Private firm to inject Sh12.3b to revive sugar factories

Kenya Sugar Board Chairman, Nicolas Gumbo. [Courtesy]

Private companies that won bids to take over public sugar factories will need to inject Sh12.3 billion to resuscitate the mills.

Details on the government's plan also say the investors will pay Sh522 million goodwill.

Of the four sugar factories, Nzoia Sugar Company leased to West Kenya Sugar Company will need the most capital injection at Sh5.8 billion.

Kibos Sugar and Allied Industries, now in charge of Chemilil Sugar, will put in Sh4.5 billion, while West Valley Sugar Company will be expected to spend Sh1.02 billion to revive the Muhoroni Sugar mill. At the South Nyanza Sugar, Busia Sugar Company will be required to inject Sh1.0 billion.

There is also a concession fee of Sh4,000 per ton of sugar produced and Sh3,000 per ton of molasses.

Lease rental is tabulated per hectare per year, which is Sh45,000 for Nzoia Sugar and Sh40,000 for the other three factories.

Nzoia Sugar has the largest land size at 4,629 ha followed by South Nyanza Sugar (3,059 ha), Chemilil (2,799 ha) and Muhoroni (2,002 ha).

While not much details of the lease arrangement have been made public, the plan spearheaded by President William Ruto that has rubbed a section of political leaders from the Western and Nyanza the wrong way seeks to offer a lifeline to the cash-strapped entities.

On Wednesday, Kenya Sugar Board Chairman, Nicolas Gumbo, said the process was done through lengthy negotiations that saw the government enter into an arrangement with the Kenya Union of Sugar Plantation and Allied Workers to safeguard the interest of workers.

He, however, could not share details on the planned revenue-sharing formula between the government and the lessees, only insisting that no public land would be lost.

"The assets will be leased out annually based on the prevailing market rates with all proceeds being collected by the Kenya Sugar Board for reinvestment into communities around the four factories and for utilisation in cane development," he said.

Debts to workers and farmers rose by Sh1.4 billion in the last one year, even after the Exchequer paid Sh2.3 billion in a bid to offset the arrears.