Ouko proposes bailout for ‘insolvent’ Chemelil

Chemelil Sugar Company is technically insolvent and its continued operation depends on financial support from the government, the Auditor-General Edward Ouko has said in a new report.
Mr Ouko said the company incurred a loss of Sh767,454,578 up from Sh640 million in 2014/15.

He said the loss brought the miller’s total accumulated losses to Sh4,381,006,719 in the year to June 2016.

The current liabilities of the company exceeded the current assets by Sh1.7 billion as at end of June 2016, he said.

“Evidently, the company is technically insolvent and its continued operation as a going concern is, therefore, dependent on financial support from the government, trade payables and its bankers,” Mr Ouko said in an opinion dated April 10 and tabled in Parliament.

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Mr Ouko said the miller and the Ethics and Anti-Corruption Commission (EACC) had not concluded a case on the irregular sale of sugar valued at Sh256.4 million to three companies ostensibly for export to South Sudan in the year to June 2015.

Mr Ouko said said the sugar was not exported but was apparently sold in the local market as a result of which the Kenya Revenue Authority demanded Sh43,768,675 from the company in unremitted VAT and penalties which the company indicates as paid.

He said during the latest audit, the management did not satisfactorily explain how sugar meant for export ended up in the local market.

“Though the issue was subsequently handed over to the Ethics and Anti-Corruption Commission for investigations, the matter has not been concluded to date,” he said in a qualified audit opinion of the books of Chemelil.

The auditor also repeated his findings in the last audit on the sugar company’s failure to settle statutory deductions.

“As previously reported, the company has been slowly paying statutory liabilities due to the KRA and the Kenya Sugar Board on the due dates.”