KENYA: Mumias outgrowers group weighed down by debts
Published: 03/22/2010, 12:24:03 PM
Mumias Outgrowers Company Ltd has formally closed shop weighed down by debts, according to Kenya's Daily Nation newspaper.
While announcing the decision, which he termed as a suspension of operations, chairman Ken Echesa said Mumias Sugar Company owed them a total of KES6 billion (US$77.8 million).
He said the shut down period would enable them recover the monies owed to them by the listed miller.
"Our company act requires us to take the option of arbitration before seeking legal redress incase the former process fails," Echesa told a press conference on Thursday.
The debt, the firm said, is an accumulation of KES2.9 million owed to its 80,000 members who supply cane to the factory.
Another KES3.2 million is in regard to transportation fee it claims has not been released despite having delivered its services.
Attempts to recover the debt, Echesa said, are being sought through arbitration by the Kenya Sugar Board.
The board has earmarked KES7 million for the process.
Like most outgrowers, Moco has been facing cash flow problems closely linked to poor management.
This has also led to frosty relations between it and the miller it serves leaving sugarcane farmers at a loss over who to turn to.
Moco claims they had an agreement with the miller where farmers were allegedly deducted KES6 by Mumias on behalf of the outgrower for its services.
This amount was to boost farmers shares in the firm and was ostensibly being channelled to a joint account held by the pair.
"The funds have since accumulated to the current figure of KES2.9 billion and the sugar miller is reluctant to give us back the money. This money is critical to our operations as a company," said the chairman.
As a result of the financial shortcomings, Moco workers have been going without pay for over two years with the company creditors threatening to auction its assets.
Recently, it carried out a KES21 million rehabilitation on its assets.