KENYA: Chemelil needs another bailout after receiving last one last week

Published: 11/10/2017, 5:33:56 PM

The problems facing the cash-strapped Chemelil Sugar Company are far from over. Despite a KES300 million (US$2.9 million) Government bailout, the firm is still grappling with machine breakdowns, debt and lack of sugarcane, according to Kenya's Standard newspaper.

The miller, which last week received the bailout cheque from Agriculture Cabinet Secretary Willy Bett to clear arrears owed to farmers, some dating back to 2014, is still in the red and needs another KES815 million to get back to profit.

Chemelil is asking the National Treasury for an additional KES315 million to pay workers, who have gone without salaries since March, and another KES500 million to complete a comprehensive maintenance of the 50-year-old factory.

Managing Director Gabriel Nyangweso said the company's crushing capacity was largely hampered by worn-out machinery and workers on strike. Largely insufficient

"The last time we managed a comprehensive maintenance was in 2013, when we used KES500 million. Last year, we sunk KES248 million in repairs but this was largely insufficient," he said.

Nyangweso said a properly maintained factory should operate at least 300 days a year. "We resumed operations on September 24 but have only been able to crush 2,500 tonnes a day a few days a week against the expected output capacity of 3,000 tonnes.

"There are days we received only 1,000 tonnes of cane and couldn't mill that small volume, so the cane lost juice in the yard," he said in an interview with The Standard.

The MD said diversion of cane by farmers in protest over delayed payments and a long-drawn workers' strike had also affected operations.

Low sugar prices caused by a sharp rise in cheap imports have also eaten into their profit margins, making it difficult for the company to break even and meet internal obligations.

A 50kg bag of sugar retails at between KES3,700 and KES3,800 while the sugarcane pricing committee has continued to maintain the farm-gate price of raw material at between KES4,000 and KES4,200 per tonne.

Nyangweso, who was recruited from South Nyanza Sugar Company to turn the loss-making miller's fortunes around, said the factory was surviving on advances to keep workers at the factory after reopening in September, about three months after sinking into inefficiency due to a stockpile of debt. And although political leaders in the sugar belt serving the company, including Kisumu Governor Anyang' Nyong'o and his Nandi counterpart Stephen Sang, have pledged to "see what can be done" towards helping to pay the workers, the situation remains the same.

But the woes dogging Chemelil go beyond a financial crisis and are not unique to the Nyando miller. Operations are also weighed down by cane wars as private millers eat into their catchment zones in the scramble for raw material.

"We are surrounded by at least four weighbridges belonging to factories situated as far as Western and Homa Bay," said Nyangweso.

To beat the effects of cane poaching, the company has put 17,000 hectares of land under cane development, he said. Heightened cane wars, according to Nyangweso, stemmed out of a glut that saw farmers stranded with the crop on their fields about four years ago.

"A number of farmers lost faith in the crop when millers took too long to harvest and resorted to other crops in the subsequent seasons." He said this happened as more millers were licensed, pushing the scramble for limited cane.

"Soon some millers were harvesting premature cane or closing for maintenance as the cane matured."

Bett said the Government was already working on a cane-sharing formula in times of glut to stem poaching.