A LOOK AT Mumias Sugar Company Issues

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Mundu Mulosi

Moderator
Staff member
#1
Away from the politics of the likes of Duale and Raila, I believe the problems bedeviling Mumias start and end with Evans Kidero. Kidero joined Mumias Sugar in 2004 as the CEO, taking over from Booker Tate management whose contract had expired in June 2003.

Booker Tate had adopted a model that was beneficial to both the farmer and the miller. In the arrangement farmers contracted to Mumias sugar under their umbrella body MOCO(Mumias Outgrowers Company) would supply cane to the miller. MOCO jointly with Mumias Sugar would undertake all activities of cane development which included, survey of land, plough, harrow, furrow, seed cane fertilizer supply, harvesting and transportation. These activities were provided to the farmers as soft loans which would then be recovered from the proceeds after harvesting cane. Apart from Moco, farmers had formed a sacco-Mosacco(Mumias Outgrowers Savings and Credit Company) which provided banking services to the farmer. These were three very vibrant organizations which existed mutually for the benefit of the farmer and share holders.

Enter Kidero in 2004 and he started frustrating the other two partners in the zone. First he cut the link beween Moco and started dealing with the farmers directly, that meant that the farmer had no voice. Initially Moco was responsible for negotiating better tonnage prices for the farmer and lower input costs. When he cut off that link, it meant that Kidero would lower the price per tonne without any consultation and he could charge higher rates for inputs as he wished. There has been a long running court case between Moco and Mumias sugar over funds to the tune of Kshs 1.2bn which Mumias Sugar owes the farmer. In all these developments, the farmers started losing interest in cane farming which means fewer raw material for Mumias Sugar. Debit balances(Commonly referred as Diiara) which meant that the farmer owes Mumias Sugar became a common phenomenon. Can you imagine taking care of cane for 18 months and upon harvesting you are told the proceeds are not enough to cover the cost of the inputs? In the arrangement with the Sacco, all the farmers were to open accounts with the sacco so that all cane proceeds are paid through the sacco, the sacco would also give soft loans to farmers which it would then recover when their cane is harvested, Msc would deliberately not recover loans and the company started encouraging farmers to open accounts in other banks. In some instances Msc would withhold the recovered money for long periods so the society would suffer cash flow problems. By the year 2009 Moco had stopped operations and Mosacco was on its knees.

Proceeds from cane proceeds for the farmer continued dwindling due to high cost of inputs and lower price for cane delivered. More and more farmers uprooted cane and resorted to other farming activities. To counter this Mumias started expanding the sugar zone which means recruiting farmers much much further away from the factory, transport costs for the cane would eat away all the proceeds due to the distance. Most farmers would uproot the cane after one cycle because they actually got nothing. By the year 2012 when Kidero was leaving Mumias Sugar there was a serious shortage of cane and the diffuser which crushed cane would lie idle for hours before they had enough cane to crush. The private millers in the zone took advantage and started poaching cane from Msc contracted farmers, farmers would happily sell their cane to the private millers because, number one, no input costs would be deducted, two, higher price per tonne and three payment was immediately after delivery(Mumias Sugar pays the farmer 30 days after delivery). Out of 65,000 farmers contracted to Msc when Kidero took over, Msc was left with less 50% in 2012.

Now there is the issue of big capital projects undertaken under Kidero. His first project when he joined was to build a perimeter wall around the estate of Mumias Sugar. Now those who have been to Mumias know that is not a small area to build a perimeter wall. The second one was tarmacking all the roads within the estate, the first two projects are not income generating and so they leave a big hole in the company’s finances. His third project was the TARDA sugar project, by the time it was rejected by the locals, Msc had invested huge amounts of money. The next big project was the Power co-generation. Now this was a VERY big white elephant. Mumias Sugar was to generate power from burning bagasse, bagasse is a bi product of sugar cane fiber that is left after the juice is extracted. In the first place Msc did not have cane to crush, where was the bagasse going to come from? His last project before he left Msc was the water bottling plant, my take is that Msc is still surviving because of this last project. The only thing I have observed is that they have concentrated on marketing this product in the Western part of the country only.

Now one would ask, where is Kenya Sugar Board when all this is happening, Kidero maintained a very close relationship with all the Directors of KSB, besides that he was actually a member of the board. Most of those Directors had running contracts with Mumias Sugar and it has always been said that during his tenure, he used to sponsor candidates and make sure they go through so they would always agree with his decisions. Ksb has actually been a big letdown to cane farmers.

