Tata joins list of Indian firms laying off Kenyan staff

Indian-owned soda ash producer Tata Chemicals Magadi (TCML) has announced plans to sack 200 staff, making it the latest firm from the emerging Asian giant to encounter headwinds in its Kenya operations.

The company, which was owned by a British company until 2006 when it was taken over by Indian conglomerate Tata, says the retrenchment will result from the closure of one of its manufacturing plants.

It becomes the latest Indian firm to implement restructuring programmes that have affected employee contracts similar to ongoing changes in telecommunications company yuMobile flower firm Karuturi, and Kenya Petroleum Refineries.

“The proposal (to restructure) was a painful one, precipitated by the high energy costs that have overwhelmed the viability of this plant,” said the Tata Chemicals Magadi managing director Jack Muchira.

“TCML will fulfil its legal and contractual obligations to the impacted employees and intends to commence consultations with the affected employees and the union towards ensuring those who may be potentially impacted are prepared.”

The firm, which is Kenya’s sole soda ash manufacturer and exporter and also manufactures cattle and industrial salts, says it will “mothball” its Premium Ash Magadi (PAM) plant in the second quarter of this year.

It joins a growing list of Indian companies likes Essar (which jointly owns the Kenya Petroleum Refineries), Karuturi (flower grower and exporter) and Bharti Airtel (yuMobile) whose businesses in Kenya have run into problems, some to the extent of closing down. Soda ash is widely used in glass production and manufacture of detergents and cleaning agents.

READ: yuMobile staff want final dues ahead of buyout

Tata Chemicals Magadi was formerly known as Magadi Soda Company, which was owned by Brunner Mond & Company of UK.

It was renamed Tata Chemicals after Mumbai-based Tata Chemicals acquired it in 2006. Mr Muchira says the company has over eight years explored various options to keep costs down but have failed to “mitigate sufficiently the serious impact of the energy costs on its business.”

He said the PAM factory accounts for about 70 per cent of the company’s total energy consumption. TCML’s fate mirrors that of Essar, its Indian peer who is selling off two of its local operations— its stake in the loss-making Kenya Petroleum Refineries Limited (KPRL) and yuMobile.

Essar is in talks with government to end their five-year partnership in the Changamwe-based refinery.

The Indian conglomerate is looking to sell its 50 per cent stake and pay Treasury about ($5 million) Sh440 million.

Essar invested $7 million in the refinery in 2009, but has decided to exit claiming it was not an economically viable venture.

Corporate India’s problems in Kenya deepened in April after CfC Stanbic Bank placed Sher Karuturi, an Indian flower firm, under receivership after the latter defaulted on a Sh383 million loan.

The Bangalore-based producer of cut roses has a farm in Naivasha, whose average daily output stands at about 1.5 million stems and which are exported to Europe.

All these Indian firms are doing superbly well in the home countries but have struggled to crack the local market.

Essar is also pulling out of Kenya’s telecom industry by selling its yuMobile to rivals Airtel and Safaricom. It has invested over Sh40 billion in yuMobile, but has not made a profit to date.

However, Tata Chemicals Magadi’s difficulties may not be purely due to high energy costs. Kenya’s soda ash earnings last year fell by 5.5 per cent to Sh8.86 billion from the previous year’s Sh9.38 billion, according to the Economic Survey 2014.

This drop in earnings happened despite an increase in soda ash production by 4.2 per cent to 468,215 tonnes in 2013, compared to 449,269 tonnes the previous year.