Treasury seeks to write off Sh117.64b millers debt

Attractor ferrys sugarcane past Ahero Town. [Michael Mute, Standard]

The National Treasury is seeking Parliament's approval to write off Sh117.64 billion in loans and tax penalties accrued by five sugar millers.

The ministry yesterday tabled a memorandum on the plans it seeks to take to revive and commercialise the state owned sugar companies; Chemelil, South Nyanza, Nzoia, Muhoroni and Miwani sugar factories. The memorandum was tabled by National Assembly Majority Leader Kimani Ichungwa for consideration by the House.

Of the amount, the Treasury is seeking to write off Sh65.8 billion owed to the government and Kenya Sugar Board as at June 30.

The Treasury is seeking Parliament's approval to write off tax penalties and interest estimated at Sh50.14 billion and further a payment plan for balances owed to farmers amounting to Sh1.7 billion to be worked out by the Ministry of Agriculture and Livestock Development and the National Treasury.

"The proposed action plans are targeted to achieve the creation of a competitive sugar sector: The government intends to create a competitive sugar that can withstand the withdrawal of the Comesa safeguards," reads the memorandum in part.

Treasury Cabinet Secretary Njuguna Ndung'u has also called on Parliament to approve vacation of the privatisation model approved by the House in 2015, noting that the implementation of the privatisation process was not concluded as it was opposed by stakeholders especially the communities because of sensitivities around permanent divestiture of land.

And to improve the performance of the companies, Prof Ndung'u is calling for adoption of a new leasing model for the five sugar millers which he says will allow private sector participation without undertaking a permanent divestiture process, enhance livelihoods of farmers, employees and communities, generate taxes and improve competitiveness in the sector.

The proposed strategic interventions by the Treasury include bringing on board private capital expertise and modernisation of sugar mills with adequate cane to allow them run efficiently and operate on commercial principals.

He explains that the proposed lease model shall be executed by unbundling the nucleus estate and the factory land. The memorandum has also recommended that Nzoia and South Nyanza sugar companies which have a cane growing area of 49,862 hectares and 81,415 hectares respectively be retained as they are. It further proposes Chemelil Sugar Company and Muhoroni Sugar Company which have cane growing areas of 18,437 hectares and 22,134 hectares respectively be merged to form one zone with total cane growing area of 40,571 hectares.

The CS has further proposed that the decisions on the Miwani Sugar Company be made once on-going court cases are determined

"Investors interested in either Chemelil or Muhoroni sugar companies will be required to bid for both. This will facilitate leasing arrangement that allows for the two factories zones merging," adds the memorandum.

Ndung'u is optimistic that the interventions will address challenges facing the sugar millers which have been identified as poor governance, failure in institutional structures, lack of capital and high debt, ageing plants, machinery, obsolete technologies and operational inefficiencies.

National Assembly Speaker Moses Wetang'ula directed that the memorandum be referred to the Finance and Planning Committee and Agriculture and Livestock Committee for immediate consideration.

"They will bring a report to the House in the next two weeks," said Wetang'ula.

Minority Leader Opiyo Wandayi however sought to have the consideration of the memorandum halted until the Sugar Bill 2023 currently before the House is debated and concluded.

"Sugar is an emotive matter. I am afraid two weeks is not enough time. We also have the Sugar Bill being debated by this House and there could be a conflict of interest because the Bill is meant to be the anchoring law and I would have imagined any policy direction from the executive should have been aligned to the Bill," said Wandayi.

To which the Speaker replied: "The paper is only buttressing what the Bill is proposing. I have also fast tracked the Sugar Bill to go for third reading and it would be in the interest of farmers and leaders that when the Bill is enacted into law, it takes off with zero debt on the part of companies."