Debts owed to cane farmers contracted to Mumias Sugar Company will be paid first before the company embarks on renovation, firm’s managing director Coutts Otolo has announced. The sugar miller owes farmers Sh600 million. This follows the Government’s release of Sh1 billion bailout for the company, which was staring at closure due to lack of funds to run operations. “We are going to pay farmers first.
Part of the balance will be used to buy spare parts for renovations to enhance cane crushing capacity,” said Mr Otolo. Facing serious financial crunch, the company failed to pay farmers on time. This became worse when the company stopped supplying electricity to Kenya Power. The miller has the capacity to produce and supply 24 megawatts of power to the national power grid.
The Government blames the crisis on former managers. Acting Agriculture Cabinet Secretary Adan Mohamed blamed the former management for the financial woes facing the company, warning that the Government would pursue and prosecute them. “Mumias Sugar had major issues with its governance making it hard to meet its financial obligations.
We have many options to revive the company and the Government has decided to work with lenders to achieve long term sustainability,” said Mohamed. However, Sh1 billion is not enough to resuscitate the country’s biggest sugar miller since it needs at least Sh10 billion to enhance its operations and performance.
According to Mohamed and Otolo, the Sh1 billion was urgently needed to rescue the company from collapse. The company is expected to raise between Sh3 to Sh4 billion through a rights issue. “The company needs more funds. We expect it to raise at least Sh3 billion through the rights issue to modernise and return it to normal performance,” Mohamed said.
Otolo said the Government has agreed to underwrite the rights issue to help the company raise more funds. Farmers contracted had earlier asked the company management to give more emphasis on their payment.
