Governors endorse privatization of sugar factories as private sector to inject Ksh.12B investment

The Council of Governors (COG) has backed the government's decision to lease four major sugar factories to private investors, marking a significant endorsement of the ongoing sugar sector reforms in the country.

The reforms, which involve leasing Nzoia Sugar, Chemilil Sugar, Sony Sugar, and Muhoroni Sugar factories, aim to revitalize the struggling sector and improve efficiency.

Speaking at a forum in Mombasa, COG Chair Ahmed Abdullahi, Vice Chair Mutahi Kahiga, and the Committee on Agriculture Chair Ken Lusaka called for the reforms to remain free from political interference, stressing that they represent a step in the right direction for both farmers and the sugar industry.

"If we have appreciated that private management of those sugar compnaies is what will turn them around and bring in efficiency, why block the government from doing it. I'm sure those who are opposing it are just doing it for politics."

Agriculture Cabinet Secretary Mutahi Kagwe reiterated the government’s commitment to the reforms, emphasizing their potential to positively impact farmers and factory workers.

CS Kagwe announced a Ksh. 12.29 billion investment by four private companies that have secured 30-year leases for the four factories. These investments will go directly into rehabilitating the factories to improve their operational capacity, safeguard jobs, increase sugar production, and enhance farmer earnings.

The companies involved are West Kenya Sugar Company, which will invest Ksh. 5.76 billion into Nzoia Sugar; Kibos Sugar & Allied Industries Ltd., which will invest Ksh. 4.5 billion into Chemilil Sugar; West Valley Sugar Company Ltd., which will invest Ksh. 1.02 billion into Muhoroni Sugar; and Busia Sugar Industry Ltd., which will invest Ksh. 1 billion into Sony Sugar.

In addition to the investment, the four companies will pay Ksh. 522 million in goodwill payments for the land leased from the government, calculated at a rate of Ksh. 40,000 to Ksh. 45,000 per hectare. These payments will support cane development and benefit local communities around the factories.

The government has also committed over Ksh. 1.7 billion to clear arrears owed to sugarcane farmers, with an additional Ksh. 500 million set to be paid in July to settle further dues. Furthermore, a partnership with the Kenya Union of Sugar Plantation and Allied Workers (KUSPAW) will ensure the settlement of staff arrears, with Ksh. 600 million allocated for worker salaries starting in May 2025. The government also plans to settle further arrears in a phased manner, with quarterly payments of Ksh. 1.17 billion starting in July.

CS Kagwe reassured the public that the sugar factories have not been sold, but rather leased, following a thorough parliamentary process that involved extensive consultations with stakeholders.

"I would like to assure farmers, workers, and members of the public that no sugar factory has been sold. The factories have been leased as per the process approved by Parliament. Various stakeholders were consulted before leasing was selected as a viable model," said Kagwe.

The government remains committed to addressing any concerns and ensuring that the reforms benefit all stakeholders, particularly farmers and factory workers.

"We are ready to submit any documents for scrutiny by Parliament and members of the public. The Ministry remains fully committed and ready to address any further concerns that may arise," said the CS.