Government Completes Leasing Process for 4 Sugar Factories

• Government completes leasing process for 4 sugar factories;

The Ministry of Agriculture and Livestock Development has entered into an agreements to lease four state-owned sugar factories to private millers, a move accompanied by a commitment to clear outstanding arrears owed to both sugarcane farmers and factory workers.

According to Mutahi Kagwe, Cabinet Secretary, Agriculture & Livestock Development, this development aims to revitalize the struggling sugar sector and secure the livelihoods of key stakeholders.

Kagwe said that the government will settle arrears owed to both farmers and workers before the handover of the four factories to private millers.

“Last year the government paid out over Ksh. 1.7 billion to sugarcane farmers to clear arrears owed by sugar factories. Since then, the factories have accrued Ksh. 500 million for cane delivered by farmers. Under the agreement the government will pay farmers the Ksh. 500 million in July this year,” Kagwe said.

Kagwe said the government paid over Sh. 600 million to factory workers last year out of the Ksh. 5.3 billion owed to workers leaving Ksh. 4.7 billion in arears.

“Since then, the arrears owed to factory workers have accrued to an estimated Ksh. 5.6 billion.Following lengthy negotiations, the government has entered into an agreement with the Kenya Union of Sugar plantation and Allied Workers (KUSPAW) to safeguard the interests of sugar factory workers,” Kagwe said in a statement.

KUSPAW has signed a Memorandum of Understanding (MoU) under which the government, (as the Lessor) undertakes that, there will be a 12-month transition period during which the 4 Lessees shall evaluate their workforce needs and determine the criteria for the retention of current employees.

Further, the Ministry shall remain responsible for all unpaid salary arrears, pension contributions, and statutory deductions up to the lease handover date, he said.

Kagwe said that Sh.1 billion is scheduled to be paid to workers upon takeover, indicating that  600 million will pay part of the staff arrears and the remaining 400 million will pay salary as from the month of May 2025.

He noted that Sh.1.5 billion will be released in July,2025 to be used for the payment of staff salaries and arrears.

In addition, he said the government shall continue to pay salaries arrears at the rate of Ksh1.17 billion (to be verified) on a quarterly basis until 30th June 2026.

“The decision to lease out the four sugar factories was arrived at after lengthy consultations with key stakeholders across the sugar sector including farmers, sugar factory workers, unions, Members of Parliament, Governors and approvals by the cabinet,” read part of the statement.

It was informed by the need to ensure a return on investment for taxpayers, who have, over the years, bailed out the ailing sugar sector.

Last year the government wrote off over Ksh. 117 billion to bail out the local sugar industry and injected an additional Ksh. 2.5 billion to clear arrears owed to farmers and workers.

“The procurement of the four firms follows broad-based engagement with stakeholders across the sugar sector, dating back to 2015 when Parliament approved the process,” he said.

Due process was followed in the lead up to the selection of leasing as a viable model for the transformation and rehabilitation of the 4 sugar factories as earlier guided by Parliament and the Cabinet.

Kagwe noted that in November 2018, the government established a task force on the sugar industry to examine the challenges facing public sugar companies and provide appropriate recommendations.

In 2020, the task force recommended mobilization of resources for capital injection through strategic investors, as Parliament had approved in 2015.

In May 2023,Kagwe said the Ministry of Agriculture and Livestock Development and the National Treasury hosted elected leaders, including governors and members of Parliament from sugar–growing counties, who unanimously agreed to the leasing model.

Therefore, the move was then submitted to the cabinet for approval.

In August 2023 the National Treasury submitted a memorandum of action plans for the revival and commercialization of the sugar companies to the National Assembly to allow stakeholders provide views on the proposed action plans in compliance with public participation.

Speaker of the National Assembly directed that the memorandum be referred to the Departmental Committees on Finance and National Planning and Agriculture and Livestock for collection of views, consideration and reporting.

In September 2023 the departmental committees held meetings with various stakeholders at the Kisumu.

Stakeholders appeared before the committees and unanimously endorsed the proposal to revive and commercialize the sugar companies through leasing .

The report was tabled before the National Assembly, which considered, adopted and approved the views from stakeholders.

The National Assembly vacated the privatization model approved in 2015.

It approved the leasing model as well as the cabinet decisions to write off the debts owed by the sugar companies.

The National Assembly further rejected the proposal to merge Chemelil and Muhoroni sugar companies.

Further, the matter of public participation has been litigated and ruled on.

Hon. Justice Chacha Mwita, sitting in the Milimani High Court, found that “The tender notice for leasing having been issued under the Public Private Partnership Act, the Privatisation Act was not applicable and, therefore, the action did not violate the conservatory order that had been issued suspending section 21 of the Privatisation Act.

There was public engagement which led to the recommendations that the sugar companies be put on leasing.”

The Ministry further wishes to reassure all stakeholders that no public land will be sold or acquired under the leasing agreements.

“All assets belonging to the four sugar companies, including land, will remain the property of the national government,” read part of the statement.

The assets will be leased out to the lessees annually based on the prevailing market rate with all proceeds being collected by the Kenya Sugar Board for reinvestment into communities around the four factories and for utilization in cane development.

The four firms were competitively procured by the government through the Ministry of Agriculture and Livestock Development, the Kenya Sugar Board, and other government key players.

Following the broad-based consultations, the following companies have been awarded a 30-year lease for the operation of the four sugar factories:

1. Leasing of Nzoia Suga Company has been awarded to West Kenya Sugar Company of P.O. Box 2101- 50100 Kakamega.
2. Leasing of Chemilil Sugar Company has been awarded to Kibos Sugar & Allied Industries Ltd of P.O. Box 3115- 40100 Kisumu.
3. Leasing of Sony Sugar Company has been awarded to Busia Sugar Industry Ltd of P.O. Box 132-50400 Busia.
4. Leasing of Muhoroni Sugar Company has been Awarded to West Valley Sugar Company Ltd of P.O. Box 1314- Kericho.

Kagwe assured the public and all stakeholders that the negotiated terms represent the best possible outcome to ensure the revival of the sugar sector.

“I call upon your continued support in realizing this vision.The Ministry remains fully committed and ready to address any concerns that may arise,” he said.