Painful death of sugar miller that reigned for over four decades

Wednesday March 18 2020
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The Mumias Sugar Company. It was placed under receivership on September 24, 2019. FILE PHOTO | NATION MEDIA GROUP

By PAUL WAFULA

Huge rollers that once pressed sugarcane juice out of the shredded stalks at Mumias Sugar Company are rotting away.

Machines are quiet. The smoke that once punctured the blue sky above them is gone.

After years of disuse, plunder and wastage, nothing at the giant sugar miller has been spared the rust attack. From boilers to an expensive 60-metre long diffuser that set the firm apart are being eaten away.

EXTRAVAGANT

Hard-to-find expensive spare parts are missing, having been stolen and sold for a song as scrap metal.

Monkeys are perhaps the happiest creatures still standing at the dilapidated factory.

They swing from one rusty structure to the other, wagging their tails and chattering cheerfully, interrupting the deafening silence that has replaced the clinking and clunking of machines as they crushed sugarcane into juice in the factory’s heyday.

Everywhere you look, the spectre of neglect and destruction that has been wrought on what was once an economic prosperity zone for western Kenya stares back.

The neatly trimmed grass has overgrown into wild bushes. Shrubs have replaced flower gardens. Beautiful hedges that fenced off staff houses from the rest of the establishment tell the sad tale of the miller’s mighty fall.

Hundreds of trucks that ferried sugarcane into the factory and sugar to warehouses are nowhere. Instead, trees are growing at some of the car parks.

An extravagant Sh800 million office block stands abandoned and is slowly chipping away, as debts deny employees the opportunity to use it.

UNMOTIVATED

Unpaid and unmotivated staff who still have the courage to come to work have to jump the tall grass almost window high as they go into their cold, old and squeaky offices.

This is the story of the slow and painful death of a miller that for over four decades, put smiles on faces of millions of families.

Mumias once controlled more than 60 per cent of the market. It dreamt big, expanded and spread its tentacles, across the country.

It had billions in its bank accounts and sugar on supermarket shelves all over the region.

Not knowing what to do with the billions of cash reserves accumulated from its profits, the firm pumped Sh4.5 billion into a new distillery.

It threw more billions into an ethanol plant and would put up a 26 megawatts co-generation power plant to sell electricity to the national grid. To top this diversification strategy, it went into the bottled water business, a natural fit for any miller.

That was not all. Mumias sold two of its smaller plants that had sustained it during its humble days to its rivals, a decision that would later come to haunt it.

BUYING RIVALS

It would then build an office at inflated costs, which would be another pain point when it neared its completion to join the growing list of white elephant projects.

In 2009, two years before its downward spiral started, the firm opened its purse strings wider and announced an ambitious five-year Sh30 billion expansion plan that would have seen it set foot in Uganda and Tanzania.

It also set its sights on buying a number of rivals, including its next-door neighbour at the time, Nzoia Sugar Company. The firm also eyed a Sh24 billion sugar and biofuel project in Tana River that would have seen it plant cane on 20,000 hectares at the Kenyan coast.

That was until rain started beating it.

By 2011, the company was seen as too big to fall, or so it appeared.

It had money to do almost anything it wanted. It paid its staff on time and subsidised sugarcane farmers by providing seed cane, fertilisers and other inputs.

It then started throwing money into projects that it could not complete among them the bagging machines and the HT clocking system as it recruited staff unprocedurally.

TENDERS SCAM

By 2013, when the first signs that the fortunes of the miller were starting to dwindle came to the fore, almost everything was going wrong behind the gigantic gates of the firm in Mumias, Kakamega County.

Its rivals that had just set shop next door were poaching its cane growers with impunity. Some would set up a weighing bridge just metres from its operation zone from where they dangled better prices for cane to contracted farmers of the miller.

Within the company, a bloated and unproductive workforce was bleeding its payroll. And then plunder set in.

The procurement department dished out contracts unprocedurally.

Politicians and staff were some of the major beneficiaries of the blatant procurement irregularities that rocked the firm. Insiders recklessly invited companies out of the list of pre-qualified companies to apply for and in some instances were awarded tenders running into millions of shillings.

INSOLVENCY

The finance department would cook books through creative accounting to hide the financial headwinds that had hit the firm.

Most of the theft and procurement scams at the firm happened between 2011 and 2014. One of the most shocking was when 1,497 trucks left Mumias Sugar Company’s warehouse between 2011 and 2014, but were diverted on the way to the miller’s other storage centres across the country and disappeared.

One of the internal audit reports had found that there were no procedures put in place to ensure sugar was delivered to the appropriate destination.

SLOW DEATH

For over five years, the firm has been in the red, reporting losses year after year, and moving closer to its grave.

But it was not until 2018 when the firm sunk into insolvency to the tune of Sh6 billion after making further losses.

Reports by Parliament to revive the miller are gathering dust on the shelves.

The miller's cry for bailouts has been met by bureaucracy and red tape that has seen it receive funds too late only to be swallowed by debts and forcing it back with a begging bowl.

Without money, Mumias has been unable to upgrade its ageing machinery and pay farmers for their cane.

In the last five years, the factory has had more days when it remained shut than running.

The taxman has not made the death less painful. The Kenya Revenue Authority (KRA) moved to freeze its bank accounts, further crippling it, demanding its dues even when there was clearly nothing it could give.

With its bank accounts frozen, it was just a matter of time.

That day happened this week, when KCB moved to place it under receivership, its last nail on the coffin.

Its fate now appears sealed, as no sugar company in Kenya has ever come out of receivership.