All sugar factories to be privatised

October 27, 2008

, NAIROBI, October 27 – The government plans to privatise all publicly owned sugar factories before the expiry of safeguard measures within the Common Market for Eastern and Southern Africa (COMESA) in 2012.

Agriculture Minister Mr William Ruto said on Monday that bringing in the private sector to manage the factories would enhance competitiveness and efficiency in the sugar sector.

“We believe that the private sector will not only inject much needed capital but will also bring on board necessary expertise to run the factories efficiently so that we can be able to compete with the rest of the world,” he said pointing out that South Nyanza Sugar Factor (Sony), Nzoia and Muhoroni, Sugar companies were some of the factories that had been targeted.

At a press conference, the minister disclosed to reporters that they were currently preparing a program which would outline how the privatisation of the sector would be done. He added that it would soon be forwarded to the Cabinet for approval.

“As soon as the Cabinet approves the program, we will identify consultants who will look at each sugar mill and advice us how to go about reducing government control in these factories,” he stated.

The divestiture program is part of the drastic measures being undertaken by the government to revitalize the sector so that it can effectively compete with other industries in the COMESA region.

In November 2007, Kenya’s waiver to import 220,000 metric tonnes of duty free sugar from the bloc was extended for a period of four years until 2012.  The government had initially announced its intention to ask for an extension after the initial specified reform measures that were being implemented failed to bear fruit.

The end of the protective measures will open up the market for competition that will see an influx of cheap imports into the country.

The privatisation of the mills is one of the requirements that Kenya is expected to fulfil by COMESA before the end of the measures.

The sector has been dogged by many problems which include the high amount of un-serviced loans amounting to Sh47 billion. Mr Ruto however said the government was looking into ways of clearing the arrears that are crippling the industry.

“Fortunately most of the arrears are statutory debts to government and therefore we have to take a decision whether we want to convert them into equity or write them off,” he said.

At the same time, the minister revealed that the draft on how to operationalise the Kwale International Sugar Company that sits on a 15,000 acre piece of land and which is expected to be commissioned in November 2010 was ready.

He said the first round of seed cane would be planted by December this year on 10 hectares while the second batch would be sowed before June 2009 on 80 hectares of land.

“By December 2009, we should have all the seed cane on approximately 800 hectares of land for commercial development,” he said adding that the cane matures early and would take 12 months to develop instead of the usual 24 months.

The civil construction for the milling plant is set to start early 2009 while farm and plant machinery will be purchased before the end of this year.

He urged farmers in Msabweni District, where the factory is situated, to register and prepare their land in preparation to grow cane in the out grower program.

Mr Ruto said the government would at a later date also initiate negotiations with the sugar company with a view to having the local community own a certain percent of the milling firm.

The coastal factory will have an initial crushing capacity of 5,000 tonnes of cane per day which would produce an estimated 120,000 tonnes of sugar per year. It is expected to significantly address the over 200,000 metric tonnes of sugar shortfall that the country has.

On average, Kenya produces about 500,000 metric tonnes of white-milled sugar against a consumption of about 700,000 metric tonnes annually.

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