KCB Group has terminated the contracts of all employees working at struggling miller Mumias Sugar in line with its efforts to restructure the failing business.
According to PVR Rao, the millers’ receiver manager, the employee contracts become null and void effective September 20, when the sugar miller was placed under KCB receivership after defaulting on loans amounting to Ksh. 12.5 billion.
“Consequent to the company being placed under receivership all employees contracts stand terminated from the date of receivership,” Mr. Rao said in a letter addressed to the employees notifying them about the lay-offs.
The miller’s receiver manager however hinted that Mumias would recall some of the sacked employees albeit at a later date.
“The receiver shall engage the services of any employee on a temporary basis on mutually agreeable terms until the time when operations resume,” Mr. Rao added.
Mumias Sugar was put under receivership in September after it defaulted on KCB loans worth Ksh. 545 million. The miller similarly owed Ecobank, French development finance institution Proparco and Commercial Bank of Africa Ksh. 2 billion, Ksh. 1.9 billion and Ksh. 401 million respectively. Mumias likewise owed the Treasury and Kenya Sugar Board Ksh. 3.1 billion and Ksh. 1.6 billion respectively. The miller was also operating on bank overdrafts worth Ksh. 2.7 billion from a host of lenders.
Mumias was put under administration despite the government’s efforts to revive the failing miller. The government, which owns a 20 percent stake in the company, injected Ksh. 3.5 billion into the company to bail it out from its precarious position but the capital injection did not augment the company’s performance in any way.
According to the Business Daily, Mumias Sugar is technically insolvent to tune of Ksh. 6 billion after sinking further in the red which has seen its total liabilities surpass total assets.