KENYA – Sugar miller Mumias was on Monday preparing to lay off 100 employees of its water bottling plant, which is being wound up as part of the grand plan to rescue the company from collapse.
Mumias said the decision was informed by poor product performance in the market, which has left the unit in the loss-making territory since its launch.
“The product has not been doing well since it was launched three years ago making it one of the loss making ventures of Mumias Sugar,” said Margaret Makhungu, the company’s marketing and communication director.
Mrs Makhungu said Mumias is also reviewing other products with the intention of winding up the poor performers.
Mumias said the 100 employees facing the axe were on permanent or contractual terms, but the job losses are expected to be higher with the addition of those indirectly employed in the business such as distributors.
Mumias Sugar Company chairman Dan Ameyo on Monday said the decision to close the water bottling plant was in line with the restructuring plan that is aimed at reducing the company’s wage bill and returning it to profitability.
Mumias established the water bottling operation three years ago at a cost of Sh200 million, but it was immediately impossible to establish the size of losses it made.
Mumias went into water bottling as part of the effort to diversify the company’s product portfolio in readiness for the long pending opening up of Kenya’s sugar market to competition from the Common Market for Eastern and Southern Africa (Comesa).
The diversification drive also saw Mumias enter the ethanol and electricity co-generation markets to reduce its traditional reliance on sugar revenue.
Mumias has in the past two years descended deeper into loss-making territory, which has been made worse by alleged mismanagement and theft by past executives.
Consultancy firm KPMG’s forensic audit of the miller revealed massive misuse of funds, pilferage and tender manipulation that saw the company lose Sh1.1 billion in illegal sugar imports.
The report has since caused heads to roll at Mumias Sugar including that of chief executive Peter Kebati and commercial director Paul Murgor who were sent packing last year.
The Treasury in February put Mumias on a stringent recovery roadmap after it released the first tranche of the Sh1 billion bailout cash it has committed to offer the company.
Release of the Sh500 million came with a demand for the sacking of the entire senior management of the sugar miller and half the board.
The money is being used to pay creditors who had moved to court seeking orders to auction the miller’s property to recover their money.
Mumias Sugar owes creditors and suppliers an estimated Sh6.5 billion and is currently in talks with the lenders for extension of the repayment period, pending ongoing restructuring and return to profitability.
More recently, Mumias has relied on government support to finance its operations and to pay farmers who had refused to supply cane to the factory until their dues are paid.
The sugar miller, which had 1,689 permanent employees at the end of June last year, had asked the government for Sh2.3 billion bailout cash but the Treasury only agreed to provide Sh1 billion, leaving the management to raise the remaining cash from shareholders.
The company last Friday held an Extra-ordinary General Meeting in Kisumu where the shareholders approved a Sh4.6 billion rights issue and suspended all its corporate social responsibility programmes pending its return to profitability.
Kenya Power has at the same time sued the miller over a Sh1.1 billion electricity bill.