cane shortage, the firm will be crushing in turns and stopping until it gets sufficient stock of cane to resume crushing.

Despite spending nearly a billion shillings from the previous bailout package to pay farmers, the firm has choked up fresh debt that is nearly overtaking what it previously owed.

A farmers lobby said failure by the outgoing CEO to clear over Sh700 million arrears owed for cane deliveries had made many farmers uproot the crop. Some officials of the Kenya National Federation of Sugarcane farmers have also said that the current acreage cannot sustain the factory for three months in a row.

In February, the company reported a half-year net loss of Sh2.92 billion in the period ended December 2016, compared to Sh1.56 billion the previous year. The miller had so far received Sh3.1 billion from the Treasury to steer it back to profitability and the current disbursement raises it to Sh3.6 billion.