Tough times for sugar millers as State scraps cheap loans

Millers who depend on cheap government loan for maintenance of their plants and payment to farmers are now faced with tough times following the government’s move to scrap the Sugar Development Levy (SDL).

The Sugar Directorate has been using the SDL to advance loan to millers’ with financial difficulties who have been relying on the fund to pay farmers and meet other requirements for effective operation.

Agriculture Cabinet Secretary Willy Bett says millers had become complacent as a result of the SDL, which they would request from the directorate whenever they had financial challenges.

“The SDL had made millers complacent because they knew that there was always funds available that they would run for whenever they are late in paying farmers or in need of some cash for maintenance,” said Mr Bett.

Speaking to the Business Daily, Mr Bett noted that the other reason for scrapping the fund was because farmers were not benefiting from the money, which is advanced to millers at lower interest rate compared with the commercial loans.

The biggest beneficiaries of the SDL include Mumias Sugar Company, Nzoia and other state- owned millers along the Nyando belt.

Mumias has so far received about Sh2 billion from the kitty, of which Sh1.2 billion was committed to paying the farmers and another Sh400 has gone towards rehabilitation of the factory.

The miller, which is still struggling as a result of a serious cane shortage, still owes farmers Sh600 million in arrears.

State owned millers that include Muhoroni, Chemelil, Nzoia, Miwani and Sony have been grappling with financial challenges that has made it hard for them to pay farmers on time.

These millers have been relying on the SDL levy to remain relevant in the market. Treasury CS Henry Rotich scrapped the SDL during the presentation of the 2016/2017 financial year.

As of June 30 all millers owe the State Sh12 billion.