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State begins process of leasing out five sugar factories

Friday July 10 2020
SUGAR

A loaded tractor arrives at Chemelil Sugar Company. Chemelil, along with South Nyanza, Muhoroni, Miwani and Nzoia sugar companies are to be privatised. The public millers are saddled with huge debts. PHOTO | FILE | NATION MEDIA GROUP

By VICTOR RABALLA
By BENSON AMADALA  

The government has started the process of leasing out five state-owned sugar millers whose operations have been crippled by debts and mismanagement.

Those targeted for the long-term lease model are Chemilil, Miwani (in receivership), Muhoroni (in receivership), Nzoia and South Nyanza Sugar companies.

The lease is expected to increase competitiveness and services in the sugar sector.

The industry is a source of income for more than 400,000 smallholder farmers who supply 90 per cent of the raw material to the millers. The leasehold period for investors who qualify is 25 years.

Interested local and international investors (individual or consortium) familiar with the industry have been invited by the Agriculture and Food Authority to submit their expression of interest.

INVESTORS

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It must be submitted to the AFA director-general in a sealed envelope on or before August 3.

Those successful will be made public on August 4. The government is looking for investors with experience to redevelop the factories into sugar complexes.

The selected financier is expected to lease, redevelop and operate the complexes at sufficient processing capacity and support diversification into generation of export power and producing bioethanol and allied co-products.

“The government intends to lease out the...factories through a long-term model, which will transfer the right of use of each  to the lessee ‘as-is-where-is’ for redevelopment and operation,” the advert that appeared in yesterday’s Daily Nation said.

“The objective is to facilitate turnaround of these companies to profitability through modernisation and efficient management, which will in turn enhance competitiveness in Kenya, the East African Community, the Common Market for Eastern and Southern Africa (Comesa) and the global sugar market.”

To prepare for the lease, the government through the authority has launched a programme to approve and restructure the balance sheet of every sugar company.

WRITE OFF DEBTS

The restructuring involves writing off of debts owed by the millers to the former Kenya Sugar Board/Commodities Fund as at December 31, 2019.

Others include writing off of growers’ debts to the former Kenya Sugar Board and writing off of tax penalties and interest.

AFA Director-General Anthony Muriithi expressed confidence that the move would facilitate the turnaround of the factories to profitability.

The factories have a combined share of 30 per cent of the domestic sugar market with a potential to increase capacity. The country consumes approximately a million tonnes of sugar every year.

SH62 BILLION

“The industry plays a significant role in the country’s socio-economic development. It plays a big part in food security, employment and rural development,” Mr Muriithi said.

“It is also a source of income for more than 400,000 smallholder families.”

The development comes after Agriculture Cabinet Secretary Peter Munya announced the waiving of debts accrued by the struggling millers amounting to Sh62 billion.

Leaders from western Kenya have been pushing to have the millers privatised as part of the revival plan.

Mumias Sugar Company, which is in receivership, is expected to restart processing sugar in September.  The company had begun producing ethanol but that was disrupted due to a shortage of molasses.

Receiver manager PVC Rao says the factory still lacks important machines to begin producing sugar.

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