The government is proposing retrenchment as a condition for further bailout funds to ailing Mumias Sugar Company #ticker:MSC.
Sports secretary Rashid Echesa said the government will peg any further support for the miller on substantive plans to reduce the wage bill.
He said the State had offered another Sh1 billion to cater for the retrenchment and Sh1 billion to pay farmers’ dues.
“I led a team of management and board members of Mumias Sugar to the office of the Deputy President and we agreed that they have to reduce employee numbers,” said Mr Echesa.
“The miller needs to identify employees who will be laid off and retain the most competent and skilled ones for effective service delivery,” said Mr Echesa.
But he warned that the money will only be released if the miller presents a concrete proposal on how the workforce reduction will happen.
Mr Echesa recommended that the firm reduces its workforce which currently stands at 1,400 to 600 workers.
According to Mr Echesa, the 1,400 employees were costing the cash-strapped factory Sh90 million a month in salaries.
He said the bloated workforce is financially untenable and claimed that some of the employees were hired through the influence of politicians yet they were unqualified.
Mumias brand is unavailable on supermarket shelves while at the Nairobi Securities Exchange (NSE), it is the only stock trading at below Sh1.
The miller has partially closed production of sugar amid piling losses and cane shortages.
Some reports have indicated that rogue importers were riding on the brand to repackage imported sugar using Mumias’ packets, thus threatening survival of the miller.
Some farmers no longer want to deliver their cane to the miller which at one time was Kenya’s leading sugar producer. Other farmers have uprooted the sugar cane in favour of crops like maize.
The company currently owes farmers Sh600 million. It needs close to Sh20 billion to pay cane farmers, banks, employees and the Kenya Revenue Authority (KRA).
For the firm to return to a stable course and be able to generate its own revenue, it requires at least Sh5 billion. The government had pumped in Sh3 billion in a bailout programme.
CEO Nashon Aseka, however, said the wage bill stands at between Sh30 million and Sh40 million every month.
The workers have gone for several months without pay and are demanding arrears of about Sh300 million.
Mr Aseka said the firm is focused on restarting production and is hopeful that the government will provide further bailout funds.
“I am hopeful that if we get money, we can to win back the hearts of farmers and this will mark the end of our challenges.
“In the absence of external support, Mumias will be staring at lawsuits that could see it end up in receivership,” said Mr Aseka.