Farmers want House to audit Chemelil amid insolvency claim

Farmers have sought the intervention of Parliament in their latest bid to establish the extent of insolvency of Chemelil Sugar Company.

Cane farmers from Kisumu and Nandi counties have petitioned Parliament to order forensic audit of the company’s accounts for the last three years.

Last week, Deputy Speaker Joyce Laboso directed the Finance, Planning and Trade committee to examine a petition filed by Mr Charles Atiang’ Etyang’ on behalf of the farmers.

Mr Etyang’ has alleged that the sugar company is on the verge of collapse due to mismanagement by the board of directors.

Among the grounds for forensic audit, he cites the recent re-appointment of Mr Charles Owele as the company’s managing director despite “questionable competence, management and integrity.”

“The company is allegedly operating in technical insolvency and indebtedness, where farmers and suppliers are issued with bad cheques leading to accrued arrears and other liabilities amounting to Sh1.4 billion since 2014,” Mr Etyang’ says in his petition.

He also claims that the firm has been employing haphazard and exploitative sugarcane pricing techniques that end up scaring away farmers.

“The farmers in Nandi and Kisumu counties are not ready for privatisation of the company without any primary restructuring, reforms and consultation with the stakeholders over the matter.

“The petitioner prays that the National Assembly interrogates the grounds in the petition with a view of causing a forensic audit on the factory accounts and performance for the last three years to establish the full facts responsible for its insolvency,” he says.

Dr Laboso asked the departmental committee on Finance, Planning and Trade to consider the petition and report its findings to the petitioner and the House in accordance with Standing Order 227 (2).

“The committee should also undertake to hear the petitioner,” she ruled.

The petition follows a government audit report which shows that Chemelil is technically insolvent.

READ: Chemelil is insolvent, says Ouko in audit report

Auditor-General Edward Ouko said the sugar miller’s performance has continued to deteriorate, which saw it declare a loss of Sh526.7 million in the year to June 2015, raising its cumulative retained earnings to negative Sh3.5 billion.

“The current liabilities exceed the current assets by Sh1.4 billion. Evidently, the company is technically insolvent and its continued operation as a going concern is dependent upon the continued financial support from the government, trade payables and its bankers,” says Mr Ouko in an audit report that was tabled in Parliament in June.

The company recorded a loss of Sh359.5 million in the financial year 2013/14. The sugar miller’s problems are compounded by its inability to remit statutory deductions to the Kenya Revenue Authority and the Kenya Sugar Directorate.

“The management has included Sh886.8 million of these liabilities in trade and other payables balance. Interest and penalties on the outstanding balance have not been quantified and incorporated in its financial statements by the management,” Mr Ouko says in the audit report for the year ending June 2015.

Chemelil is one of the five millers that the government is seeking to privatise. The others are Sony, Nzoia, Muhoroni and Miwani. Muhoroni and Miwani are in receivership.