Cane farmers challenge plan to lease of Mumias Sugar Company

Mumias sugarcane farmers protest at Ekero area where were urging an investor who was in plans to revive Mumias Sugar Factory to continue with the plans but involve them as stake holders. [Benjamin Sakwa, Standard]

A farmers’ lobby group has moved to court to challenge the intended lease of Mumias Sugar Company Limited. Gikwamba Farmers’ Cooperative Society places the blame for the miller’s failure to pick up on the agriculture ministry and Agriculture Food Authority (AFA).

The lobby has sued Kenya Commercial Bank, Attorney General Kihara Kariuki, Kakamega County Government, AFA, and Devki Steel Mills Limited. Their lawyer Kibe Mungai said although Devki dropped its bid, the government still insists on selling Mumias to Devki.

It emerged that the sugar miller’s life turned sour between 2012 and 2015, stirred by its failure to commence full-sugar production.

The farmers say that as of 2018, Mumias owed creditors Sh30.1 billion. Among the creditors is KCB which was owed Sh600 million.

At the same time, Mumias owes the Treasury Sh3.1 billion, Sugar Board Sh1.6billion, Eco Bank Sh2 billion and Commercial Bank of Africa (CBA) Sh401 million.

Their court papers filed before the commercial court read that the successful investor has already been picked through a private treaty thus locking out a possibility of getting more from it.

“The dismal performance of the sugar sector as illustrated by the collapse of the company leading to its current receivership occurred during the period when this sector had been regulated by the Crops Act,” the lobby argued adding that the court should halt the lease until the Sugar Bill 2019 is enacted into law.

They add:“ Whilst the financial challenges facing Mumias Sugar Company are largely from poor policy guidelines. Ministry of agriculture and AFA are largely to blame for the plight as opposed to fundamental economic deficiency affecting the company.”

There are several cases touching on the survival of the once upon a time sugar production giant.

Three years ago, Kisumu Senator Anyang’ Nyong’o, in response to Privatisation Commission Executive Director Solomon Kitungu, said there was no provision in the Common Market for Eastern and Southern Africa (Comesa) agreement that required the country to sell its millers to private investors.

The Government intended to sell 51 per cent of its shares in Nzoia, South Nyanza, Chemelil, Muhoroni, and Miwani sugar firms, but the move failed twice as it faced opposition in court. The Senator, through lawyer Victor Onyango, told the Milimani Law Court that Comesa free trade would take effect even if the government retained majority shareholding in the millers.

“The (Comesa) treaty only obligates state parties to eliminate custom duties and other charges of equivalent effect imposed or in connection with the importation of goods,” Justice Weldon Korir heard.

Mr Kitungu had told the court that Kenya had committed to privatising its sugar companies in 2002 to ensure their survival in the market after the lapsing of the sugar trade safeguards.

The protection, which lapsed in February 2017, allows Kenya to limit the entry of sugar imports to 350,000 tonnes to bridge an annual milling shortfall.

However, the country is faced with the dilemma of having millers struggling to profit while producing sugar at a higher cost than other countries in the economic bloc. The cost of producing a tonne of sugar is $570 (Sh57,400) in Kenya, while in Egypt, it is $270 (Sh27,200).

The Privatisation Commission told the court that the six million Kenyans who rely on sugarcane would be affected if the process of looking for financiers and rehabilitating the firms was not done by the time the country opens its borders to sugar imports.

But Prof Nyong’o said the cost of sugar production would not come down simply by selling off the sugar firms. He cited a report done by the commission that indicated 60 per cent of Kenya’s sugar is produced by the private sector.