Counties eye bigger stake in sugar millers, fault privatisation bid

Nzoia Sugar Company. (Photo: Benjamin Sakwa/Standard)

Governors have renewed calls to amend privatisation laws and allow farmers and county governments assume the running of sugar factories in their jurisdictions.

Migori Governor Okoth Obado, who is also the Council of Governors’ agriculture committee chairman, said any move to privatise millers without involving counties will be counterproductive.

The Government, through the Privatisation Commission, has embarked on the planned sale of Nzoia, South Nyanza, Chemelili, Muhoroni and Miwani sugar factories as a panacea to liquidity challenges facing the millers. However, the plan has been beset by differences among stakeholders.

Mr Obado said the solution to the sub-sector’s woes lies squarely in addressing the millers’ operational challenges, value addition and diversification. He warned that failure to consult widely could sink the companies deeper into crisis.

“The national government has been talking about privatising sugar millers, including Sony Sugar in my county. But in my view, I would like Sony to be left to Migori County farmers or the county government to run so that we can turn it around. We also want it to diversify what it produces. There is huge nut untapped potential,” said the governor, who has challenged the matter in court.

Under the planned privatisation, some 51 per cent shareholding of each of the sugar companies will be sold to a strategic partner, 24 per cent to farmers and employees through outgrowers and employees’ trusts while the central government will initially retain 25 per cent of each sugar company.

This, according to Treasury Cabinet Secretary Henry Rotich, will break the ‘vicious circle’ that has seen the millers continue accruing billions of shillings in debt despite the Government writing off Sh59 billion of debt in 2009.

Obado said his county is betting on improved sugar cane pricing and falling production costs to improve earnings in the sugar sub-sector.

He said a new formula of paying for cane delivered had been agreed upon and will now see farmers earn Sh4,300 per ton up from the previous Sh2,300.

“We had agreed on a formula on which sugar cane farmers were to be paid. Value of cane was to be based on market prices. We are pushing for implementation of this formula,” he told Weekend Business in Nairobi this week.

While rooting for sweeping reforms, he said under the new arrangement, factories must harvest cane within 24 months failure to which the miller would pay for the resultant losses. Farmers must also get their money within a month failure to which they would be compensated.

“I have constantly been reminding the sugar millers and consulting with the Cabinet Secretary for Agriculture Willy Bett to ensure the formula is implemented,” he added. The governor said his county government had invested in better roads in the sugar belt to reduce cane spillage.

“We are constrained by resources we get from the National Treasury but whatever we get we are putting it into good use. We may not be 100 per cent perfect but we are trying our best,” he added.