Mumias Sugar Company has suspended 52 employees in connection with the loss of an estimated Sh400 million following termination of cane supply contracts with farmers.
The employees were managers and supervisors in the company’s agriculture department.
They are accused of causing the sugar miller loss by irregularly terminating the farmers’ cane supply contracts, making it difficult for the company to recover debts owed to it by the growers, who had been advanced loans.
“The employees that we have suspended have been implicated in having taken part in malpractices that have hurt the company and its stakeholders,” said Mumias board chairman Dan Ameyo in an interview.
Cane growers are usually given farming inputs by the miller in the form of loans that are recovered by deducting from sales of sugarcane when it is harvested.
The irregular contract terminations, noted the chairman, will be detrimental to the company which has asked the Treasury for a Sh2.3 billion bailout.
The government last week advanced Sh500 million of the requested amount.
The terminations paved the way for the farmers to supply cane to Mumias’ rivals, without having cleared their outstanding debts.
The suspended employees, who were cited in a forensic audit report by financial consulting firm KPMG, will face disciplinary action in line with the company’s code of conduct.
About 28 of the employees were suspended late last year while 24 were suspended last week, in a staff shake-up aimed at turning around the dwindling fortunes of the largest miller in the country.
Mr Ameyo pointed out that the purge will affect staff in all the departments who are adversely mentioned in the KPMG report, including transporters who might be found to have violated the company’s rules.
Former Mumias CEO Peter Kebati and commercial director Paul Murgor were sacked early last year in what the company attributed to an illegal sugar imports racket that saw the miller lose Sh1 billion.
Former business development manager of the company, Peter Hongo, was last week taken to court to answer to charges of malpractices in the firm.
The staff suspensions come at a time when the factory is grappling with a shortage of raw materials after it failed to issue farmers with fertiliser for planting, leading to a poor harvest.
Mumias expects to process 1.2 million tonnes of cane this year, about 700,000 tonnes less than the earlier projected output. Mumias owes Sh6.5 billion to a number of banks and suppliers. It began talks last year to reschedule the debts.
Low cane supply is also expected to affect other revenue streams of the company, especially power generation, due to insufficient bagasse for generating electricity as well as decreased molasses for making ethanol.
Top executives of Mumias Sugar Company are set to lose their jobs, as per terms of the cash bailout by government.
Agriculture Secretary Felix Koskei last week said that stakeholders had unanimously agreed that new managers are needed to steer the business in a different direction.
Mr Koskei said Mumias was locked into unfavourable trading deals and was incurring losses due to mismanagement. He said all those who contributed to the firm’s downfall would be held to account.