State seeks out-of-court deal with governors over sale of sugar millers

Star sugar on sale at Ukwala supermarket in Kisumu. Kenya has been unable to prepare its local sugar industry to compete against the sweetener from Comesa markets. [Photo: Collins Oduor/Standard]

The Government wants to negotiate with governors from the sugar belt to unlock a stalemate over the privatisation of millers. This is after Kenya received an extension of the Common Market for Eastern and Southern Africa (Comesa) sugar safeguards.

The country was given a two-year extension to privatise its struggling sugar millers to make them competitive in a liberalised market, a process that has stalled due to litigation. Privatisation Commission Chief Executive Officer Solomon Kitungu said the Government wanted an out-of-court settlement and is already consulting with industry players.

“The parties have been exploring the possibility of resolving the matter outside the courts, through the Inter-Governmental Relations framework but that has not yet yielded any agreement. Discussions are therefore progressing to a higher level at the Inter-Governmental Relations framework,” Mr Kitungu told The Standard.

He said the matter is also before the Inter-Governmental Relations Technical Committee (IGRTC), which has already held consultations with the Privatisation Commission, the Council of Governors, the counties in court and the other key players to facilitate discussions prior to presentation of the matter to the Inter-Governmental Relations Summit.

Governors and politicians from the sugar belt in Western Kenya have blocked plans to privatise Chemelil Sugar Company, South Nyanza Sugar Company, Nzoia Sugar Company, Miwani Sugar Company (in receivership) and Muhoroni Sugar Company (in receivership), saying the Privatisation Commission has failed to comply with the law.

The cases by Prof Anyang’ Nyong’o, the Council of Governors and the counties of Bungoma and Migori had earlier been scheduled to be heard as a consolidated case on October 5, 2016. Hearing has now been rescheduled to November 16, 2016. Mr Kitungu said the two-year extension from February next year will be sufficient to resolve the stalemate within the law if talks fall apart.

“The extension is critical in view of the time that we have lost to date. We need more time as we wait for the determination of the cases in court. The extension remains as important as it was when we received the last one,” he said.

The Government tried to sell 51 per cent stake in the five millers to strategic investors, while another 24 per cent was set aside for farmers and employees.

It then planned to sell the remaining 25 per cent stake in the milling companies in an initial public offering once the factories are profitable. Governors, however, opposed the move, asking Treasury to clear over Sh50 billion in debts accumulated by State-owned sugar companies and hand them over to counties to be managed by them since agriculture is devolved.

The Government has already invited investors to bid for a stake in five sugar companies earmarked for privatisation in reforms aimed at turning around the fortunes of the ailing sector.