State told to allow farmers to manage sugar companies

Expert says bailing out of state parastatals, especially sugar companies is not a long term solution

In Summary

• Government told to stick to initial decision of selling the loss-making state enterprises. 

• This will allow the private sector to bring efficient management.

Harvested sugar cane is ferried to Sony Sugar Factory near Awendo town.
Harvested sugar cane is ferried to Sony Sugar Factory near Awendo town.
Image: KNA

The government has been urged to allow farmers to manage commercial parastatals in the agriculture sector.

Timothy Njagi, a senior researcher at Tegemeo Institute said bailing out of state parastatals, especially sugar companies is not a long term solution.

“The bailing out of sugar companies never works and the government should not keep doing the same thing over and over,” he said.

“We propose that the government considers selling these firms to farmers for efficient management. Farmers have already signaled willingness to raise equity and the government can work out a deal with farmers.”

The government had signaled an intent to privatise semi-autonomous government agencies as a measure to rid itself of loss-making institutions.

Many of the commercial  SAGAs in the agriculture sector fall under this category.

The High Court last year put a stop to the plan but President William Ruto has maintained that there will be no turning back on the government’s plans to privatise state-owned parastatals.

He said the sale of the parastatals was informed by a report that identified 150 loss-making state-owned enterprises and recommended them for sale.

“We have 350 public companies that just take money from the budget, we are supporting them with billions of shillings. A report was already done saying about 150 companies should be removed,” Ruto said.

He said there would be returns on investment if the private sector is allowed to take over the management of the state-owned entities.

In November last year, the National Treasury announced plans to sell 11 parastatals to free up cash pumped into their operations.

These parastatals include, the Kenyatta International Convention Centre (KICC), Kenya Literature Bureau, National Oil Corporation, Kenya Seed Company, Mwea Rice Mills, Western Kenya Rice Mills, Kenya Pipeline Company and New Kenya Cooperative Creameries.

Others are the Kenya Vehicle Manufacturers, Rivatex East Africa and Numerical Machining Complex.

ODM challenged the decision arguing that the sale should be subjected to a referendum because the entities are strategic state firms with a combined worth of Sh200 billion.

In his ruling on December 5, Justice Chacha Mwita said the petition by ODM raises critical constitutional and legal issues of public importance, which require critical examination and consideration. 

“A conservatory order is hereby issued suspending implementation of section 21(1) of the Privatisation Act 2023 and or any decisions made under that section, until February 6, 2024,” the judge said.

Njagi said in order to further support farmers, state should abandon proposal to tax smallholders.

The Budget Policy Statement contains proposals to impose direct taxes to farmers, classifying farmers as part of the untaxed category.

The proposal is problematic and represents a lack of understanding of the agriculture sector,” he said.

Njagi said there is a need for the treasury to commission a study that will help shed light on the tax burden by farmers.

“Farmers pay a lot of indirect taxes, and a reason why the government subsidises the sector. Imposing direct taxes on farmers contradicts the government objectives in the BETA approach,” he said.

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