State-run sugar millers' debt rises to Sh90.4 billion

The debt owed by State-run sugar millers has risen to Sh90.4 billion, a report reveals highlighting the growing taxpayer burden of keeping the assets.

The amount includes outstanding loans, taxes, penalties and fines due to the government.

And now the national sugar industry stakeholders taskforce report is recommending the implementation of a 2013 debt write-off plan to ease the burden.

The report released on Monday showed that the government, being the long-term lender for the millers, was not protected as the loans were barely serviced.

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

Top on the list is the collapsed Miwani Sugar which has an outstanding debt of Sh27 billion while Muhoroni Sugar owes Sh25.1 billion.

Sony Sugar owes the government Sh6.2 billion while Chemilil is yet to settle Sh6.1 billion.

Mumias Sugar #ticker:MSC, currently under receivership, has an outstanding debt amounting to Sh4.8 billion, excluding taxes, penalties and fines.

The report read: “the companies have for a long time incurred losses resulting into negative returns on investment. Thus, due to the accumulated losses, the companies’ net worth had been systematically eroded to the extent that by June 2018, only Sony Sugar Company had a positive net worth of Sh0.5 billion.”

The other five companies had a deficit shareholders fund, which translates to negative equity.

Chemilil’s negative equity stood at Sh2.6 billion), Nzoia (Sh37.3 billion), Miwani (Sh22.9 billion), Muhoroni (Sh26.2 billion) and Mumias at Sh14.4 billion. The report recommends that financial restructuring of the companies proceed as approved by Parliament in 2013 and that both the national and county governments should mobilise resources to keep the mills running.

In 2013, the National Assembly approved the write-off of excess 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.

It was, however, stopped through litigation, and the situation has worsened since then.

Meanwhile, sugar cane farming could become a lucrative venture once again if proposals to have farmers paid based on quality of cane as opposed to the current weight system are implemented

The change in pay system that would see cane farmers earn based on sucrose content will ascertain that farmers are paid for co-products such as molasses, ethanol and co-generated electricity among others.