Farmers and former employees have sued Transmara Sugar Company claiming Sh972 million for alleged breach of contracts and unfair retrenchment.
Details of the legal disputes have been disclosed by Mauritian conglomerate IBL Group which has an ownership interest in the company that produces sugar in Western Kenya.
“There are several legal cases against Transmara Sugar Company Ltd relating to disputes and breach of out growers' contracts and termination of employment with total exposure amounting to 343 million Mauritian rupees (Sh972 million),” IBL said in its latest annual report.
“A provision amounting to 7.8 million Mauritian rupees (Sh22.1 million) was recorded in the year [ended June 2022] for the cases that management assessed the probability of losing as possible.”
The multinational added that the management of Transmara Sugar does not anticipate that there will be payouts for the balance, hence no provision was made.
Most of the disputes with farmers revolve around the question of who is responsible for harvesting and transporting sugarcane to the factory.
Some farmers have been awarded hundreds of thousands of shillings, according to court records seen by Business Daily.
Transmara Sugar however believes most of the applications have no merit. The company earlier said it had been bombarded with hundreds of cases brought to court by unscrupulous lawyers.
Transmara Sugar says the sugarcane it crushes comes from about 18,000 farmers located within a 30-kilometre radius of the factory.
The company is among the millers benefitting from increased production of sugar amid rising prices of the commodity.
Official statistics show that millers operating in the country produced a total of 587,697 tonnes in the nine months to September 2022, marking an 11 percent growth from 528,391 tonnes recorded in the same period a year earlier.
“Sugar prices have been soaring due to inflation in Kenya’s economy and supply crunch in the industry.
In the period under review (January to September), the average wholesale price of a 50-Kg bag increased by 25 percent from Sh4,736 in 2021 to Sh5,957 in 2022,” the Sugar Directorate said in a report.
“On the other hand, the average retail price of 1 kg increased by 22 percent from Sh110 in 2021 to Sh134 in 2022.”
The price of the sweetener has inched higher since then, with leading supermarkets currently selling 1kg of the commodity at more than Sh150.
Transmara is set to undergo a restructuring of its ownership.
IBL and CIEL Agro Limited, another Mauritian conglomerate, have started transferring the ownership of Transmara Sugar from their subsidiary Alteo into their direct control.
The two multinationals are moving the Kenya and Tanzania sugar production operations from the umbrella of Alteo under a new investment vehicle known as Miwa Sugar Limited.
The stake in Transmara Sugar currently stands at 69.2 per cent after Alteo bought an additional holding of 18.2 per cent of the miller last year for $8.2 million (Sh1 billion).