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Mumias Sugar Company seeks government bailout as COTU's Atwoli cries foul

By Standard team | June 8th 2015 at 00:00:00 GMT +0300

Mumias Sugar Company may be forced to shut its factory unless it gets the Sh1 billion it was promised by the Government soon, the Central Organisation of Trade Unions (COTU) has warned.

"Strategically placed individuals within the Government are blocking the release of the funds to Mumias Sugar and are already plotting to buy off the sugar firm upon its closure and eventual collapse," said COTU Secretary General Francis Atwoli in a statement to newsrooms yesterday.

Confirming the crisis, the sugar miller's Managing Director Coutts Otolo told The Standard he was unable to pay transporters on time because of a biting cash crunch that could only be eased through the promised State bail-out.

“Some transporters have pushed for payment and are holding the company at ransom. The issue is transport and other unions, and unless it is resolved, it is affecting us. It has now become urgent,” said Mr Otolo.

The Government had promised to release Sh1 billion to help the ailing company as it floated a rights issue in a bid to raise Sh3 billion for operations and clear its debts. The plan to raise more funds through the Nairobi Securities Exchange was first mooted at a meeting held in Kisumu a month ago.

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Roadside declaration

The company has drawn up a five-year restructuring plan to revive its business and is in discussions with a number of banks on how to repay a debt of Sh6 billion.

Funds from the rights issue will be used to clear farmers' arrears of up to three months and pay for plant maintenance among other activities even as the company implements several measures to increase income from its water plant, ethanol and co-generation projects.

Mr Atwoli urged Members of Parliament from Western Kenya to push the Government to honour its promise to bail out Mumias Sugar as over 500,000 families depend on the firm.

“If the firm collapses, many families across the country risk losing their source of livelihood besides the millions of people that depend on the firm both directly and indirectly in Western Kenya and outside. The education of children who depend on cane farming will also be affected,” Atwoli said.

In January, Finance Cabinet Secretary Henry Rotich said Treasury, after a series of meetings with the sugar miller's top managers, had agreed to bail out the firm by giving it Sh2.3 billion.

In return, the miller was to provide a restructuring plan that would convince the Government the money would not go down the drain.

Atwoli said similar promises by the Government to Pan Paper Mills in Webuye were never met, leading to the factory's collapse.

“We are sure that soon after the collapse of Mumias Sugar, Nzoia Sugar Company will follow and this will no doubt be the worst deal Kenyans will have received from its Government. It will be an uphill task for anybody to revive these plants as the production and distribution chain and the economy will be affected,” he said.

He appealed to President Uhuru Kenyatta to intervene and save Mumias.

“Let the Government equally tell Kenyans if the Sh1 billion pledge promised was a roadside political declaration or real,” Atwoli said.

Mumias Sugar Company has been facing a serious financial crisis owing to its alleged mismanagement by former top managers, causing the firm to default on the repayment of debts owed to farmers, bankers and other creditors.

The Government had earlier promised to inject Sh1 billion in the company in a bid revive the country's giant miller.

But Navakholo MP Emmanuel Wangwe says President Uhuru Kenyatta asked western legislators to ensure the company allowed KPMG to audit its finances.

"The Government agreed to give the company Sh1 billion, which will be released very soon to help in its revival. We asked the company's management to allow KPMG to audit any operations before they allocated the money," said Mr Wangwe.

He said the Government also agreed to settle the balance after the company receives other funds from the rights issue.

"The Government has promised to top up the balance to ensure the company becomes fully operational again," he said.

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