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Agency warns delays in sale of sugar millers to hurt sector

Posted in Sugar & Related

KENYA - The Privatisation Commission has warned further delays in the sale of State-owned sugar millers will delay reforms in the sector and expose the ailing industry to stiff competition on expiry of regional safeguards in February.

Chief executive Solomon Kitungu said the companies are at risk of missing the divestiture deadline stipulated by the Common Market for East and Southern Africa (Comesa) under an arrangement shielding Kenya against importation of cheap sugar.

“Further delays in the sale of these factories put the companies at risk in view of the lapsing of the Comesa sugar safeguards in February next year,” Mr Kitungu told the Business Daily. 

Kenya received a one-year extension this year from Comesa restricting the regional importation of sugar at 300,000 tonnes to protect the ailing industry.

Governors from the sugar belt have threatened the process by opposing the formula to be used in allocation of shares. Instead they want the companies transferred to counties prior to the sale, a move that would see privatisation proceeds from the shares currently owned by government accrue to the counties.

Mr Kitungu notes Kenya will also miss out on the benefits of factories operating efficiently and competitively through milling farmers’ cane as soon as it matures besides timely payments.

The commission has held more than three meetings with the governors and other elected leaders in the past two months but the county bosses have stuck to their guns.

“We have met the governors in three different forums, including a meeting that we held in Mombasa with MPs and senators from the factory and cane catchment counties. Another meeting was held with them in Nairobi two weeks ago,” he said.

The government is selling Sony, Chemelil, Nzoia, Muhoroni and Miwani to strategic investors to allow for the injection of new capital and reverse the mills’ loss-making status.

Under the plan, 24 per cent of the mills is to be reserved for farmers and employees. The government will sell the remaining 25 per cent stake in the five sugar companies in initial public offerings once the factories are profitable.

Mr Kitungu said he has been consulting the Treasury at every stage and believes the ministry is well placed to deal with issues the governors have raised.

The five State-owned millers are steeped in debt amounting to Sh100 billion due to mismanagement and dumping of illegal sugar in the market.

Nzoia Sugar Company owes Sh37 billion, Miwani Sugar Company (in receivership) Sh28 billion, Muhoroni Sugar Company (in receivership) Sh27 billion, Chemelil Sugar Company Sh5 billion and South Nyanza Sugar Company Sh3 billion.

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