Pan Paper needs to succeed

Thursday May 19 2016

By BANKELELE
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Last month, the government announced that it had accepted a private investor’s bid to revive the Pan African Paper Mills in Webuye, Bungoma County.

Subsequently, the government handed the facility over to the Rai Group, who, through a subsidiary, will invest to revive the plant.  This was welcome news for the town, ending a seven-year wait for the plant to reopen. Rai will start the plant with a staff of 150, mainly guards.

Reviving a plant is not an easy thing. Often, the machinery that investors find is unproductive, broken or outdated.

So they have to install modern, more efficient machines, find skilled staff to hire and persuade them to move to the town, order new supplies and rebuild links to the local businesses and the community.

Rai hope to start one production line in a few months and hire up to 1,500 employees.  They and other investors have to make the right decisions, hope their projections and estimates are correct, process materials, sell products to markets that are ready to pay, and ship them.

At their height, what factories like Pan Paper and other large investments like universities do is give economic boosts to towns and rural communities. A recently released independent report about Base Titanium and their Kwale processing plant showed that the investment had created with 3,400 jobs and Sh5 billion worth of infrastructure.

The plant, over its decade-long life, will pay about Sh19 billion to Kenyan suppliers and companies and about Sh23 billion in taxes to the government. 

JUGGLING BAILOUTS

You could argue that Eldoret has been boosted by the presence and growth of Moi University. The presence of these institutions has spawned support business like supermarkets, schools, hospitals, and houses.

When on the other hand, a factory shuts down prematurely, it’s devastating for a community. Towns across Kenya including Kwale, Kisumu, Nanyuki, Thika, Nakuru and Naivasha are littered with stalled plants and factories like Webuye’s once was.

These are factories whose owners got things wrong, or who did not keep up, or for whom macro-economic conditions or exports markets changed. Some just ran out of working capital to survive prolonged downturns.

They are now empty factories with locked gates, dusty, rusty, old machines and small teams of guards left there in a futile attempt to stop vandalisation of bits of the factory for scrap and building material.

When the machines go silent, hundreds or thousands of workers are laid off, no mores supplied are ordered, and schools and hospital shut down as a result.

At the Base company event, Mining CS Dan Kazungu also mentioned that some of the best schools and hospitals in Kajiado are operated by the Magadi Soda Ash company.

If factories close, the land they occupy becomes prime targets for speculators, who move in, sometimes using squatters as a front, to claim the idle land.

The factory investors, who are battling with old employees claiming their terminal dues, former suppliers seeking payments, and banks who want the debts paid, often can’t fend off these land-grab attempts.

At the time the Pan Paper deal was being concluded, Parliament set aside Sh650 million in the budget to modernise and restructure the Kenya Meat Commission.

According to a 2006 article in The Standard, as far back as 1967, Kenya Meat Commission had juggled bailouts alongside government moves that apparently crippled it, such as licensing competitors and directing KMC to trade at uncompetitive prices.

Reviving a factory is not easy. Nor is building a new one. Many governors have announced that new factories would be built in their counties but how many have come about as a result?

Best wishes to Pan Paper, Base Titanium, Kenya Meat Commission and any other investors who break ground on new factories.

Twitter: @Bankelele