The Kenyan government has said it will provide U.S. $55 million dollars to revive Mumias Sugar Company, the country’s largest sugar miller.
Deputy President William Ruto said in a statement issued in Nairobi that the funds will help the turnaround cash-strapped miller, which accounts for close to a third of Kenya’s annual sugar production.
“We have to take these measures so that farmers in the region can be paid for delivery of sugarcane,” Ruto said after holding day-long meeting with senior government and company officials and representatives of creditors.
Ruto said the turnaround, to be paid for by shareholders and the government, will involve the retrenchment of about 300 staff and the weeding out “sugar brokers” who have made the prices of sugar from the company uncompetitive.
The deal, struck with the company’s lenders in a meeting chaired by Ruto will see more than 50 per cent of the board sent home and changes in the firm’s management.
“Audit firm KPMG will be appointed to oversee the restructuring that will see issuance of a rights issue to inject 44 million dollars to the ailing factory,” the statement said.
The restructuring will start immediately with the board directed to notify shareholders of an Annual General Meeting and appointment of the audit firm.
Mumias posted a loss before tax of 37.3 million dollars in 2014 with a loss of 24.2 million dollars the previous year, which the company blamed on weaker sugar prices.
The firm, whose sugar output accounts for about a third of Kenya’s annual sugar output, said net revenues for the period to end December fell 62 per cent to 29.3 million dollars.
The loss was attributed to cane poaching; fewer deliveries to the factory by farmers who blamed the firm for this, adding that it did not provide them with inputs to support production.
Ruto requested members of the board to voluntarily resign for failing the company or they will be fired.
The decision came just a day after farmers held violent demonstrations in an attempt to evict the management, whom they accused of failing to pay them for cane deliveries.
Ruto said the sugar company has to provide farm inputs at the right price and also sell its sugar at competitive prices.
Mumias Sugar Company’s current status is attributed to mismanagement.
The sugar miller has also been plagued by fraud perpetrated by some of its former executives who were involved in illegal sugar importation that cost it 110 million dollars further worsening its financial position.