Plans are underway to lease 5 financially crippled state-owned sugar mills to private investors. This is a first step towards reviving their operations, ahead of the state’s planned divestiture from the sugar sector.
Agriculture Cabinet Secretary Peter Munya has also disclosed amnesty for loans worth KSh 58 Billion and a tax bill of KSh 4 billion owed to Kenya Revenue Authority (KRA) by state-owned sugar mills. The debt includes tax penalties and interest accrued over the years.
Data from the Privatization Commission shows that the 5 sugar firms owed the Government and the Kenya Sugar Board as estimated KSh 40 Billion in 2019.
The five financially distressed state-owned sugar factories earmarked for privatization are Muhoroni, Nzoia, Chemelil, Miwani, and Sony.
The Government also owns a huge stake in listed Mumias Sugar Company. Private Millers include West Kenya, Soin, Kibos, Butali, Transmara, and Sukari (2012). The latest entrant into the sugar industry is Kwale International Sugar Company Limited.
The Government wants to sell these factories once they have a clean financial sheet.
The loan amnesty and tax waivers for the ailing sugar industry come at a time when the Government is keen to revive the sector, ahead of the expiry of the COMESA safeguards in February 2021.
Experts maintain that privatization of state-owned sugar firms remains a challenge owing to the difficulty of finding a buyer for an insolvent mill.
It is still unclear what framework the Government will use to select those firms that intend to lease these sugar mills to.
Munya also said the State has banned the importation of brown sugar so as to shield the local sugar industry from adverse competition.
“As a major step to help ailing sugar mills, Government has canceled all sugar importation licenses with immediate effect,” said CS Munya.
Commentators took to social media platforms to react to these latest moves by the state to revive the sugar sector.
” I do not understand this announcement by the Government that it has banned the importation of sugar. How is it possible when Kenya has signed binding standing trade protocols with COMESA countries to promote free trade?,” said Edward Kisiang’ani, a political analyst.
There is anxiety that with the ban on importation of brown sugar, this could lead to shortages and price hikes as local millers struggle to meet the specifications required in the production of white sugar.
” I am extremely happy with the sugar industry’s revival at long last. Government waiver of KSh 62 billion owned to millers and farmers as well as plans to lease the factories to private players is a very strategic move,” said Hon Opiyo Wandayi, Ugunja Member of Parliament.
Following the launch of the Free Trade Area on October 31, 2000 by members of COMESA, Kenya expressed concern that her sugar sector was not able to compete against those from other member countries.
The Government then applied for protection of the sector by way of a safeguard under Article 61 of the COMESA Treaty so that sugar exports from the common market to Kenya are subject to customs duties.
The safeguard was implemented in March 2002 for an initial period of 12 months and subsequently renewed by the Council of Ministers.
Subsequent extensions have been done more than five times, with the last one expiring in February 2021.
As matters stand, the privatization of State-owned sugar mills has stalled as the clock ticks towards the end of yet another extension. A report by US-based Global Agricultural Information Network(GAIN) forecasts stagnant sugar production in Kenya during the 2019/2020 period.
This is due to poor investments in production technology and poor cane harvests.
In contrast, sugar consumption is expected to rise. The resultant deficit, says GAIN, will be met by carryover stocks and duty-free imports from Common Market for Eastern and Southern Africa (COMESA) countries.
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