State to prosecute Mumias Managers

Mumias Sugar will fire and prosecute its management in a decisive twist that could also have current and past managers surcharged to recover stolen funds.

Agriculture Secretary Felix Koskei, has told The Standard on Saturday of an elaborate plan to revive the firm, including immediate replacement of top management, months after audit firm KPMG unearthed major scandals that forced the country’s largest miller to its knees.

“The legal process has taken its course on each and every individual that has been found culpable in whatever manner on what has brought Mumias to its knees,” Mr Koskei wrote. Already, the firm has announced vacancies to head all departments – almost seven months since chief executive Peter Kebati and commercial director Paul Murgor were fired.

Board Chairman Dan Ameyo, told ‘The Standard’ in June last year, that the duo were involved in criminal activities including illegal sugar importation in a scam that cost Mumias more than Sh1.1 billion. No charges have been brought before the two, while we could not determine if any progress had been made on threats of surcharging them.

But yesterday’s decision to sack even more executives was reached after years of investigation into the collapse of the miller by the agriculture committee of the National Assembly. A final report is, however, yet to be tabled amid claims of a split in the committee orchestrated by people who were implicated in the scandal, several committee members have told ‘The Standard’ in separate interviews.

In an attempt to show fresh resolve, Mr Koskei added that the State would ‘not watch as they walk free and enjoy ill-gotten wealth’ in his threat. He, however, did not reveal any names, but was specific about a board directive to replace top managers.

“The MSC board has already approved the advertisement and recruitment of staff with requisite competences, work ethics and culture to drive the company back to where we would all want to see it.”

Towards turning around the fortunes of the firm, Mr Koskei said that the State had come up with a bouquet of measures that would reverse the miller from the downward spiral it is on.

Among them is a Sh500 million bailout that would be released within the week to enable the firm in settling its current overheads. “We intend to engage all Government agencies such as KRA and KPLC to whom Mumias is heavily indebted to support the bail-out process by putting on hold any precipitate action a commitment that has already been demonstrated by other key lenders,” Koskei said of the firm’s saving grace.

Mumias is heavily indebted to the power distributor for outstanding electricity expenses, and to the Revenue Authority for unremitted taxes. The firm has sunk to its lowest, turning losses for successive years and losing more than half of its market share locally.

In just two years, the miller has reported Sh4.3 billion in cumulative losses – attributing the poor performance to illegal imports of sugar that complicated its marketing. Even with the claims from the management and board, Parliament had evidence that the firm’s bosses were culpable in the very fraud.

Several other individual traders have also been found to be repackaging imported sugar as Mumias’, the sugar subcommittee chair Florence Mutua, told ‘The Standard’ in a past interview.

Packaging imported sugar as Mumias’ means the company could be well spending on marketing and advertisement of products that it does not sell. Now, Mumias controls just about 30 per cent market share after the entry of smaller privately-owned millers such as West Kenya. As a result, the company has been unable to meet its basic obligations including paying for sugarcane deliveries and servicing debts.

Huge losses

Small millers, some not five years old yet, are already turning profits. Inability to service obligations has seen the board put out a plea to the State seeking bailouts, after talks with lenders to restructure debt and possibly provide new loans hit a snag.

Chief executive Coutts Otolo, said in a previous interview that the miller was on its knees and was badly in need to Sh2.4 billion from the State to stay afloat and sustain its operations. The request for additional funds had been submitted to the National Treasury, and that the company’s board was ‘hopeful the request will be addressed positively and urgently’.

The Agriculture ministry had reported that Mumias was grappling with low cane production and cash flow constraints the last year, which have led to its near closure. Investors in the company have reported huge losses after buying the shares at Sh49.50, before the stock went on a free fall to the Sh2.50-3.00 range.

At 0835 GMT, Mumias was trading 5.5 per cent higher at Sh2.95 a share on the Nairobi Securities Exchange.