Workers load sugarcane on a tractor in Muhoroni. Critics blame the high cost of production for the woes bedevilling Kenya’s sugar industry. PHOTO | FILE
What you need to know:
The High Court has stopped the sale pending determination of a suit filed by Transition Authority (TA).
TA accuses the Privatisation Commission of overlooking its input on disposing of the millers, adding that it is in breach of the law.
This means the auction of the 51 per cent stake in Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies to strategic investors will take longer.
The High Court has stopped the sale of five State-owned sugar millers after the Transition Authority (TA) filed a suit against the move.
Justice George Odunga stopped the sale pending determination of the TA suit, meaning the auction of the 51 per cent stake in Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies to strategic investors will take longer.
This looks set to put Kenya on a collision course with the Common Market for Eastern and Southern Africa (Comesa). The two signed a pact to complete the sale of the firms next year.
TA accuses the Privatisation Commission of overlooking its input on disposing of the millers, adding that it is in breach of the law.
TA lawyer Steve Mogaka says the commission was in breach of section 35 of the TA Act which states that government assets and liabilities should not be transferred during the transition period without the approval of the authority.
The transition period ends three years after the first General Election under the current Constitution which took effect in 2010, giving TA mandate over transfer of government assets until March 2016.
“An order prohibition directed at the 1st respondent (the Privatisation Commission) restraining it from continuing advertising the sale and invitation of expression of interest for five sugar firms,” ordered Mr Odunga.
He also ordered the commission to provide TA with the full list of assets owned by the five sugar mills. The government recently invited bids from investors keen on buying a 51 per cent stake in Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies.
The sale was expected to be concluded by mid next year but risks being declared invalid should TA succeed in its court battle. The Privatisation Commission, which is guiding the sale, earlier said the Attorney-General’s office had advised that it was exempted from article 35 of the TA Act.
The commission said it was not selling assets but new shares to strategic investors. The legal hitch looks set to further complicate the sale given that county governments where the sugar factories are based have opposed the distribution of the millers’ shares.
Twenty-four per cent ownership of the mills will be reserved for farmers and employees. The government will sell the remaining 25 per cent stake in the factories in an initial public offering once they are profitable. Muhoroni and Miwani are under receivership.
The five companies are in urgent need of modernisation to survive competition following the registration of more millers and the impending end to sugar import limits from the Comesa.
Kenya was last week granted a one-year extension to restrict imports from Comesa to enable the country to complete reforms which will make its sugar industry more competitive. This is the sixth extension and will run till March 2017.
Critics blame the high cost of production for the woes facing Kenya’s sugar industry. Poorly funded government factories have aging machines which are prone to breaking down.
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