Ignoring Privatisation Commission in leasing sugar firms will haunt process

We must fulfil Comesa requirements and quickly remove the protection policy.

In Summary

• The gazettement of the team to lead the process and the banning of brown sugar into the country is welcome news, but not the most needed in reviving the sugar sector.

• Court cases and auctioneers await immediately the private investors come in and the government protection is waived.

A truck carries sugar cane to an open yard at Mumias Sugar Factory.
A truck carries sugar cane to an open yard at Mumias Sugar Factory.
Image: FILE

A kind reminder to you Agriculture CS Peter Munya, over the manner and process of leasing the five public sugar millers.

Failure to involve the legally mandated Privatisation Commission nor implementing the measures requested by the government under the Comesa free trade arrangements that expiry early 2021 to save the sugar sector will be counter productive and will frustrate you at some stage.

The gazettement of the team to lead the process, the publication of the bidders and the banning of brown sugar into the country is welcome news, but not the most needed in reviving the sugar sector unfortunately.

The restructuring involves writing off of debts owed by the millers to the former Kenya Sugar Board/Commodities Fund as at December 31, 2019.

Others include writing off of growers’ debts to the former Kenya Sugar Board and writing off of tax penalties and interest.

Several studies and committee reports done have blamed the collapse of the mostly state firms doing the sugar business on high production and transport costs making Kenya’s sugar very expensive against other producers in the global market, use of outdated technology, small holder farm ownership denying advantages of large scale production, lack of enough raw materials/cane for leading to firms producing below capacity, poor and highly politicised management especially of state sugar firms, reasons the government used to seek protection for the sector from the Comesa colleagues, safeguards that have never been met since then because nobody really cares.

Without which, Kenya sugar can never compete globally.

The protection policy does not favour the industry as it has encouraged inefficiency, have denied cane farmers market incentives, poor sugarcane varieties, poor infrastructure, corruption, non-payment to farmers among others.

We must fulfil the Comesa requirements and quickly remove the protection policy to allow the industry thrive and assure the debtors and farmers through a consultative process how their interests will be catered.

Court cases and auctioneers await immediately the private investors come in and the government protection is waived.

I am not sure if you will get time to read this reminder because of the hectic schedule. 

Given that agriculture is the main stay of Kenya’s economy and with the Covid-19 pandemic, harsh weather conditions that has affected harvests negatively, adverse effects of climate change and these small insects in the name of locusts, your desk in full.

And your hand in working on your Meru Governor’s seat on one hand and the pressure to deliver on the President’s expectation on the other, the speed of leasing out the millers is commendable.

I think we are used to long distance pace in such transactions in Kenya in such matters that the relay pace adopted seems unsettling.

While one would understand that involving the Commission, which falls under the National Treasury, might delay the process; actually the Commission was established in 2008 and us currently operational under an Act of Parliament has remained very private initially because of technical reasons, then its life became complicated with the devolution process that requires it to consult both the national and county governments on privatising some services that have been devolved, and currently has been denied functional capacity as it has no board (former Minister Dr Paul Otuoma is lonely is serving as a chair of the board with no board members), its input and involvement in the process is very critical.

This Commission needs to be place so that it does leave a vacuum, or create room for court cases, given the vested interests in the sector.

I know as a former law don at Moi University you fully understand the import of this and actually might have prepared for any legal or administrative exclusion of the commission from the on-going politically nurtured and cheered process.

The Commission had started a process of privatising the five firms after the cabinet approval, met sugar stakeholders and prepared a program for the undertaking.

As you are aware, the process of privatising the highly indebted firms needed a multi-agency approach including the Treasury, Kenya Revenue Authority and other debtors owed billions by the firms.

While you announced the writing off Sh60 billion owed by the firms to KRA, both the Treasury and KRA remain mum on the issue, and whether the legal process of writing off debts, was followed and finalised.

A prove of this will suffice, so that unlike in the past where whenever people want the support of the sugar growing areas, they engage in rhetoric and political games laced with salty attempts to revive the sugar industry.

We have been there severally before; seen the appointment of task forces, Parliamentary Committees and several reports, which have left the millers and farmers more crippled and traumatised.

And Ramisi factory in Kwale and  the sugar potential in Tana River have never be pursued while Mumias Sugar Company issues have been so complex that its not mentioned in the current efforts.

Companies advertised are Chemilil, Miwani (in receivership), Muhoroni (in receivership), Nzoia and South Nyanza Sugar companies.

The industry is a source of income for more than 400,000 smallholder farmers who supply 90 per cent of the raw material to the millers.

The leasehold period for investors who qualify is 25 years.

The government is looking for investors with experience to redevelop the factories into sugar complexes.

The selected financier is expected to lease, redevelop and operate the complexes at sufficient processing capacity and support diversification into generation of export power and producing bio-ethanol and allied co-products.