The government has dropped plans to privatise State-owned sugar firms in the country amid sustained opposition to the proposal by leaders and sugarcane farmers from the sugar-belt region.
Deputy President Rigathi Gachagua said Kenyans and sugarcane farmers were not keen on the privatisation of any of the State-owned sugar firms, hinting the government was now leaning towards a leasing model.
“The Ministry considered full public participation by the people of Kenya and farmers in the sugar belt. The result was that they are not keen on privatisation but prefer a leasing model,” said Mr Gachagua at an intergovernmental budget and economic council (IBEC) meeting on Monday.
He pointed out that the Ministry of Agriculture has agreed to the demands of the people and was working with Attorney-General Justin Muturi on how to actualise the leasing model.
“We have agreed that the leasing model will be worked out with the opinion given by the AG on how those sugar factories and nuclear farms can be leased for the benefit of those counties and the people who reside there,” he said.
The Deputy President said that the ministry submitted that five cases that were before the court opposing the privatisation plan were concluded and dismissed. However, three cases are still pending in court.
Early last month, Agriculture Cabinet Secretary Mithika Linturi sought to assure leaders and farmers from the sugar-belt region that the government would not privatise any State-owned sugar millers, saying there were better ways to deal with the ailing sugar industry and return it to profitability.
He alleged that those spearheading the privatisation had a hidden agenda, including grabbing land around the factories.
The Cabinet Secretary said that the government was committed to ensuring sugar millers are back into full business, producing enough sugar and also benefiting the farmers.
The ailing State millers that had been earmarked for privatisation include Chemelil Sugar, South Nyanza (SONY), Nzoia, Miwani and Muhoroni.
A task force established by former President Uhuru Kenyatta had recommended their privatisation to rescue them from imminent collapse.
However, the plan to dispose of the loss-making firms has faced opposition from various stakeholders, especially after President William Ruto’s Cabinet in March approved the Privatisation Bill 2023, which seeks to shorten the process of selling State-owned corporations and parastatals by bypassing parliamentary approval in the sale of public companies.
Leaders from the sugar-belt region faulted the privatisation plan, saying it will be counterproductive as it only seeks to advance the interests of “corruption cartels”.
Vihiga Senator Godfrey Osotsi claimed the plan was a well-orchestrated scheme designed to benefit a few individuals at the expense of thousands of residents who rely on sugarcane farming, saying locals have a right to be involved in any plan to sell the factories as some sit on community-owned land.
His Kakamega counterpart, Boni Khalwale, said the ailing sugar sector could only be saved by blocking the importation of cheap sugar rather than the privatisation of the millers.
In April, President Ruto said that the five sugar factories, together with Mumias Sugar Company, have debts of up to Sh60 billion, which he said would be written off by his government.
“I have directed that the sugar factories go back to the locals. We want to change the narrative and ensure the millers start making profits and give our people jobs,” said Dr Ruto.
Plans to privatise the crippled sugar firms have been in the pipeline since 2015 when the Privatization Commission approved the sale of the government’s stakes in five sugar companies.
In 2020, former Agriculture Cabinet Secretary Peter Munya had said plans were underway to lease the five financially crippled State-owned sugar mills to private investors.
The move was meant to revive their operations, ahead of the State’s planned divestiture from the sugar sector.
As part of the plan, he observed that the government had given the firms amnesty for loans worth Sh58 billion and a tax bill of Sh4 billion owed to Kenya Revenue Authority (KRA), including tax penalties and interest accrued over the years.
However, the plan did not materialise amid opposition from various stakeholders.