Companies

State-run sugar miller insolvency climbs to Sh78 billion

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Cabinet Secretary for Industry, Trade and Co-operatives Peter Munya. FILE PHOTO | NMG

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Summary

  • The government investment report for the financial year ended last June shows that the insolvency of Chemilil, Muhoroni, Nzoia and Sony Sugar has grown by 19.7 per cent from Sh65.56 billion at the end of June 2018.
  • Nzoia Sugar’s insolvency is the largest (Sh45.04 billion) followed by the under-receivership Muhoroni (Sh27.93 billion), Chemilil (Sh2.8 billion) and Sony (Sh2.68 billion).
  • The latest report does not, however, disclose the status of Miwani Sugar, which in June 2018 had insolvency of Sh22.9 billion.

The liabilities of State-run sugar millers are now Sh78.45 billion more than the value of assets, making the millers technically insolvent even as privatisation programme delays.

The government investment report for the financial year ended last June shows that the insolvency of Chemilil, Muhoroni, Nzoia and Sony Sugar has grown by 19.7 per cent from Sh65.56 billion at the end of June 2018.

Nzoia Sugar’s insolvency is the largest (Sh45.04 billion) followed by the under-receivership Muhoroni (Sh27.93 billion), Chemilil (Sh2.8 billion) and Sony (Sh2.68 billion). The latest report does not, however, disclose the status of Miwani Sugar, which in June 2018 had insolvency of Sh22.9 billion.

All the sugar millers have also returned losses, dampening recovery prospects at a time government is banking on capital injection by private investors to revive them.

Nzoia Sugar returned a net loss of Sh3.48 billion during the review period while Sony, Muhoroni and Chemilil posted Sh1.54 billion, Sh795 million and Sh577 million loss, respectively.

The insolvency and loss status sets up the millers for acquisition for a song given that they face stiff competition from private firms like West Kenya Sugar Company and Sukari Industries.

The millers are bogged down with huge debts, poor governance, ageing, obsolete equipment and technology as well as labour-related issues.

The debt owed by the millers had risen to Sh90.4 billion at the end of June 2018, with the amount being made up of outstanding loans, dues to farmers, taxes, penalties and fines.

In 2013, the National Assembly approved the write-off of debt owed by the millers for the period up to 2009.

The programme was expected to take off immediately as part of the implementation of the privatisation of the mills.

The write-off was linked to the sale of the mills as part of the comprehensive revival process, but this was stalled by litigation.

The State now plans to lease out all its factories to strategic investors as it seeks to give them a new lease of life through fresh capital injection to improve productivity and cut on imports.

Agriculture ministry in August said it had received bids from 29 companies interested in running the millers on lease terms as part of reforms aimed at reviving the ailing sector.

The bidders include two firms linked to tycoon Jaswant Rai — West Kenya Sugar Company and Sukari Industries. Others are China CAMC Engineering Company, Shenzhen Start Instruments, Mehta Group, Kiboss Sugar, Butali Sugar Mills, Mini Bakeries and Kuguru Food Complex.