BusinessPeople Daily

Pan Paper Mills not out of the woods yet

Musa Radoli @PeopleDailyKe

The reopening of Pan Paper Mills, renamed Rai Paper, was supposed to see activities start with a bang, breathing new lease of life into the sleepy Webuye town in Bungoma County. However, several months after the new owners purchased the facility at Sh900 million, the former giant miller is yet to operate at full capacity for reasons attributed mainly to lack of raw materials.

Jaswant Rai, chief executive of Rai Group that bought the facility, says operations are still at a minimal level, with only a section of machines being used. He said more than Sh6 billion is to be pumped into the company to fast-track the revival process.

“We are preparing to go the whole hog to achieve full production, but the most important thing for us is to have adequate supplies of the raw material – timber. To have mature timber does not happen in a day, but we will get there,” said Rai.

He said machines at the factory are those which were being used for production of recycled paper, but not pulp for newsprint and other major products. Rai Group took over the multi-billion shillings facility after it had grounded to a halt for more than 20 years. The closure took a heavy toll on the very survival of Webuye town, condemning its inhabitants to a life of grinding poverty and apathy.

The factory restarted with production of 80 tonnes of paper per day and this was expected to increase to 150 tonnes per day within three months. When the roar of the huge turbines at the former Pan African Paper Mills (PanPaper) went silent in 2009 – sending 1,600 employees home and leaving 40,000 indirect beneficiaries destitute – the miller dominated pulp and paper production in the region.

In fact it was a virtual monopoly of the business since there was no other competitor in Kenya or East and Central Africa region and none has cropped up so far. What many Kenyans do not know is that the company was a joint venture between the Kenyan government, the World Bank’s private investment arm International Finance Corporation (IFC), and Orient Paper Mills, part of the Birhla group from India.

The pulp mill was established in 1974 in Webuye town, with a population of some 60,000 people, on the banks of Nzoia River which drains into Lake Victoria. The only other major factory in Bungoma being Nzoia Sugar Factory, a few kilometres from Webuye town. From the start, despite the potential environmental impacts concerning plantation establishment, liquid effluents, air emissions, sludge and solid waste disposal, the project did not benefit from a full environmental assessment.

The IFC’s Environmental Review Summary simply stated that the project was designed to meet all applicable World Bank policies, and environmental, health and safety guidelines. According to a former managing director Harri Singhi, Panpaper was working closely with IFC to expand the paper mills before it collapsed due to “external forces beyond their control.”

The then IFC Chief Special Operations officer Erick Cruikshank confirmed that the institution would continue working closely with the miller. According to documents seen by this writer, Panpaper was exempted from a government logging ban and allowed to fell trees to produce pulp for paper. That was particularly during its peak of operations in the 1980s to the late 1990s, but the situation appeared not to get any better.

Just before it collapsed Singhi had called on the government to assist the company solve the problem of shortage of wood supply, bringing to question whether that would have meant more forests being degazetted.

Apart from Singhi’s appeal to the government to help reduce cost of production, lowering electricity tariff, make up the typical fiscal incentives which include tax exemptions, investment, grants, subsidies, on which the global pulp and paper industry develops.

What has since emerged is that for its globalisation, PanPaper also counted on direct or indirect subsidies from bilateral agencies, State investment, multilateral development banks, among other actors. The biggest reminder of the giant factory, at the peak of its operations, was that as a result of the chemicals produced during pulping, the area around the mill was enveloped in foul smelling air.

Acid fumes and fly ash were resulting in the corrosion of the corrugated iron roofs of the houses in the vicinity. In addition, the mill’s solid waste, which was dumped on fields as manure, led to a decline in local agricultural production.

The hope that the revival of the factory would create employment for the people of Webuye and spur the economic growth got business and ordinary communities of the region excited when President Uhuru Kenyatta presided over its official opening last year.

Uhuru assured Kenyans that his government was determined to revive many factories across the country which had collapsed over the years due to a variety of reasons. The President’s efforts were a continuation of government efforts to revive the plant since it has emerged that National Treasury had pumped in at least Sh1 billion before it eventually collapsed.

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