Webuye could be reopened in October

September 27, 2010
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, NAIROBI, Kenya, Sep 27- Webuye Paper Mills could formally resume full operations next month despite having a debt portfolio of about Sh5.1 billion, a senior government official has said.

Industrialisation Permanent Secretary Karanja Kibicho vowed that ‘hard decisions’ would have to be urgently made and the legal issues that were hindering the re-opening of the factory would have to be dealt with.

Part of the issues that are complicating the revival of the mill is the fact that the government – which held 34 percent of the shares – is trying to intervene in a factory that was operating as a private company before its collapse in January last year.

“The matter is with the AG now. If we are dealing with a parastatal, it would have been an easy thing to deal with. We have had over 20 meetings but we have set targets. We are expecting that within the month of October we will have a very precise program to restart that factory,” he said of the negotiations that have dragged on for over one year.

Although he was quick to clarify that the government does not owe the company’s lenders and that it was only intervening in the interest of the public, the PS said the Sh1 billion it allocated would be used to finance the initial operations of the factory once they resumed.

“Some of it has been spent because the company has been running trial operations and the rest of the money is with the ministry,” he added while refuting reports that the money was not available.

Pan Paper Mills went under in January 2009 due to gross mismanagement after which Birla Group the majority shareholder fled the country, jeopardising the lives of the 1,300 permanent employees who worked there and thousands other households that depended on it.

At the time of its closure, the mill was up in debt amounting to Sh8.1 billion owed to large and small lenders who included the International Finance Corporation (IFC), Kenya Commercial Bank, Proparco and Barclays Bank.

IFC and Proparco however wrote off their debts of Sh2.6billion and Sh380million respectively.

In a quest to recover their money, the small lenders who are owed Sh1.3billion went to court, managed to have the firm placed under receivership and they have also won the battle to sell the floating assets mainly raw materials and spare parts. They have been given 14 days from September 24 2010 to do so.

The money that the government is injecting will therefore be used to stock up the factory and ensure that it can smoothly commence its operations.

The revival strategy is modelled around the Uchumi’s recovery plan where the government pumped in funds to rescue the supermarket chain and later had that converted into shares.

However, Eng Kibicho explained that they would have an exit strategy from Webuye Paper Mills that it would deploy once the firm was back on a profitability path and it had recovered its money.

“We have put a proposal to the lenders that ‘if we started operations today, in nine months we would be able to profitable and then have a schedule of how to repay all these loans including what the government has injected. So the government is just coming in and giving money which it will get back,” he said.

Once the mill is up and running, he disclosed that his ministry was drawing up a strategy that would be implemented to ensure that the firm operates efficiently and is able to wade off competition from the region.

In the meantime, he appealed to the Western Kenya people to be patient with the government as it was trying to streamline the pending issues which it was optimistic would be addressed within no time.

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