The Kenya Revenue Authority has issued a notice to bankers restricting transactions on accounts of the cash-strapped Mumias Sugar Company (MSC) in a bid to recover Sh10 billion in unpaid taxes.
The amount demanded by the taxman has been outstanding since 2012 and MSC management is reported to be negotiating on how to resolve the issue.
In a memo to employees of the company, dated August 30, 2019 acting Head of Human Resource John Shiundu said: "As management was processing payment of salary advance to employees, the Kenya Revenue Authority issued an Agency Notice to all our bankers restricting transactions until Sh10 billion in taxes outstanding since 2012 are settled in full."
The latest development has crippled ethanol production which the company was relying on to generate some revenue to sustain operations and pay workers salary advances.
Mr Shiundu told the Nation on Monday that the management of the miller was expected to meet their KRA to resolve the issue.
"It is unfortunate that this is happening when we had planned to pay our employees salary advances. The management is focused on resolving the issue in the shortest time possible and is committed to paying staff advances as promised," said Mr Shiundu.
A source told the Nation that they noticed there was trouble after a client deposited Sh3 million into the miller's account last week to be supplied with ethanol and the amount was immediately recovered.
Mumias Sugar Company board chairman Dr Kenneth Ngumbau Mulwa promised to issue a statement later.
“The latest move by KRA has left the miller is an awkward situation but we are doing our best to have the issue resolved so that we can resume ethanol production to keep operations at the factory,” he said.
The financial woes the miller is grappling with deepened after Kenya Power disconnected electricity to the firm over over an outstanding bill amounting to Sh1.2 billion.
Kakamega Governor Wycliffe Oparanya is expected to unveil a report prepared by a taskforce he appointed a month ago to come up with recommendations on the revival of the debt-ridden firm.
Governor Oparanya is expected to release the report in Mumias town on Wednesday.
According to recommendations, the revival plans is to be implemented in phases.
The taskforce recommends that a cane development plan of 10,000 hectares in needed annually in the miller's catchment to sustain operations.
The 13- member taskforce met various stakeholders including farmers, their representatives, board members, former managers of the sugar firm and shareholders.
The team met in Kakamega County before heading to Nairobi for sessions with creditors and suppliers of MSC in the last one month.
Governor Oparanya is spearheading a campaign to encourage farmers who had abandoned cane farming in the region to resume planting of the cash crop.
Lawyer Francis Kadima said the Mumias Sugar Company board should embrace the ongoing revival strategy initiated by Governor Oparanya to ensure farmers resume planting of cane as part of the strategy to turn around the troubled sugar sector.
"One of the critical things that needs to be addressed at this stage is the scrutiny of agreements entered into to address legal loopholes that could cripple the turnaround strategy for the miller," said Mr Kadima, a resident of Mumias.