A tractor loaded with sugar cane arrives at the Chemelil Sugar weighbridge. Sugar companies lined up for sale include Nzoia, Chemelil, South Nyanza and Miwani. Photo/FILE
What you need to know:
The sale will be either through an auction or private treaty.
Sugar companies lined up for sale include Nzoia, Chemelil, South Nyanza and Miwani.
The government will invite bids for the delayed sale of five State-owned sugar factories at the end of this month.
The parliamentary committee on agriculture said on Wednesday that the sale will be either through an auction or private treaty.
The latter is where a sale price is set and the government waits for investors keen on the stakes.
“This activity is estimated to take at least two years,” the Agriculture ministry said in a statement read by Mohammed Noor, chair of the parliamentary agriculture committee, adding that Parliament had approved the sale.
Sugar companies lined up for sale include Nzoia, Chemelil, South Nyanza and Miwani. The firms are saddled with huge debts, mismanagement and political interference which have delayed their turnaround and sale to private investors. The Cabinet approved their sale in 2008.
The sugar firms posted a collective loss of Sh6.1 billion in the year to June. A sessional paper on writing off their debts amounting to Sh42 billion was approved by Parliament last January, removing one of the hurdles for the sale of the millers.
Under an earlier sale plan, the Cabinet directed that a 51 per cent stake in the firms be reserved for strategic investors, farmers 30 per cent and 19 per cent through an initial public offering once the factories are profitable.
Attracting strategic investors is seen as critical in turning around the struggling millers ahead of the expiry of safeguards from competitors in the Common Market for Eastern and Southern Africa (Comesa) bloc next year.
The country was expected to open up its market to imports from Comesa members in March after more than a decade of being allowed to protect its farmers.
Carry out reforms
Industry regulator Kenya Sugar Board (KSB) estimates the cost of producing a tonne of sugar in western Kenya at about $570 (Sh49,000). The cost is about $290 (Sh25,000) for producers such as Egypt.
Comesa tariffs on sugar were scheduled to fall to zero in March, but Kenya sought an extension until 2015 to give the country more time to improve infrastructure and carry out other reforms.
Kenya’s raw sugar production is expected to rise 17 per cent to 700,000 tonnes this year, buoyed by higher cane supplies and more factory capacity. The country has an annual sugar deficit of 200,000 tonnes, usually filled by regional producers.
KSB said Kenya produced a record 600,179 tonnes of sugar in 2013, up from 502,563 tonnes the previous year. Kenya has a factory capacity of 30,109 tonnes of sugar per day and expects 3,000 tonnes to be added when a plant under construction at the coast tarts operating.
