Treasury seeks to write-off Sh33bn sugar firms’ debt
Chemelil Sugar factory plant was shut down for two months to undergo renovation. Under the write-off plan, the firm will get a Sh1.3bn relief. TOM OTIENO
What you need to know:
Nzoia Sugar Company will get a Sh3bn relief
South Nyanza Sugar Company Limited will get Sh1.6bn
Chemilil Sugar Company (Sh1.3bn)
Muhoroni and Miwani sugar are not included in this plan
The Treasury is seeking parliamentary approval to write off Sh33.8 billion out of the Sh41.8 billion owed by five sugar companies.
Finance minister Njeru Githae says in Sessional Paper 12 of 2012 that writing off the debts owed to the government and the sugar board would place Nzoia, Miwani, Muhoroni, Chemelil and South Nyanza sugar companies in good stead to compete when the Comesa safeguards against cheap imports lapse in 2014.
Out of the remaining Sh8 billion after the debt write-off to clear the excess debt as at June 30, 2009, the government wants an additional Sh5.9 billion, the value of plant and equipment, to be forgiven to allow the construction of new sugar mills using modern technology that enhances competitiveness.
The House has also been asked to grant the State the authority to write-off tax penalties and interest estimated at Sh4 billion as at June 30, 2009.
Mr Githae is also asking MPs for permission to write off land rates and related penalties amounting to Sh118 million to enable Nzoia Sugar Company obtain title deeds for its nucleus estate.
Through the sessional paper, the government is seeking a write-off of Sh1.5 billion and Sh1.4 billion due from Miwani Sugar Company to the Treasury and Kenya Sugar Board (KSB) respectively.
The government expects approval for waiver of Sh6.1 billion and Sh2 billion waiver to KSB due from Mohoroni Sugar Company as at March 31, 2009.
Nzoia Sugar Company Limited will get a debt relief of Sh21.7 billion and Sh909 million owed to the government and KSB respectively.
Under the reconstruction write-off plan, Nzoia Sugar Company will get a Sh3 billion relief, South Nyanza Sugar Company Limited (Sh1.6 billion), and Chemilil Sugar Company Sh1.3 billion. Muhoroni and Miwani sugar are not included in this plan.
“The National Assembly is requested to note the recommendations approved by the Cabinet in 2009, to enhance the viability of sugar companies and ensure their continued viability and approve the write-off of the government and sugar fund loans,” the minister said in the document tabled last Thursday in Parliament.
The proposals adopted by the Cabinet included the expediting the privatisation of the five sugar companies prior to the lapsing of Comesa sugar safeguards which have been extended twice.
The government intends to ensure sale of 51 per cent shareholding of each of the sugar companies to strategic investors and reserve 24 per cent for outgrowers and employees trust.
The government would retain 25 per cent of the shares which could later be sold to the public (19 per cent) and the employee’s trust (six per cent) through the Nairobi Securities Exchange.
Mr Githae said a clause in the Sugar Act that requires out growers to control 51 per cent of a privatised sugar company would be repealed to accommodate the changes.
