Commission gets nod to sell off debt-ridden sugar companies

Privatisation Commission’s new Chairman Henry Obwocha.[PHOTO:FILE/STANDARD]

The Privatisation Commission has been given nod to sell stakes in State-owned sugar factories to a strategic investor, farmers and employees. The transactions will be completed in the next nine to 12 months.

The move aims at raising cash for rehabilitation of millers and make them more competitive and efficient. The millers are in dire need of modernisation to survive competition after the entry of other sugar producers and an impending end to sugar import limits from the Common Market for Eastern and Southern Africa (Comesa) trade bloc after the end of a one-year extension given early this year.

The State-owned millers to be privatised include Nzoia Sugar Company, South Nyanza Sugar Company, Chemilil Sugar, Muhoroni Sugar Company and Miwani Sugar Company (both in receivership).

Trade Committee

This follows approval on April 21, 2015 of privatisation proposals presented to the National Assembly’s Finance, Planning and Trade Committee by Treasury Cabinet Secretary Henry Rotich. “Prior to implementation, further consultations on the privatisation process will be held with county governments, sugar farmers and other stake holders,” said Privatisation Commission Chairman Henry Obwocha, in a statement.

The Commission said it will within six weeks, roll out a programme for stakeholder consultations and engagements that will also involve county governments that have the ability to do so. “At close of the consultation period, this transaction process is expected to be complete between 9 months and one year,” he said.

The privatisation strategy involves sale of new shares comprising 51 per cent shareholding of each of the sugar firms through a competitive process to a strategic investor. “The proceeds of the sale will fund rehabilitation and modernisation needs of the sugar firms. There will be sale of 24 per cent of the remaining shares to outgrowers and employees through investment trusts to be formed for that purpose,” said Obwocha.

“The Government will retain 25 per cent stake in the sugar millers which it may decide to sell later through an Initial Public Offer (IPO) or any other method. In this future sale, six per cent shareholding will be reserved for farmers depending on their ability and needs of the factory.”

The privatisation of the debt-ridden State sugar millers comes at a time when Kenya got a one-year extension of the existing Comesa safeguards, subject to review and renewal for another one year. The decision was made on March 26, this year by the Comesa Council of Ministers during its sittings in Addis Ababa Ethiopia.

“The approved privatisation strategy also involves write off to clear excess debt and conversion of various amounts to revamp the sugar companies as an initial step to creating healthy balance sheets,” said Obwocha.