Millers grind into losses as workers are forced out to wait for better days
Unemployment has tightened its grip on the sugar belt as millers face difficult times.
”As we speak, the company still owes over 1,000 workers money accrued from 2017,” said the Kenya Union of Sugarcane Plantation and Allied Workers Chemelil branch secretary Paul Menya.
A spot check by the Nation Newsplex established that all state-owned sugar factories in Nyanza and Western Kenya are either shut or operating way below capacity and making losses.
Besides mismanagement and theft, for which the sector is historically known, many millers have recently faced difficult times in business.
Sony Sugar Company, currently not crushing cane due to a mechanical breakdown, has also been downsizing by neither hiring nor renewing contracts.
The prevailing turbulence in the sugar industry has seen the company accumulate close to Sh100 million in salary arrears of more than 2,000 workers for the last two months.
According to Kenya Union of Sugarcane Plantation and Allied Workers Sony Sugar branch secretary John Ogutu, the company owes farmers for the month of February and March. ”Workers were partially paid in February while the entire pay for March has not been remitted,” he said.
Mr Ogutu, who is also the union’s national deputy secretary general, accused the suspended managing director Bernard Otieno for misappropriating Sh335 million allocated by Agriculture and Food Authority (AFA) for factory maintenance. In the absence of Mr Otieno, no one from the management was willing to comment on the union’s allegations.
In Chemelil, frequent factory closures due to constant wrangles between company management and stakeholders has continually underused the company’s potential to create employment.
The firm has had its factory closed since mid-March, after farmers boycotted delivering their produce to the company over the delay to be paid Sh210 million due to them. Acting managing director Gabriel Nyangweso confirmed that this debt has since been taken over by the government as part of the Sh2.7 billion President Uhuru Kenyatta promised will be used to settle debts owed to all sugar millers. The President was speaking at the last Mashujaa Day in Kakamega. But Chemelil again failed to pay farmers some Sh61 million.
Mr Nyangweso added that the miller is also currently grappling to pay workers and farmers over Sh463 million accumulated in 2017 and 2018. Workers have not been paid for one year, according to the Union’s Chemelil branch secretary Paul Menya.
”As we speak, the company still owes over 1,000 workers money accrued from 2017,” he said. He also indicated that the company is yet to pay retirees millions of shillings in as pension from 2015.
The miller, with an installed crushing capacity of 3,000 tonnes per day, has been producing just about 85 tonnes of sugar daily, according to Mr Nyangweso.
The leading miller in the country Mumias Sugar Company, which has not crushed cane for one year now due to no cane supply, revealed that it will be leasing some of its non-core assets, such as water and electricity plants, golf course, Mumias Sports Complex, real estate with over 2,500 houses and a guest house, to boost revenue collection for the company as well as increase efficiency in management of the assets.
This was after a streak of loss making that saw the miller post a net loss of Sh15.1 billion in the 2017/2018 financial year up from Sh6.8 billion in the previous financial year, and a revenue of Sh1.4 billion even after the management put in remedial strategies.
The bad shape has seen the company trim its workforce from 1,500 to 500 between 2017 and 2019, majority being workers whose contracts were not renewed on expiry. Many positions that felt vacant due to natural attrition have also never been filled.
Mumias has blamed its current woes on heavy taxation and low production. ”The steep rise in loss was driven by a 101 per cent increase in impairment charges to our plant and machinery of Sh4.9 billion from Sh2.6 billion charged last year,” read part of a statement signed by board chairman Kennedy Ngumbau.
The Kenya Revenue Authority demanded a tax of Sh5 billion from the troubled miller, an increase from Sh2.7 billion in the same period in the previous year. The company had shut down its plant in the first and fourth quarters, leading to diminished revenue of Sh1.37 billion compared to Sh2.1 billion in the previous period.
The degradation of the sugar sector is a big concern in the sugar belt as it has been the main employer. Nyando MP Jared Okello however expressed optimism that most of the issues bedevilling the industry will be dealt with by the government sugar taskforce that has collected the views of different stakeholders in the country. ”Part of the taskforce mandate was to appraise the president on the indebtedness of the companies, among other issues facing the sector,” he said.
The government, through the Privatisation Commission has made efforts to privatize the state-owned sugar millers including Miwani and Nzoia in a bid to help them recover from their huge losses.