The troubled giant Mumias Sugar Company (MSC) is desperately in need of Kshs. 5 billion to stay afloat as brokers and opportunists go on rampage to flood the local sugar market with crippling tonnages of cheap imports.
According to sources from the company’s board of directors the company immediately needs Kshs. 2 billion to deal with the immediate financial challenges it is facing, but the balance to be staggered over the next five years.
A senior director who declined to be named said: “Let the government and Kenyans not be cheated that this company is no longer viable after the financial challenges it has gone through. Now we need this money to steer us to where we want.
“We are ready and all set to reclaim the lost glory of our company, but there are a number of critical challenges that we must all deal with right from the national to the county governments and stakeholders,” he added.
The Director says that the Kshs. 2 billion was required immediately and the rest disbursed over a period of five years. The money is specifically to be used for factory machinery maintenance and a massive sugar development programme across the region among others.
That is because over the years morale among sugarcane farmers in the region has plummeted to the lowest ebb due to delayed payments as the company struggles to keep afloat – a situation that has been worsened by rampant sugarcane poaching by millers without contracted farmers.
This means going back to the drawing board to restore the farmers’ confidence and also commit billions of shillings in the now collapsed sugar development programmes that used to be jointly executed between farmers and the millers sharing the costs before the phasing out of the Kenya Sugar Board.
The other issue is the fact that with mounting debts, the company was forced to use its factory machinery continuously without breaking for the routine annual closure for machinery maintenance and replacement of tired parts.
The end result was the fact that the over-exploited machinery got tired too and desperately needs replacement to keep the factory functioning efficiently in its production processes.
“Our biggest worry is that if the government delays releasing this money to us the situation will definitely degenerate and when that happens that can easily spell doom to our noble future plans for Mumias Sugar, “said the Director.
He argues that in the first place if the company had been bailed out immediately its financial problems started manifesting themselves and corrective measures taken it could not have ended up in the mess it is still currently wallowing in.
It has since emerged that the other critical challenges that are slowly but consistently consigning the industry to oblivion is the massive rampage in which the sugar mafia, brokers and all manner of opportunists have raided the sector to import cheap sugar to flood the local market.
According to industry players, the situation is so bad that the country’s sugar market is experiencing the worst glut it has never experienced in its history as fortune hunters from all walks of life seek to make a killing from the ailing sub-sector.
The MSC Chief Executive Nashon Aseka says: “The situation is so bad that virtually every miller in Kenya right from Mumias is stranded with hundreds of thousands of sugar in their warehouses that they cannot sell because the market is glutted with cheap highly mediocre quality sugar imports.”
Mr. Aseka says that the millers who are not bearing the brunt of these imports are mostly private entities with questionable backgrounds which are also involved in the importation floodgates and re-packaging the imports before selling them as their own.
Investigations by this writer established that the worst hit companies starting from Mumias Sugar include Nzoia in Bungoma County, Butali in Kakamega, Chemilil, Sony and Muhoroni factories in the former Nyanza province – most of them are state corporations apart from MSC which was privatized in the 2000.
These companies confirmed that they have stockpiles of the commodity that they have not been able to sell because of the sugar saturated market. Each was taking stock to determine the exact amounts of tonnage they had accumulated in unsold sugar since last year to date.
The Mumias CEO says that this state of affairs is putting the millers and the farmers at complete total cross-roads since former cannot pay the latter their dues on time as required and in the process killing the farmers’ morale.
“This is not just about sugar alone, but the situation is so bad that other by-products like ethanol are also adversely affected by cheap imports. We have been stuck for long with thousands of tonnes of ethanol that we produced worth more than Kshs. 700 million but we have nowhere to sell it because the market is flooded with cheap imports,” says the Mumias CEO.
He warns that if this state of affairs is not immediately brought under control, the future of the local sugar industry may be doomed because once the farmers’ morale is completely destroyed it will be extremely difficult to restore it just like it happened to the country’s cotton industry in the 1970s.
Though the Sugar Directorate had in March last year warned that the country may experience a 1.9 million tonnes of sugar deficit by this year, it did not report which measures it had put in place to meet this looming challenges.
The directorate says that the country annually produces 600, 000 tonnes of sugar everything being equal, against an ever rising annual consumption that had reached 800, 000 tonnes by the end of last year but does not say how low production considering the challenges facing the industry.
The Directorate Managing Director Jane Odhiambo says the huge deficit was occasioned by the acute shortage of sugarcane that virtually each and every miller was facing, the worst hit being those that are still state corporations.
Ms. Odhiambo says: “All these millers were badly hit by an acute shortage of the raw material sugarcane. The worst affected being Mumias because of rampant poaching of sugarcane by rogue millers from its contracted farmers though stakeholders are working hard to stem this problem.
She agrees that in view of the looming huge deficit of the commodity, that was a very attractive recipe for the mafia like cartels, brokers, and all kinds of opportunists to swing into action to exploit the situation.
According to our investigations the situation has been made worse by rampant corruption, total lack of enforceable legislation to control the sector, total lack of control and enforceable systems by the Sugar Directorate, deadly stranglehold of the sub-sector by powerful corruption/import mafia like cartels.
What is clear is the fact that the Sugar Directorate which is supposed to be the regulatory authority of the sub-sector does not have any teeth to bite, a situation that was worsened when the Sugar Act was repealed under the new constitutional dispensation.