Old machinery: Money drain, staff cash cow

The future of public sugar mills is as weather-beaten as the rusty machines they use to feign life — an endless pit that consumes billions of shillings of taxpayers’ money.

When the task force ordered by President Kenyatta to look into what ails the public sugar mills gets down to work, these ageing machines will stick out like ancient monoliths.

The five mills, with unquenchable appetite for financial bailouts, are reeling under decades of endless patch-repairs, which have left them with terminal breakdowns. Two have since died and the remaining five limp on with difficulty.

Indeed, Nation has established that the multimillion repair and maintenance business is the new cash cow for public sugar mills.

The task force will most likely find that some of the billions of shillings pumped into trying to revive the mills are used to buy spare parts with the connivance of insiders.

Unscrupulous employees

It is unscrupulous employees who often help themselves to the bailout money, according to insiders who spoke to Nation.

COSTLY BREAKDOWN

With an average age of 59 years, a visit to any of the public millers leaves one with the impression of a well-managed museum: Rusty, manual-operated and inefficient machinery with costly breakdowns and repair cycles that hurt production.

Miwani Sugar Company, which was first built in 1922 by Devji Hidocha, last roared to life 17 years ago and all that remains are rusty metals, the old smokestack and overgrown vegetation around the collapsed miller.

The same fate befell Ramisi Sugar Company some 30 years ago. The rest are limping on with breakages being the order of the day. The old machines have been overtaken by technology and trail the newly-installed mills run by private millers whose efficiencies have not only boosted their economic survival, but also endeared them to farmers in the intense battle for raw materials.

Muhoroni Sugar Company, which was set up in 1966, has, for instance, been running in expensive starts and stops. Most machine parts are worn out, and costly breakdowns have left the firm begging for a Sh660 million bailout to fund its survival with some Sh83 million just to sustain its rolling urgently needed.

After seven months of silence, more debt piled up and the machine’s wear and tear is still the elephant in the room. The firm’s new receiver-managers believe that the biggest solution for the investment will be the purchase of at least one new machine out of the four ageing mills.

EXTREMELY EXPENSIVE

“Stopping and starting this kind of a machine is extremely expensive. The reason why we stop is partly due to machine breakdown or lack of cane. It is not easy to convince farmers to bring their cane for crushing when you still owe them,” Engineer Francis Ooko, one of the receiver-managers said

“So, either way, we have to be ready to mill fast and efficiently to meet these costs and unlock the supply. We are even thinking of leasing one machine just to ensure the mill never experiences these expensive stops,” he added.

Neighbouring Chemelil Sugar Company, started in 1968, is no different. When Nation visited it in September 2016, the then managing director Charles Owele narrated how some spare part of an old ship had been fixed into the machine to keep it running.

Very little has changed and it too had a silent spell for six months with debt piling and critical supplies, including water and power, disconnected.

Acting MD Gabriel Nyongesa says that the machine is old and manually operated, which comes with heavy labour and repair costs.

PIECEMEAL REPAIR

“We are struggling to maintain even a 40-50 per cent crushing capacity per day, but we stop every week. We have not serviced the machinery for five years now. We did some maintenance last year, but this piecemeal repair technique is akin to having the front wheels of a car fixed and the rear one punctured,” he said.

Indeed, the mill runs like a car on two wheels, making almost a six months stop every year instead of running 300 days per year. The inefficiency has hurt its conversion ration with 14 tonnes of cane yielding one tonne of sugar instead of 10 tonnes. In other words, it would be losing some 80 tonnes of sugar per day if it runs at its full crushing capacity of 2,800 metric tonnes.

The result is millions in unpaid arrears to farmers and transporters and employees owed 12 months salary arrears as the mill struggles to crush under the wear and tear the management believes badly needs Sh500 million to comprehensively address.

The constant repairs have, however, become a cash cow for some factory employees who mint millions from inflated costs of machine parts and fake repairs.

In Muhoroni, there is rampant talk of two individuals who have been key beneficiaries of the breakdowns.

FREQUENT BREAKDOWN

One has even been nicknamed “Odhiambo Mortar” due to his alleged familiarity with one of the mortars in the factory, whose frequent breakdown and maintenance, it would seem, he has turned into a veritable source of livelihood.

The man, an electrician, is said to own a fleet of cars and several tractors, with people saying pointedly that he acquired them at a time the factory was struggling to stay afloat.

The collusion that happens with the procurement and finance teams is said to be a major conduit for theft, which has left the miller reeling under debt and making little gains from the costly repairs.

A senior official in the finance team is said to own hardware stores in Kisumu and is building two houses on plots he bought near the factory.

Engineer Ooko, whose stint at the mill only spans eight months, admits that there has been wastage in the past, but hesitates to agree it has been the order of the day at Muhoroni Sugar Company.

“Part of that is true. In fact, we had to suspend some ongoing repairs in one of our workshops since we wanted to know how they arrived at those figures. These are some of the issues we want address as we move on. An inspection committee is now in place to check for breakages and recommend solutions,” Mr Ooko said.

HUGE KICKBACKS

Previously, one person was in charge of checking for breakdowns and recommending the repairs, giving people like Mortar the leeway to bloat costs and claim fake breakages and make huge kickbacks.

The public millers are also bad on assets, apart from Sony Sugar, which has since bought two trucks to transport cane in addition to its fleet of 46 tractors. The rest have almost nothing of a movable asset.

Muhoroni has one tractor and two cane loaders surviving. Chemelil has two tractors for ploughing and it is still planning to purchase more. The bad asset base has left the millers leasing heavily with transporters, sometimes holding them at ransom over unpaid arrears and causing a cane deficiency and stalling operations.

Workers have also colluded with some transporters to deplete the crumbling assets by selling parts of the stalled tractors and vehicles, further crippling them.

Tomorrow: We look at the impact of private millers in the sugar sector and the loophole that public factories are using to stay afloat, but which is pushing them further into debt.