Counties now want major stake in privatisation of sugar millers

By BRYAN TUMWA

Western, Kenya: County governments of Kakamega and Bungoma want a stake in the privatisation process of major sugar factories in the region. The county government of Kakamega wants a role in the management of Mumias Sugar Company (MSC)  while Bungoma County wants to be given a chance to buy shares in Nzoia Sugar Company when it is privatised.

The privatisation of the five companies was approved by the Government way back in 2008, but politics, mismanagement and huge debts have delayed the process. The firms set for privatisation include, Sony, Chemelil, Muhoroni, Nzoia and Miwani. The five are in huge debts of Sh6.1 billion by 2014.

Negotiate for acquisition

Following the devolvement of the agriculture function, counties want to play a major role in the running and management of the sugar industry but find no room to accommodate them. Even the legal arrangement does not accommodate them. 

“MSC is a private company and so there is no way we can have a role to play in its management unless we find our way on the board. The only way is for us to negotiate for the acquisition of the 19 per cent shares held by the national government,” said Kakamega County Governor Wycliffe Oparanya. “This will enable us sit on the company’s management board to be privy to decisions at the company.”

Mumias, which has been recently in the news, has seen its Managing Director Peter Kebati suspended and Coutts Otolo take over in acting capacity. “We have taken keen interest in the ongoing Kenya Sugar Board forensic audit of assets and ongoing cases between Mumias Outgrowers Company and Mumias Sugar Company to ensure that farmers do not lose their shares and the 15 per cent retention money owed to them,” said Oparanya.

Bungoma Governor Kenneth Lusaka wants the county government to play a major role in the affairs of Nzoia Sugar Company, whose performance has of late been wanting.

Lusaka has called for concerted efforts from leaders in the region to buy shares from Nzoia when the privatisation process begins at the end of this month. “If farmers are not prepared to buy shares, the county governments should step in and obtain shares on their behalf,” Lusaka said. “But the process should not be done in a hurry because the interests of farmers might not be catered for. We want a structured engagement in as far as privatisation is concerned. ” The State has started the process of selling off its stake in five state-owned sugar factories at the end of this month.

Strategic partner

The process will be trough  auction or to  a strategic partner.  “This activity is estimated to take at least two years. We are working hard to ensure we privatise this time round,” said Mohammed Noor, chair of the Parliamentary Committee on Agriculture.

 When the companies are finally privatised, farmers are set to own 30 per cent of the shares. Even as the stakeholders discuss the privatisation process, importation of cheap sugar from the international market has been the biggest impediment to the sector in recent times. This is among the factors that saw MSC top managers sent home.  “Our sugar factories are stuck with unsold sugar because the market is flooded with cheap sugar imports. Soon, we will have a meeting of all governors who come from the sugar growing areas to come up with strategies to salvage the sugar sector,” said Lusaka.

Lusaka revealed that Nzoia Sugar Factory alone possessed 55, 000 50-kilo bags of unsold sugar in its stores. We feel that the national government should move in and assist because the entire economy of Western Kenya will collapse if the issues in the sugar industry are not addressed. While we wait for these interventions, governors from the region should remain united to tackle the common challenges that they face.”

County Governments have taken up the initiative to spearhead reforms in the sugar sector. A sugarcane taskforce commissioned by Governor Wycliffe Oparanya proposed that County governments in the sugar belts should  build institutions to strengthen the industry.

There are currently 11 sugar millers in the country, which include Mumias, West Kenya, Butali, Sony, Nzoia, Chemelil, Muhoroni, Kibos, Soin, Ndhiwa and Trans Mara. A Sh 2.4 Billion sugar factory has also been proposed to be built in South Mugirango in Kisii County.