10 May 2008
Nairobi — The government has said it will not let PanPaper Mills collapse even as it announced that the debt-ridden company incurred a loss of Sh320 million during the post-election violence. "The Government of Kenya and its other principal shareholders are solidly behind Panpaper and are committed to its turnaround and growth," Finance minister, Mr Amos Kimunya, said in a statement.
The government views Panpaper as a very critical contributor to the economy, in terms of employment creation, industrialisation and regional development.
The miller also helps in the reduction of rural-urban migration, supply of paper for domestic use as well as export, foreign exchange earnings, tax revenue and social development. Reacting to press reports that Pan African Paper Mills (EA) Limited (Panpaper) is on the verge of collapse, Mr Kimunya said plans were underway to rescue the company, including capital injection. "Shareholders are considering a number of short- and long-term measures to address the underlying causes of its problem and put it back to profitability," he said while urging its business partners to give it support.
The shareholders in the company, which was set up in 1969, are the Government of Kenya 41.1 per cent, the Birla Group of India, 54.4 per cent, East African Development Bank, 3.6 per cent and others, 9 per cent. In the short-term, Mr Kimunya said, the injection of additional cash and adequate wood supplies are being arranged for the company, whose total indebtedness is said to stand at Sh5 billion.
In the medium and long-term measures, there are plans to give land to the company for growing of biomass for its proposed co-generation project, which will greatly reduce its dependence on fuel oil and power from the national grid.
Mr Kimunya said during the first 25 years of operation, the company was profitable. However, owing to increased cost of production occasioned by high price of fuel oil, other inputs and financing costs as well as stiff competition from cheaper imports, Panpaper started experiencing challenges from 2000.
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