Insolvent Nzoia sugar mill at the mercy of creditors

Sugarcane being harvested on a farm in Mabanga village, Bungoma County before being transported to Nzoia Sugar Company. The State-owned Nzoia sugar mill is insolvent and its financial position is at the mercy of creditors and government support, the auditor-general has said. PHOTO|JARED NYATAYA|FILE 

In Summary

• Managing director Saul Wasilwa admitted the verdict from the auditor general and blamed a tough operating environment in the sugar industry for the inability to generate operating capital.
• The management came under sharp criticism for failure to supply complete records of financial transaction and half disclosures to the auditor general — a factor that made it hard for Mr Ouko to know the firm’s exact debt position.

By Nation Correspondent
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The State-owned Nzoia sugar mill is insolvent and its financial position is at the mercy of creditors and government support, the auditor-general has said.

In his presentation to the Parliamentary Investment Committee, Mr Edward Ouko said the miller has a negative working capital of over Sh16 billion created by debts, mismanagement and non-performing loans.

“The current liabilities stand at Sh21 billion against an asset base of Sh4 billion as at 2012,” said Mr Ouko while giving a summary of the miller’s financial performance since 2003.

The miller, which is among four others earmarked for privatisation, READ: 23 State-owned assets lined up for privatisation, official reveals) has a debt of Sh10.4 billion owed to the government and the Kenya Sugar Board (KSB) as at June 2012.

It owes the government Sh948 million as advanced loan and a guarantee loan of Sh8.6 billion. The loan to KSB is Sh840 million.

Managing director Saul Wasilwa admitted the verdict from the auditor general and blamed a tough operating environment in the sugar industry for the inability to generate operating capital.

“The local cost of producing sugar is very high, compounded by fluctuating market prices of sugar due to cheap imports,” Mr Wasilwa told the Adan Keynan-led committee.

The management came under sharp criticism for failure to supply complete records of financial transaction and half disclosures to the auditor general — a factor that made it hard for Mr Ouko to know the firm’s exact debt position.

The auditor general could not also validate most of the company’s expenditures and figures due to absence of relevant supporting documents, pointing to a possibility of misappropriation of funds by management.

Mr Keynan ordered the management to present all the relevant documents to the auditor general.