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County governments fear communal parcels will be transferred to private hands

BUSINESS
By Otiato Guguyu | February 11th 2018
Muhoroni Sugar Company

Kenya’s expansive sugar belt has just one year to stay alive before it is swept away by inflows of cheap imports from the Common Market for Eastern and Southern Africa.

The protection against imports from the 19-member region has been in place since 2002, with Kenya requesting several extensions every time it expired.

But in more than a decade, Kenya has been unable to privatise five ailing sugar millers - Chemelil, Muhoroni, Miwani, Nzoia and Sony - with the process hampered by court cases, low uptake of new cane varieties by farmers and implementation of a new method of cane payment based on sucrose content.

At the centre of the dispute is the 41,411.47 acres of land, equivalent to 31,372 football fields, where the companies own extensive tracts that may be ripe for grabbing.

Chemelil has 6,868 acres, Nzoia 11,438 acres, South Nyanza 7,407 acres while Muhorini has 6,866 acres. Miwani has 8,831 acres.

Privatisation Commission Chairman Henry Obwocha claims MPs from the sugar belt are apprehensive that the community land will go to private hands.

“Parliament expressed concerns that ancestral land should not be sold. But we maintain that the land will remain with the factories,” said Mr Obwocha.

LOCALS COMPENSATED

He, however, said while the legislators argue the land was communal, the commission discovered that some of it was bought by the government and the locals compensated.

“Some land belongs to the factories. In Sony, for instance, 98 per cent of the land belongs to the Government. Nzoia is owned partly by the then county council,” said Obwocha.

The national government, county governments and farmers would want to be given priority if the land is acquired, a situation that has thrown a spanner into the works.

Obwocha said the commission was not a land arbitrator and any land injustices would have to be addressed by the National Land Commission.

He said the commission has ensured that the land remains intact during the privatisation process by setting out conditions for the strategic investor.

“The strategic investor will only come in to modernise the factory, diversify production of by-products such as ethanol to ensure the farmers are paid promptly and that Kenyan sugar is competitive in the open market,” he said.

“The investor will leave the land as it is. They cannot even change the use and, say, put up real estate on the factory land,” added the chairman.

So much attention has been given to the strategic investor, with the commission insisting it does not want a local player.

The strategic investor must show capacity and should have been in operation for the last 10 to 15 years to provide a guarantee that they will not run down the factories.

Another problem in the process has been the ownership structure which has pitted the county, national government and farmers against the deal.

In the initial plan, the strategic investor was expected to take up a 51 per cent stake in the sugar millers while the farmers would have 24 per cent, employees six per cent and the Government 19 per cent.

After several negotiations, another structure was proposed where the Government would take 25 per cent and the farmers and employees would share 25 per cent.

Now county governments, which argued that the Agriculture function fell under their jurisdiction, want the Government stake.

Governors have asked the National Treasury to clear over Sh50 billion in debts accumulated by State-owned sugar companies and hand them over to be managed by counties.

The National government, which has invested in the factories, opposes the move as well as farmers who say that giving the mills to the counties would only increase inefficiencies.

 

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