Sugar Privatization in Kenya

Kenya has floated an international expression of interest for the privatization of five sugar companies.

The Government through the giant Agriculture and Food Authority (AFA), manages the sugar sector. The five are Chemelil Sugar Company, South Nyanza Sugar Company (SONY), Nzoia Sugar Company, Miwani Sugar Company (under receivership) and Muhoroni Sugar Company (under receivership).

The Government is seeking investors who will redevelop the factories into sugar complexes and manage them on lease for 25 years, turning them to profitability through modernization and efficient management. Investors, as individual or consortiums, will have to demonstrate familiarity with the sugar industry, submit regulatory documents (PIN, incorporation certificates, factory operation licenses), and prove their experiencing managing sugar plantations for at least 5 years, and their available financing.

The Government’s Privatization Commission has long had plans to privatize the sugar companies as part of a COMESA arrangement and to modernize Chemelil, rehabilitate SONY, expand Nzoia, and address the debts of Miwani and Muhoroni. It’s shareholding is 96% at Chemelil, 99% at Sony, and 98% at Nzoia. It also owns 49% of Miwani and 17% of Muhoroni through the Agricultural Development Corporation. Other government agencies with shareholding include the Development Bank of Kenya with 1.4% of Chemelil and 0.3% of Muhoroni respectively, IDB with 0.3% and 0.9% of SONY and Nzoia respectively, and ICDC with 0.7% of SONY.

To prepare the companies for this exercise, the government had undertaken balance sheet restructuring, writing off debts that the five owed to it, the Kenya Sugar Board, and to growers, as at December 31, 2019. They have also written off with taxes and penalties through 30 June 2019 and accrued up to date.

Recently, two governors, Wycliffe Oparanya of Kakamega and Anyang’ Nyong’o of Kisumu, writing on behalf of the Lake Region Economic Bloc, welcomed the Government’s decision to waive Kshs 62 billion (~$580 million) of debts owed by the firms. They also asked that a bill in Kenya’s Parliament direct that millers make payments to sugar farmers within 7 days of delivering crop and with these payments based on the sucrose content, rather than the weight of cane.

They also asked for a reintroduction of the Sugar Development Levy to ensure that farmers, counties, and the factories will have steady financial flows. Chemelil, Muhoroni and Miwani are located in Kisumu County, Nzoia is Bungoma, while SONY is in Migori county.

The deadline for the expressions of interest, that are to be submitted by sealed envelopes to AFA, is August 3. The bid documents will be disinfected (it’s Covid-19 season), and opened, with the results announced on August 4, 2020, at the AFA offices.

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