Poverty ravages Muhoroni after sugar millers collapse

It is a bitter life for residents of Muhoroni, Kisumu county, who now wallow in poverty following the collapse of once thriving sugar firms.

Three state-owned sugar companies namely Muhoroni,  Chemelil and Miwani are in Muhoroni subcounty.

Cane farmers and locals who depended on the sugar millers for their livelihood painfully narrate how life has become difficult for them.

John Otieno, 53, a resident of Miwani said life is very hard due to the collapse of the factory. He said they can hardly put food on the table. “Cane farming was profitable. Things changed when Miwani collapsed,” he said.

The firm, he said, was the main driver of Miwani town’s economy. It was placed under receivership in 2000, crushing the hopes and economic survival of many residents.

Miwani that was full of life has become a ghost town.

The situation has forced a number of farmers to abandon cane farming for other crops. Julia Apondo, 59, said they’re now suffering as poverty continues to bite after the factory was shut down.

“There is no money in circulation like when the engines were roaring,” Apondo said.

Kenya National Chamber of Commerce and Industry director Felix Minda said the collapse of the three state-owned industries has made life miserable for residents.

In the early 1990s, businesses thrived in the towns hosting the millers but little activity is found in any of them currently.

Minda said the circulation of money is too low in the towns as those with loans are unable to pay. “The economy of Muhoroni is completely run down. Workers, farmers and business people hardly make ends meet.”

The chamber has appealed to the government to act swiftly and invest more in the industries to revive them.“This will greatly improve lives and businesses in Muhoroni,” Minda said.

He called on the government to hasten the privatisation process of the public sugar industries which has lagged behind for 18 years due to lack of political goodwill.

“If privatisation cannot be realised then an executive order should be issued to reinstate the original owners of these companies," he said.

Muhoroni was managed by Mettah Group while Chemelil was under Booker Tette International.

Minda asked the government to create an economic stimulus fund to support the local economy in cane growing zones.

Pending privatisation, the government should allocate Sh1 billion for cane development in Chemelil and Muhoroni millers.

The government, he said, should reconstruct all the 560km sugar belt roads as a way of creating investment to boost the local economy.

The three milleers, Minda said, were the main drivers of Muhoroni constituency's economy but are no longer productive.

Leaders and residents have largely blamed the collapse of the industries on obsolete machines and huge debts.

They also blamed cane poaching by private millers and cheap sugar imports.

Miwani, under receivership since 2000, and Chemelil are not operational. Chemelil managing director Gabriel Nyangweso recently said they need Sh258.7 million to resume operations.

Chemelil stopped operations on March 11 after farmers refused to supply cane over accumulated arrears. The machines are also obsolete and require replacement or thorough maintenance.

Nyangweso said Sh82.7 million is required for factory maintenance, Sh73 million to clear farmers arrears, Sh37 million for cane purchase and Sh20 million to clear an outstanding electricity bill.

The company also needs Sh844 million to pay its 600 permanent workers and 469 casuals. He said the company is on the verge of insolvency unless quick action is taken.

He said creditors may soon institute liquidation proceedings to recover owed amounts. The company's funding request has been submitted to the Ministry of Agriculture.

Nyangweso said the factory ran for six years without any major maintenance, which has significantly affected its efficiency.

For the last 19 years the factory has carried out maintenance only five times intermittently, Nyangweso said.

“The last comprehensive maintenance was undertaken in 2013. Commodities Funds loaned the company Sh248 million in 2016 which was used for partial maintenance of the factory,” he added.

Nyangweso said the factory has been operating at a loss because of years of non-maintenance.

Muhoroni, which operates partially, owes workers Sh312 million. It faces cane shortage and financial constraints.

“With the 17 months of salaries in arrears, employees are in a deplorable financial situation. They can hardly afford to provide daily meals to their families and can no longer keep their children in school,” he said.

“The factory has to stop every time a breakdown occurs, thereby occasioning tremendous losses. Sugar recovery has become poor, pushing the cost of production over the roof.”

The six-year average cost of sugar production since the 2013-14 financial year is Sh106,396 per tonne compared to the average ex-factory net sugar price per tonne of Sh68,880 over the same period.

Over the last six years, the company has experienced declining sugarcane supply, depressing ex-factory sugar price and high cost of production

The company has had to suspend milling operations for periods of between five to seven consecutive months each financial year since the 2016-17 financial year.

“The unavoidable results are accumulating operating losses, inadequate cash for operations and accumulating liabilities,” Nyangweso said.

He wants a restriction on sugar imports as well as hastening the privatisation process and gazetting sugar regulations to salvage the deteriorating industry.

Countrywide, workers in state-owned sugar companies are owed about Sh2.8 billion in salary arrears by Chemelil, Muhoroni, Sony, Mumias and Nzoia millers.

Chemelil workers union secretary general Paul Menya said they are unable to pay school fees and feed their families. He asked the government to ensure all their dues are cleared.

Muhoroni owes workers Sh312 million inclusive of retirement benefits and terminal dues.

The company’s receiver manager Elisha Ooko said they are unable to hire and retain staff due to current status.

He asked the government to control cheap sugar imports.

“We have a high labour cost that consumes an average of 23 per cent of all revenue generated against an acceptable 15-17 per cent. This is due to old technology and CBAs that do not include labour productivity factor,” Ooko said.

Muhoroni MP Onyango Koyoo blamed the government for the collapse of state millers in Kisumu.

He said the government has for many years failed to effectively tackle issues bedeviling the sugar firms.

“Farmers are not being paid well because of low production at a high cost. Locals are now left wallowing in poverty,” Koyoo said.

He questioned why the government continued to post inept managers to the millers.

The sugar industry, Koyoo said, will not pick up even if they are privatised if the government cannot control the imports of cheap sugar.

He noted that sugar barons have taken advantage of sugar deficit to import thousands of tonnes into local markets thereby killing public firms.

“Why is it that some unscrupulous traders are allowed to import cheap sugar at the expense of government industries? Who is protecting them?” Koyoo said.

He called upon legislators from the sugarcane growing areas to stand up despite the handshake and demand for the revival of the sector.

He further announced that pending payments for Muhoroni will soon be paid out. More than Sh300 million have already been allocated by the Treasury to clear the arrears, he said.

Koyoo told the management of the factory to ensure that sugarcane farmers and workers get their pay first before they can start paying suppliers.

Koyoo told the government to offset workers' dues and also pump in money to revitalise the company before it is privatised.

“We are not opposed to privatisation but it must be done properly and in accordance with the law,” he said.

Koyoo said any attempts to deliberately shut down the factories so as to sell it cheaply to an investor will be resisted.

“Muhoroni and Chemelil must be made vibrant in production before they are sold. We cannot accept plans to sell them as scrap metal,” he said.

Kenya Sugarcane Growers Association secretary general Richard Ogendo said the removal of the Sugar Development Levy was largely to blame for the poor performance of public companies.

“The major problem is lack of finance. Factories have no money for maintenance and cane development like before,” Ogendo said.

The factories, he said, were self-financed before SDL was abolished. “These firms cannot get cheap loans to develop cane and repair machines to produce high at low cost.”

Many workers, farmers, cane cutters and transporters are jobless due to poor production. “The fate of farmers depends on private millers. They have no option but to accept payments set by private millers,” he said.

Kenya Union of Sugar Plantation and Allied Workers general secretary Francis Wangara said workers were suffering over salary arrears. He said that they are languishing in poverty.