9 June 2014

Kenya: Debts and Dead Stock Weigh in On Muhoroni

Muhoroni Sugar Company is reeling in a sugar glut that has made it unable to meet its obligations to cane out-growers and its suppliers.

The sugar miller, which is owned 17.2 per cent by the State and is currently under receivership, now risks closure after grinding its operations to halt.

An 7,000 workers would be rendered jobless, and about 20,000 cane farmers in Kisumu and Nandi counties will be affected as they supply the miller.

Muhoroni has 30,000 tonnes of unsold sugar estimated to be worth Sh325 million while it owes farmers about Sh270 million. It also owes cane transporters Sh28 million and a Sh370 million owed to spare parts suppliers renders it insolvent.

"Should the machines break down, the factory may stall since it cannot secure spare parts," said general manager Anderson Oloo.

The miller attributes its woes to an influx of cheaper sugar imports in the local market. It needs at least Sh500 million to bail it out.

Oloo said Muhoroni "is in a state of desperation" and could close any time as it is unable to shift the stock."We only have two options: either stop production, or look for alternative storage in Miwani Sugar Company," he said.

It is charged Sh300 per bag to store at Miwani, another State-owned (49 per cent) sugar miller under receivership.

"This will make the final product expensive," Oloo said.

Some suppliers have stopped transacting with the cane miller until after their dues are settled.

"We cannot pay them (as at now) since we have no money," said Oloo.

Muhoroni produces 150 tonnes of the commodity in a day. It has sold just over 1,300 bags over the past seven days. The Kenya Sugarcane Growers Association now wants the government to intervene to save the miller from the crisis.

Muhoroni MP Onyango Koyoo accused unnamed influential government officials of colluding with cartels to to flood the country with tonnes of sugar.

"Our local millers are finding it difficult to sell their produce at reasonable prices due to stiff competition," Koyoo said, adding that the government has failed to crack the whip on the cartels.

The sugar sector is estimated to generate Sh12 billion in revenues annually.

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