All said and done, even if the government pumped 20bn in Mumias without focusing on the farmer who provides the raw material we are not going anywhere. It saddens me a lot when you listen to politicians shouting who owes Mumias Sugar what when the real problem lies with availability of cane.
 
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Fala 12

Kijana Fupi Nono Round
#2
hio diffuser naskia hata uganda hawana na ndio wanatuuzia sukari.
then ile greed iko na watu wa bookers haiwezi saidia mkulima
lastly decisions za management ya factory zisikuwe influenced na politicians
 

Ice_Cube

Village Chief
#7
I had time to visit the Mumias complex under booker, it was a very well organized place with Booker academy and high school, wonderful clean estates even electricity production and supply was done by the sugar company itself without relying on KPLC. The electricity, I was told was also supplied to the Booker estate. It was a cocoon of success
 

Electronics4u

Village Elder
Staff member
#10
Wow. this is a very good but painful analysis and its to the point. I remember Kidero joined Msc from Nation Newspapers where he was strategically placed to become NMG's CEO. Everyone at NMG(including myself) by then believed that it was a done deal for him to take the helm. But surprisingly, the board turned him down and instead recruited the recently retired Gitahi. Probably the NMG board had noticed something that the rest of the lesser mortals had not. He subsequently got the Msc job.
I don't know what NMG( and the 4th estate in general) would have turned out to be if he had become CEO.
 

WuTang

Village Chief
#11
Wow. this is a very good but painful analysis and its to the point. I remember Kidero joined Msc from Nation Newspapers where he was strategically placed to become NMG's CEO. Everyone at NMG(including myself) by then believed that it was a done deal for him to take the helm. But surprisingly, the board turned him down and instead recruited the recently retired Gitahi. Probably the NMG board had noticed something that the rest of the lesser mortals had not. He subsequently got the Msc job.
I don't know what NMG( and the 4th estate in general) would have turned out to be if he had become CEO.
Gitahi took over from Kiboro and by then, Kidero was not working for NMG anymore. But that Kidero is a disappointment.
 

mariachi

Village Elder
#12
sadly, stealing is now firmly entrenched in the private sector.many companies are suffering ni vile some keep their dirty linen to themselves.
 

Mundu Mulosi

Moderator
Staff member
#15
sadly, stealing is now firmly entrenched in the private sector.many companies are suffering ni vile some keep their dirty linen to themselves.
True, I have not dwelled on the part of Kidero stealing from Msc because that is the norm in Kenya nowadays, my point is, if Kidero hadn't screwed the farmers, Msc would still be doing good even after stealing billions from the company through dubious contracts.
 

Electronics4u

Village Elder
Staff member
#16
Msc would still be doing good even after stealing billions from the company through dubious contracts.
He must be having a field day at City Hall given that that place is the capital of corruption. He must be milking the County coffers dry and going by the weak internal control measures at the City Hall, he is very likely to get away with it.
And he plays his cards very well; making sure that the workers are paid in time, suppliers get their dues on time and there is always a Nairobi city Masterplan being launched somewhere.
 

Mundu Mulosi

Moderator
Staff member
#18
He must be having a field day at City Hall given that that place is the capital of corruption. He must be milking the County coffers dry and going by the weak internal control measures at the City Hall, he is very likely to get away with it.
And he plays his cards very well; making sure that the workers are paid in time, suppliers get their dues on time and there is always a Nairobi city Masterplan being launched somewhere.
True, ile shimo atawacha city hall, ni mungu tu anaweza sema. Mark you this guy literally bought the Gubernatorial seat.
 

Bark

Village Elder
#19
"Outsourcing approach guarantees checks among firms and is equally beneficial to parties involved" City council of Nairobi outsourced some company to do the cleaning and waste disposal, Nakumatt hires a company to provide customer attendants at the tills.. I think going back to this arrangement would revive the company. *I stand corrected on the facts.
 

wheelz

Village Elder
#20
I think Kidero is a worker, not a leader. In this case, his job was to make sure MSC was profitable, against all adversity and inefficiencies. Which he did, by screwing up the farmers. But his mandate, MSC was posting profits at the helm.

So if you'll fault Kidero on anything, it shouldn't be his competence. He knows exactly what to do but doesn't think of others...
 
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