Government Drops Plan to Privatise Sugar Companies

Due to persistent opposition from leaders and sugarcane farmers from the sugar-belt region, the government dropped plans to privatize State-owned sugar companies in the country.

Deputy President Rigathi Gachagua hinted that the government was now leaning toward a leasing model by saying that Kenyans and sugarcane farmers were not enthusiastic about the privatization of any of the State-owned sugar companies.

“The Ministry considered full public participation by the people of Kenya and farmers in the sugar belt. The result was that they are not keen on privatisation but prefer a leasing model,” said Mr. Gachagua at an intergovernmental budget and economic council (IBEC) meeting on Monday.

He highlighted that the Ministry of Agriculture had acceded to public expectations and was collaborating with Attorney-General Justin Muturi on how to put the leasing model into practice.

“We have agreed that the leasing model will be worked out with the opinion given by the AG on how those sugar factories and nuclear farms can be leased for the benefit of those counties and the people who reside there,” he said.

According to the Deputy President, the ministry said that five court lawsuits challenging the privatization proposal had been resolved and rejected. Three cases, nevertheless, are still pending in court.

Early last month, Mithika Linturi, the Cabinet Secretary for Agriculture, made an effort to reassure leaders and farmers from the sugar-belt region that the government would not privatize any State-owned sugar millers, arguing that there were other methods to address the struggling sugar business and bring it back to profitability.

He alleged that those spearheading the privatisation had a hidden agenda, including grabbing land around the factories.

The Cabinet Secretary said that the government was committed to ensuring sugar millers are back into full business, producing enough sugar and also benefiting the farmers.

It was decided to privatize the failing State millers Chemelil Sugar, South Nyanza (SONY), Nzoia, Miwani, and Muhoroni.

Their privatization had been suggested by a task team headed by former president Uhuru Kenyatta to save them from impending collapse.

However, the plan to dispose of the loss-making firms has faced opposition from various stakeholders, especially after President William Ruto’s Cabinet in March approved the Privatisation Bill 2023, which seeks to shorten the process of selling State-owned corporations and parastatals by bypassing parliamentary approval in the sale of public companies.

The privatization idea has been criticized by leaders from the sugar-belt region, who claim that it will be ineffective since it primarily serves the interests of “corruption cartels” and is therefore unwise.

The idea, according to Vihiga Senator Godfrey Osotsi, is a well-orchestrated scam intended to benefit a select few at the expense of thousands of citizens who depend on sugarcane growing. He argued that since some of the factories are located on community-owned land, locals have a right to be engaged in any plan to sell them.

His Kakamega counterpart, Boni Khalwale, claimed that preventing the importation of cheap sugar, rather than privatizing the millers, was the best way to salvage the struggling sugar industry.

President Ruto stated in April that his administration would write off the debts owed by the five sugar mills and Mumias Sugar Company, which total up to Sh60 billion.

“I have directed that the sugar factories go back to the locals. We want to change the narrative and ensure the millers start making profits and give our people jobs,” said Dr. Ruto.

Since the Privatization Commission approved the sale of the government’s shares in five sugar companies in 2015, plans to privatize the remaining sugar enterprises have been in the works.

2020 saw the announcement of intentions to lease the five financially precarious State-owned sugar mills to private investors, according to former Agriculture Cabinet Secretary Peter Munya.

Prior to the State’s anticipated exit from the sugar industry, the action was intended to revitalize its operations.

He noted that the government had granted the companies amnesty as part of the scheme for loans totaling Sh58 billion and a tax bill totaling Sh4 billion due to Kenya Revenue Authority (KRA), including tax penalties and interest incurred over time.

However, due to criticism from numerous stakeholders, the proposal did not succeed.