We’ll lease out State sugar firms, AFA director says
By Kepher Otieno, December 7, 2023Five State-owned sugar millers are now set to be leased to private investors for 20 years, a government agency has revealed.
The firms—Sony, Miwani, Muhoroni, Nzoia and Chemelil—would be leased for a period not exceeding 25 years. Mumias is already privatised.
Agriculture and Food Authority (AFA) has already kick-started the process in readiness to invite bids by early January.
Speaking yesterday at the second sugar symposium held at a Kisumu hotel, AFA Director Jude Chesire said: “We will place the advertisement bids on the dailies by January for interested bidders with capacity to tender.”
This is after the Parliament a vacated plan to auction the firms as was suggested in the Sugar Task Force Report. The leasing timelines were also spelt out in the report.
“We are working round the clock to come up with a transitional management ahead of the leasing for between 20 to 25 years,’’ Chesire said, adding that writing off the Sh117 billion debts that has been holding the move has necessitated the process.
The debts accrued from bank loans, tax arrears and penalties and farmers and employees’ dues. The firms owed banks Sh65 billion, Sh50 billion in taxes and nearly Sh2 billion in farmers’ dues in arrears.
Defined period
Cane farmers welcomed the move to lease the factories as opposed to selling them. However, through the Kenya Federation of Sugar Cane Farmers, they demanded the government makes public the interested bidders to allow farmers and industry stakeholders to help evaluate whether the investors had the capacity.
The federation secretary general Killion Osur, said all investors must be made public. “We are not going to allow investors with tainted image in the industry to use proxies to lease the firms,’’ he said.
Osur said farmers are keen to see new investors from well-established and thriving sugar factories like Brazil. The federation’s chairman Ezra Okoth also backed the move but said the private sector should also bid.
“We want farmers to be given substantive share or equity holding where possible,” Okoth proposed.
But Chesire said the private sector will be allowed to bid, assuring the farmers that the process would be open. The farmers demanded that the new investors will have to show proof of ability to run the firms efficiently.
“The new investors will also have to tell us whether they can modernize the factories, and optimize production,’’ said Okoth.
State run factories
There have been forerunning concerns that most of the State run factories was operating below optimal ends.
Consequently, the management has been vouching for mechanization of the firms to optimize their production
As things stand, nearly all the state run firms listed for leasing operate below installed milling capacities.
Faced with erratic shortage of cane, the factories have not been able to meet the daily set production threshold.
While on the average, they are expected to mill between 2,000 to 3,000 tons per day, they have been doing half.
Some are on record attributing this dismal performance to obsolete machinery.
Yesterday, it emerged at the symposium that machinery may not be the real issue though, but management.
Although, this the millers claim is due to shortage of cane and millers’ inefficiency to mill sufficient cane.
There were crosscutting concerns with industry experts shifting goal posts and blaming each other.
But even as the debate took a heated and dramatic turn of what ails the industry, farmers insisted on overhaul of the industry management.
They want the State to fast rack the process of leasing the firms as soon as possible. Osur and Okoth, argued that there was no need for the management to blame each other for the decade’s woes.
Chairman of AFA Cornelly Serem said time was ripe now for the industry to redeem its lost glory.
“We cannot keep going round in circles blaming each other. Now, we must find lasting solutions,’’ Serem said
Over the years, the state millers have been operating in financial deficits and crises. None of the firms have been managed to an extent that their shares can be listed in the National Trading Bourse.