How Mumias bungled hiring of CEO

The Mumias Sugar Company board disregarded aice of an HR consultant hired to pick its chief executive amid warnings that the directors’ choice of Peter Kebati could hurt the miller.

Consultancy firm Human Performance Dynamics (HPD) Africa had asked the Mumias board to either pick Wesley Koech, then head of IT at the miller, or Timothy Chege, the managing director of Kericho-based Kenya Tea Packers (Ketepa).

HPD Africa had dropped Mr Kebati, then the miller’s finance director, from the top list of those in line to replace Evans Kidero from July 2012, adding that he presents the “greatest risk of derailment” to Mumias among the candidates shortlisted for the top job.

This is based on a brief forwarded to the Parliamentary Agriculture Committee, which was probing financial troubles at Mumias Sugar. MPs stopped debate of the Mumias Sugar report.

“The recommendation is that the board meets and interviews the two final candidates,” HPD Africa said in reference to Mr Chege and Mr Koech.

The board, which has since been replaced, opted not to interview the two and instead offered the top job to Mr Kebati despite HPD Africa’s assessment that he was not best suited for top job.

Dr Kidero was managing director at Mumias from 2003 to 2012, the first Kenyan to head the country’s largest miller. In the period, he was credited with turning around the fortunes of the company. It was after his exit that the effects of a financially depleted entity began to show. Dr Kidero is now Nairobi Governor.

Having previously served as finance director for nine years under Dr Kidero, it was assumed that Mr Kebati was the best bet for continuity.

The company, however, recorded a Sh1.67 billion loss for the period ending June 2013 in his first year at the helm despite registering a Sh2 billion profit the previous year.

READ: How Mumias Sugar bosses brought firm to its knees

From there on, the company’s financial performance took a downward spiral. The heavily-indebted firm has been struggling with cashflow problems in recent years, forcing the government to step in with bailout funds and hiring a new chief executive, Errol Johnston, in August to drive its turnaround.

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Mumias, which received a cash bailout from the government at the end of January, said its loss widened to Sh6.31 billion in the year to June from S.41 billion in the previous year, while revenues fell to Sh5.53 billion from Sh13.08 billion in the year to the end of June 2014.

READ: Mumias Sugar in more trouble with losses past Sbn

The Nairobi bourse listed miller has been hurt by falling revenue due to lower sugar production and a drop in cane deliveries.

But a report by consultancy firm KPMG says some poor decisions under Dr Kidero may have partly contributed to the downfall of the miller. Dr Kidero declined to comment.

He maintained in an earlier interview that the company had made cumulative profits of Sh14.8 billion by the time of his departure. He said: “I left MSC in a very sound financial state in June 2012. In my final year as managing director the company made a net profit of Sh2 billion.”

Mr Kebati was sacked along other executives and now faces prosecution over sugar sale and importation transactions. The company is seeking to recover Sh1.1 billion from the former CEO and three other executives for allegedly opening and operating an account in Dubai Bank with two separate sugar importing companies without the miller’s knowledge.