The latest restructuring has also seen allowances of staff working outside the sugar miller’s premises halved. PHOTO | FILE
What you need to know:
Mumias Sugar Company's board has ordered deep cuts in car allowances paid to managers and supervisors starting March 1.
Mumias managing director Coutts Otollo informed staff of the changes, part of a restructuring process initiated by the board, in an internal memo dated February 13.
Sources indicated that the allowances of top executives, which vary according to departments, have been chopped in excess of Sh100,000 per month.
Troubled Mumias Sugar Company has halved senior staff allowances and frozen pay increments as it struggles to climb out of the deep pit of losses it fell into two years ago.
The company’s board has ordered deep cuts in car allowances paid to managers and supervisors starting March 1.
Mumias managing director Coutts Otollo informed staff of the changes, part of a restructuring process initiated by the board, in an internal memo dated February 13.
A Sh2,200 cooking gas allowance paid to the managers monthly has also been scrapped and the sale of sugar to staff at subsidised prices suspended to cut costs.
The board hopes that the restructuring will help improve the bottom line of the sugar miller whose half-year loss widened fourfold to Sh2.08 billion in the six months to December 31, 2014.
The halving of car allowances means supervisors are now entitled to only Sh15,000 per month, down from the previous Sh30,000.
Superintendents – a rank higher than supervisors – are now entitled to Sh31,500, down from the previous Sh63,000. Sources indicated that the allowances of top executives, which vary according to departments, have been chopped in excess of Sh100,000 per month.
It remains to be seen whether the reduction in staff costs will help the miller find its footing even as it chokes with debt and losses that have been blamed on mismanagement and irregular import of cheap sugar that has intensified competition.
The listed company spent Sh2.2 billion on remuneration of its 1,689 employees in the first six months of last year, up from Sh1.9 billion in 2010, according to its annual report.
It owes seven banks more than Sh5 billion and has opened talks aimed at reviewing the repayment schedules as it struggles to remain afloat. The creditors include KCB, Ecobank and Dubai Bank.
Mumias is seeking to delay settlement of some of the debts by up to three or four years.
The latest restructuring has also seen allowances of staff working outside the sugar miller’s premises halved.
“The amount of travel allowance paid to staff working out of stations is to be reviewed, but the expectation is that this will be reduced by at least 50 per cent,” Mr Otolo’s memo reads.
Last month, Deputy President William Ruto’s meeting with Mumias officials over a Sh1 billion government bailout package agreed that the struggling miller halve its board to six and retrench 300 staff.
The chops in allowances, however, have unnerved staff, some of who now see a witch-hunt in the decision.
“We are wondering whether the board is deliberately creating discontent or disaffection among staff so as to ground the company and then offer it for sale at a very low price,” an employee who sought anonymity said.
The amount demanded by the electricity supplier may unsettle Mumias’ planned bailout as it may encourage other creditors to go after it for money owed.
In January, security firm G4S filed a suit seeking Sh45 million in unpaid bills incurred over three years through the provision of guarding and courier services.
Mumias’ production units – sugar, co-generation power plant, bottled water and ethanol – have all been facing difficulties, prompting the government to intervene.
Mumias is set to receive a Sh1 billion cash bailout from the government and plans a Sh4 billion rights issue aimed at turning around its fortunes.
But the cash call is subject to the approval of the miller’s shareholders during a forthcoming extra-ordinary general meeting expected Friday 10.
“In addition to the above measures, employees are advised that the code of conduct and conflict of interest declaration forms are under review and staff will be required to sign the revised declarations in due course,” Mr Otollo said in the memo.
Mumias’ financial troubles have been blamed on importation of illicit sugar by some of its past and present officials that have occasioned it massive losses. Dumping of illicit sugar remains rife despite existing safeguards that Kenya’s partners in the Comesa trading bloc have granted.
The Comesa secretariat last month granted Kenya a one-year extension – the fourth the country has sought – of the imports quota following the expiry of the third one on March 1.
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