WANTON PLUNDER

Why Mumias Sugar is on the deathbed

Farmers received debit payments because of the collusion by staff to pay ghost farmers instead of real farmers.

In Summary

•Poor governance resulted in loss of the much needed cash to pay cane farmers for their deliveries, leading to delays in payment that demoralised them and they started uprooting the crop from their farms.

•The commercial department diverted ethanol meant to be sold in Tanzania and also the imported molasses tankers never arrived at company,” reads the report unveiled on Wednesday.

Mumias Sugar Company Limited./file
Mumias Sugar Company Limited./file

Poor governance, heavy borrowing and investments in projects that never give returns are some of the causes of trouble at the ailing Mumias sugar company (MSC).

A report by a task force on the revival of the giant miller also blames the high cost of production and a poor farming model.

It further points at malpractices by staff at the miller that resulted in loss of millions as another cause of the financial turmoil the once premier miller is facing.

They include double procurement, single sourcing, overstating of books of account, inflated commercial activities, printing of books and fliers with renowned fraudulent companies compounded by poor record keeping.

“The Mumias Sugar Company Board, management staff, and suppliers have over time engaged in unprofessional malpractices that contributed immensely to the current state of the company. The commercial department diverted ethanol meant to be sold in Tanzania and also the imported molasses tankers never arrived at company,” reads the report unveiled on Wednesday.

The report says the agriculture department fraudulently acquired satellite fields, some which did not exist, paid ghost farmers in collaborations with the Information Technology (IT) staff, and overstated acreage firm inputs in collusion with the survey section, diverted firm inputs meant for the nucleus and farmers.

The staff diverted sugar and colluded with firms that distributed sugar to defraud the company. They inflated prices, offered sugar discounts beyond acceptable limits and participated in the purported sugar export of 2006–2012, the report says.

The report says that the company’s financial status started dwindling in 2013 largely due to mega projects that the company engaged in and whose return on investments has never been realised.

This took away the much needed cash to pay cane farmers for their deliveries, leading to delays in payment that demoralised them and they started uprooting the crop from their farms.

Farmers received debit payments because of the collusion by staff to pay ghost farmers instead of real farmers.

The report says that company staff started projects they could not complete. These include CCTV, IDMS, Ethanol, bagging machine, HT clocking system, recruited staff unprocedurally, failed to control board of directors expenditure and colluded with board members to open an account in Dubai that was used to deposit customer funds.

 

Company chairman Kennedy Ngumbau agrees with the findings, saying it unearthed what the management had already noted and handed the matter to relevant state authorities for action.

“We’re working together and complementing each other to revive the company because Mumias is bigger than the board or management or even the county government,” he said.

The company is technically insolvent as per the audited accounts for 2017/2018 financial year which puts the current liabilities stand Sh30 billion, while assets base of the company stand at Sh15 billion.  

Though the taskforce did not release names of those behind the plunder of the company, taskforce chairman Kassim Were revealed they had identified 15 names of individuals who should be investigated further by the Ethics and Anti-Corruption Commission.

The sugar report that was expected to lay bare the looting of the miller has thrice failed to be adopted by in Parliament.

The report says the poor governance by the management resulted in losses that triggered delayed or nonpayment for cane deliveries by farmers leading to them quitting cane farming.

The report identifies repealing of the Sugar Act 2001 with the enactment of the Crops Act 2013 that left the sugar sector without regulations to guide it, leading to confusion in the sector in general as a major gap in the performance of the sugar sector.

The regulation of sugar importation and tax waivers has continuously rattled the sugar industry in Kenya and contributed to the flooding of the local market with imported sugar, the report says.

The report also points at use of obsolete technology as a major cause of under-performance of public sugar millers.

The report also identified awarding of huge sums of money to suppliers and staff by courts as part of the reasons for its financial instability.

The report recommends a raft of interventions to turn around the once vibrant miller. They include involvement by the county government of Kakamega in the development of cane, negotiation with national treasury to surrender its 20 percent shareholding in the company to the county government to give it a foothold in decision making.

The report also recommends putting a caveat on community land hosting assets of the company to prevent them from being grabbed.

The task force report recommends that there be emergency management for one year, two years for restructuring and another two years for recovery before the company fully become operational.

The reports says the company can only be revived if the revival plan prioritizes change of governance [management], investment in cane development, engagement with lenders and creditors on viable debt payment plan and finally pursue capital injection for key areas of operation.