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Citizen Weekly

Sunday, 4 January 2015

Plot to suspend Mumias Sugar from Nairobi bourse



The high, the mighty and the barons in the sugar business have been behind the report by South African-based Global Credit Ratings on Mumias Sugar Company’s financial status with the verdict being that it has a bleak future with hopes that it be placed under receivership.
The idea is to portray Mumias Sugar survival is beyond redemption by the current management. Local politicians will be brought in to call for overhaul in management and even petition the government to intervene. Sugar industry stakeholders will not be left behind either. Millions of shillings have been set aside by sugar barons to compromise key players in the industry to achieve their ultimate goal to stifle Mumias Sugar.
The final plan is to have Mumias Sugar trading at Nairobi Securities Exchange suspended as it happened sometimes back to Uchumi shares to cause anxiety among shareholders.
The South African firm report is out and Mumias is literally on its deathbed.   One of the names that have featured prominently as eyeing the company is that of the Rai Family, who also happen to be proprietors of the West Kenya Sugar. They are said to be in a major plot to buy Mumias once it is placed under receivership.
According to sources well-versed with the plan in offing, the Rai Family is allegedly working in cahoots with other top government officials to see Mumias expelled from Nairobi Security Exchange.
The game plan is to ensure the recent report that revealed that Mumias is on its death bed be used to have it closed down, then put it under receivership and later influence the receiver manager and his team to advise that it be sold to the vultures who are waiting in the wings.
We have information that the Rai Family is seriously lobbying to own the company and going by the power and influence they wield in the current Jubilee government, chances are high that Mumias Sugar ownership will soon exchange hands. Cotts Otollo is the managing director with Dan Ameyo as the board chairman. They came in after Peter Kebati was shown the doors.
Sources say the Rai Family has been influential even during the Moi regime through the Grand Coalition Government of Mwai Kibaki and Raila Odinga and now he is said to be a one of the few businessmen who are now politically correct and connected to pull strings. The family bought Pan African Paper Mills based in Webuye under controversial circumstances that have continued to generate political heat in western region. It is also said to be associated with the Kenyatta family’s Timsales enterprise.
The Rai Family is now alleged to be behind a report that has now revealed that Mumias’ financial woes are far from over. According to the report, Mumias has suffered a credit-rating downgrade with a probability of further deterioration, reflecting the firm’s worsening financial position on the market scales.
The report by South African-based Global Credit Ratings, licensed by the Capital Markets Authority to evaluate the financial strength of firms listed on the Nairobi Securities Exchange, downgraded the troubled sugar miller’s long-term credit rating to BBB from A of December last year and A+ in 2012.
The report reveals that the company has been through a rough patch due to financial strains and issues of corporate governance that GCR said were likely to further impact Mumias credit rating.
The Rai Family is alleged to be working on a scheme that once Mumias is kicked out of the NSE, it will open doors for its sale to interested parties. This is based on the report that Mumias valuation at the NSE is down 42.4pc to become the cheapest share in the market at Sh1.90 per unit this year. The government is the majority shareholder with a 20pc stake in the factory.
“GCR has noted several instances of weak corporate governance that have seen the suspension of certain senior and middle managers. On the basis of these governance issues and the challenges within core operations, GCR has placed Mumias’ ratings on “Rating Watch”, and accordingly, “will continue to monitor the ratings closely,” GCR said in its report on the company.
It is important to note that all is not well at the sugar firm which has been struggling to pay multi-billion debts. Seven banks are on its neck. Industry players say, poor rating means a company borrows at an extra interest rate and is not easy to sustain payback.
Mumias is in red and made a full-year loss of Sh2.7 billion down from Sh1.6 billion last year. The company’s management has also blamed the poor performance on an influx of illegal imports that have eroded its competitive position in the region as a leader.
To show how sinking Mumias is, in its annual report, the company has cut its workforce by 243 employees in the year to June this year. However, the fear now is that the protection of Mumias from competitors in the Common Market for Eastern and Southern Africa region is set to expire in February this year.
Former chief officers at Mumias who were sacked because of corruption had imported 10,000 tonnes of sugar worth millions of shillings from Sudan.
Investigations by Weekly Citizen established that 400 containers which had been loaded with the imported sugar from Sudan are still detained at Kenya Ports Authority in Mombasa after the chief officers were unable to pay storage charges of more than Sh150million. Among the managers sacked was Emily Otieno who has allegedly since deserted her husband and is now cohabiting with another man in one of Nairobi’s surburbs. The husband has threatened to expose her ill-gotten wealth to the Ethics Anti-Corruption Authority in due course.
Inner sources further  revealed that the initial amount which stood at Sh160 million six months ago is supposed to have risen to Sh200 million by now despite having cleared with KRA after paying the requisite tax as by law.
The source said that the chief officers were expected to get an ill-gotten profit of about Sh200 million after selling the sugar but the deal went sour before the process was over.
Weekly Citizen learnt that 10,000 tonnes of sugar which was imported by chief officers at Mumias is equivalent to sugar which was imported into the country by businessmen who have been appointed officially by Kenya Sugar Directorate to import sugar from Kagera Sugar Factory in Uganda.
Despite claims that the Kenyan market has been flooded by imported sugar, reliable sources said that chief officers at Mumias were also to blame for the problems facing local sugar factories in the country.
“The country requires 800,000 tonnes of sugar for consumption but only 500,000 tonnes of the commodity is produced by local factories making the country to have a deficit of 300,000 tonnes of sugar,” source said on condition of anonymity fearing victimisation.
Mumias alone produces about 50pc to 60pc  of the total sugar that is consumed in the country including table and industrial sugar respectively.
However, the deficit is expected to rise following the recent closure of Mumias which is yet to start operating fully since it reopened two weeks ago.
The fate of Mumias is not known following the large number of sugar being imported into the country from Kagera into the country by appointed businessmen that caused uproar with Kampala.
Mumias, the factory which was famous and rated the best in East and Central Africa might end up collapsing like Panpaper unless strategic measures are taken.
Mumias has the largest sugarcane nuclear ranging in thousands of acres of land in the region which is now unable to pay its contracted farmers despite producing electricity, bottled water and spirits respectively.
Most of the farmers who were contracted to the company have since withdrawn due to delayed payments after delivering their cane produce to the factory.
Farmers revealed that some of them have been forced even to take cane produce  belonging to Mumias to either West Kenya or Butali Sugar companies because they are paid promptly within a  one week.
“It is true many farmers have pulled out of Mumias Sugar Company due to delayed payments and poor services to the farmers,” Azeri Amos told this newspaper in Kakamega town.
Azeri who has been planting cane for more than 10 years revealed that farmers who deliver their cane to Mumias take more than one year before they are paid their money.
“Some farmers are unable to educate their children even after delivering their cane to Mumias and also because they can not access any loan facilities like previous years when the company was still stable,” Azeri said.
Mumias and Nzoia Sugar companies are in big problems following large quantity of sugar being imported from Uganda into the country through dubious means.
A survey at Malaba border point established that more than 50 trucks enter into the country every two weeks ferrying imported sugar from Kagera.
Imported sugar is now repackaged and sold by supermarkets in the whole of western region and is on high demand by the the community because it is cheap compared to that from Mumias.