This archive report was first published on 26 September 2019.
On September 26, 2019, Mumias Sugar Company, Kenya's largest sugar producer, was put under receivership by the Kenya Commercial Bank (KCB). This move has been met with protests from lenders and stakeholders.
According to Jaidi Kisero, the situation presents an opportunity for the Treasury to work closely with KCB to design a feasible turnaround plan that has the support of all creditors.
However, Kisero emphasizes that simply pumping in money without addressing the root causes of the problems will not help. He notes that the company's diversification capital projects, including co-generation, ethanol production, and water purification, were unviable ventures.
Furthermore, Kisero highlights the company's serious problems in the marketing area, including the nexus between distributors, transporters, directors, and top managers who have made a complete mess of pricing and marketing.
He also points out that the company has been captured by a small group of distributors, who have been siphoning billions of shillings through opaque discounts, duplicated credit notes, and opaque forward contracts.
For a sustainable turnaround to happen, Kisero believes that the priority must be given to supporting the sugarcane farmer. This includes stopping over-surveys of farms, paying farmers on time, and providing them with access to subsidized credit for cane development.
Ultimately, the company must work to restore its relationship with the farmer, who has been exploited by distributors, transporters, and their political allies in Nairobi.
