How President Kenyatta brokered Sh500m Mumias bailout

Mumias Sugar factory. President Uhuru Kenyatta ordered Agriculture CS to prepare a roadmap after meeting 16 Western Kenya MPs. PHOTO | FILE 

By SIMON CIURI and VICTOR JUMA

In Summary

• Mumias Sugar is set to get Sh500 million two months after Mr Kenyatta met a group of Western Kenya politicians in behind-the-scenes negotiations. 
• Lugari MP Ayub Savula said the leaders took the extra-ordinary step to prevent the collapse of a company that is the centre-piece of Western Kenya’s economy.
• Mr Kenyatta was, however, clear that any relief from the government must come with a clear turnaround strategy to safeguard public funds.

The Treasury’s decision to bail out ailing Mumias Sugar Company on Friday was the result of President Uhuru Kenyatta’s intervention that sought to stave off a looming economic and political fallout from the impending collapse of Kenya’s biggest sugar miller.

The Kakamega-based miller is set to get Sh500 million two months after Mr Kenyatta met a group of Western Kenya politicians in behind-the-scenes negotiations. 

Lugari MP Ayub Savula said the leaders took the extra-ordinary step to prevent the collapse of a company that is the centre-piece of Western Kenya’s economy.

“The company was on the verge of collapse, forcing us to take desperate measures,” said Mr Savula, who was part of the delegation that sought Mr Kenyatta’s intervention at State House last year.

Mumias accounts for 30 per cent of locally produced sugar, meaning its collapse would deepen the country’s dependence on imports.

The miller had 1,689 permanent employees as of June last year, besides the hundreds of thousands of jobs it supports in the sugar belt.

Besides, more than 130,000 Kenyan investors risked losing their combined shareholding of more than 50 per cent as the company teetered on the edge of insolvency.

Taxpayers also faced huge exposure in the event that the sugar firm collapsed arising from the government’s ownership of a 20 per cent stake.

This is the reality that prompted Mr Kenyatta into asking Agriculture secretary Felix Koskei to craft a rescue plan for the miller.

Observers also reckon that a Mumias bankruptcy would have devastated western Kenya’s economy that is still reeling from the failure of other major employers, including the Webuye-based Pan Paper Mills.

Mr Kenyatta was, however, clear that any relief from the government must come with a clear turnaround strategy to safeguard public funds.

The bailout announced on Friday, however, represents only a fraction of what the miller’s management and the 16 leaders from western Kenya had asked for at the crisis meeting.

READ: Top executives to lose jobs as govt offers bailout to Mumias

Mr Savula said that the group had requested for a Sh2.4 billion cash injection to be disbursed in several tranches. It is therefore expected that the balance will be released in the next two months.

Mumias on Friday said it had embarked on an intensive vetting exercise that will require some employees to apply afresh for their positions. The company’s chairman Dan Ameyo said the vetting was part of the effort to reduce its wage bill and the cost of operations.