Inside the government’s new plan to revive the Sugar Sector

In what has been a week of withdrawal of cases related to the running of Mumias Sugar Company, following a directive by President William Ruto, the government is now outlining 15 strategic interventions that will guide the revival of five public sugar mills in the country which have been experiencing financial distress since the late 1990s. 

A memorandum by the National Treasury tabled before the National Assembly by the leader of the Majority Kimani Ichung'wa on the 22nd of August outlines 15 proposed strategic interventions that will revive the sector and also ensure the implementation of the sugar industry stakeholder's taskforce report 2019. 

The proposals include; bringing on board private capital, expertise and modernisation of sugar mills with adequate sugar to allow them to run efficiently and operate on commercial principles, enhancing cane development in both nucleus estates and small-holder out-grower farms, addressing stakeholder and community sensitivities on permanent divestiture of land, lease model to be executed by unbundling the nucleus estate land and the factory land, expedite the leasing of the five sugar companies to facilitate rehabilitation and expansion.

Others are the merging of Chemelil and Muhoroni Sugar companies, restructuring of the sugar companies balance sheets, Regulation of Factory Zones, government support for smallholder cane farmers to develop the crop and enhance productivity, enhancing efficient settlement of disputes and enforcing zoning to incentivise investors in the sector. 

On why the government prefers leasing to privatisation, the National Treasury has outlined nine benefits of leasing which include enhanced livelihoods of farmers, modernization of the sugar mills, generation of taxes, cut public sector financing and improved competitiveness.

For Mumias Sugar Company with debts relating to the government adding up to Ksh.8.7 billion, the Treasury recommends a revitalization committee be appointed to work with the Board, County Governments and other key stakeholders to identify and implement an effective restructuring plan.

Treasury in its memorandum has put the debt status of the five public sugar mills at Ksh. 128 billion with Nzoia leading with a debt of Ksh.62.6 billion, Muhoroni is second with a debt of over Ksh.26 billion, It is followed by Miwani which is under receivership with debts amounting to Ksh.22 billion, Chemelil and South Nyanza follow suit.

 The Government attributes the challenge of public-owned sugar mills to among other things poor governance, lack of capital and high debt portfolio, and declining cane yields. 

The National Treasury has asked the National Assembly currently on recess to consider and approve the write-off of loans owed by the five public mills to the government and Kenya Sugar Board amounting to Ksh.65.7 billion as of 30th June.

 Approve the Cabinet decision directing the National Treasury Cabinet Secretary to write off tax penalties and interest amounting to Ksh.50 billion as of 30th June and any other additional interest and penalties that have accrued since then.

Treasury also wants parliament to allow vacation of the privatization model approved by parliament in 2015 and also give a nod to the leasing model for the five publicly owned sugar mills.