Privatisation Commission CEO Solomon Kitungu. FILE
What you need to know:
The Privatisation Commission says a go-ahead from Parliament will see the privatisation of the sugar millers in six to nine months since due diligence is almost complete.
A specific approval from the national assembly is however still needed to authorise the government’s divestiture in the sugar millers in what is expected to turn around their dwindling fortunes.
State sugar millers have inched closer to privatisation after the Treasury wrote to Parliament to grant the final approval needed for the process to begin.
This comes after the fulfilment of two conditions that had to be met before the government could offload its majority stakes in Chemelil, Muhoroni, Sony, Nzoia, and Miwani sugar companies.
The conditions are the establishment of county governments and the enactment of a raft of agriculture sector laws earlier in the year.
The Privatisation Commission says a go-ahead from Parliament will see the privatisation of the sugar millers in six to nine months since due diligence is almost complete.
“The National Treasury has written to Parliament requesting that the necessary process (approval) be expedited,” said Solomon Kitungu, the CEO of the Privatisation Commission.
“The Commission will proceed to implement immediately Parliamentary approval is granted,” he said, adding that the sugar millers will be privatised simultaneously.
The government has for years protected the firms from cheaper duty-free sugar imports from the Common Market for Eastern and Southern Africa (Comesa).
Attracting investors is seen as critical in turning around the struggling millers ahead of the expiry of the latest safeguards from competitors which expire in March next year.
Mr Kitungu said the approval was not granted on January 9 when the national assembly discussed the Agriculture, Livestock, Fisheries and Food Authority Bill 2012.
The Bill was however passed by Parliament the next day and assented to by President Uhuru Kenyatta on January 14.
The other requirement —the establishment of county governments— has also been met following the election of governors and county representatives in the March 4 General Election.
A specific approval from the national assembly is however still needed to authorise the government’s divestiture in the sugar millers in what is expected to turn around their dwindling fortunes.
Miwani is closed, while Muhoroni is under receivership. Chemelil, Nzoia, and Sony are, however, running profitable operations but all the five firms have massive debts.
The Treasury has said it will write off Sh40 billion debts owed by the sugar millers to make it easier for strategic investors to buy the firms.
Kenya remains a net sugar importer and is struggling to boost output as its consumption continues to outpace production. Consumption of sugar stands at 800,000 tonnes per year against local production of 550,000 tonnes.
The Comesa window allows the country to bring in up to 350,000 metric tonnes of sugar in a year but the import quota expires in March after the government sought several extensions.
It is feared that an influx of cheaper sugar from Comesa and the international market will greatly erode market shares of existing local millers and kill them.
“The average cost of production in Kenya still remains one of the highest in the world,” said Rosemary M’kok, the CEO of the Kenya Sugar Board.
“Factors such as declining cane yields, harvesting of immature cane, high cost of inputs and services has been the major drivers of high cost of production.”
She said on average, Kenya’s cost of sugar production stands at Sh82,650 per tonne compared to other regional markets like Malawi where the costs is as low as Sh30,450 per tonne.
