Sugar sector faces big test as MPs fail to debate sale of millers

Kenya: The sugar industry is hanging on a thread after Parliament failed to pass a motion meant to pave way for privatisation of five sugar companies.

This jeopardises plans to beat the February 2015 Common Market for Eastern and Southern Africa (Comesa) sugar safeguards deadline. Kenya remains unprepared for the commencement of a Comesa free trade area.

Last month, the House Committee on Finance, Planning and Trade approved the Government’s plan to sell 51 per cent stake in five struggling sugar millers to strategic investors. However, Parliament is yet to debate and pass it. The millers targeted include Miwani, Muhoroni, Nzoia, Sony and Chemelil.

The Comesa sugar safeguards period expires on February 28, 2015, meaning Kenya will likely not have sold the millers by then. Analysts say this would see cheap sugar imports compete with the local sugar products, thereby risking the livelihoods of more than six million Kenyans who depend on the sugar industry.

“The matter should be dealt with expeditiously before next year, otherwise our sugar will not be able to compete favourably with cheap imports from the Comesa region,” said Mumias East MP Ben Washiali.

Members of Parliament from the sugar-growing zones say failure to debate it on Thursday will see the matter wait till February 2015 when the Comesa safeguards will have long been lifted, thereby exposing the sector to cheap imports.

“We are making efforts to contact Leader of Majority Aden Duale to ensure the matter is debated alongside the controversial Security Bill on Thursday (today),” said Washiali who is also a member of the Parliamentary Agriculture committee. The committee approval was tabled in Parliament on December 2, 2014. The Motion was in the Order Papers for December 9, 10 and 11 but was not debated. “Unless it is discussed this week, it would have to wait until Parliament opens in February 2015. And by then no factory will be ready to compete,” Washiali explained. The 29-member Agriculture committee Chaired by Adan Mohamed Noor has been pushing for the debate in vain.

Write off debt

Kenya has been running out of time to fully meet the conditions set out by Comesa in 2007. Last year, the period was extended to February 2015. Through the proposed sale of new shares to strategic partners, Treasury projects to receive Sh40 billion that would be mobilised to rehabilitate and modernise the sugar companies to enhance their competitiveness.

“We were expecting that the national government will discuss the matter with the Governors because they too have a stake before the matter is brought for debate but that too is taking so long,” said Lugari MP Ayub Savula, who is also a member of the Parliamentary committee on Agriculture.

 

The new bill proposes the sale of 30 per cent to farmers and employees through a Trust to ensure the shares will continue to be held by the farmers and employees.

A three-year moratorium is also proposed, whereby farmers and employees have three years to pay for the shares set aside for them. The privatisation process will see the Government write off more than Sh39 billion debts that were approved by Parliament in January 2013.