Treasury sweetens sugar mills sale with Sh33bn debt write off (Daily Nation (Kenya))

Plans are underway to write off Sh33 billion in debt owed by five sugar companies to make them attractive to investors. Chemelil, Miwani, Muhoroni, Sony and Nzoia Sugar companies owe the government a cumulative Sh59 billion accrued over years of mismanagement that have brought the mills to their knees.

An additional Sh5.9 billion of the debt will be used to strengthen their balance sheets to facilitate reconstruction. The balance will be converted into equity for the government.

We want to give the investors a fresh start in these companies without burdening them with the past issues and liabilities, said Treasury Cabinet Secretary Henry Rotich, admitting that the companies are likely to be sold at a loss.


The balance sheets of these companies are all in the red. The assets owned by the companies have deteriorated and nucleus farms to supply these companies with sugar cane have not been developed. This will obviously affect the price these companies will fetch on the market, he said.

Mr Rotich was speaking on Monday on the sidelines of a forum in Nairobi where stakeholders in the sugar industry met to deliberate over privatisation strategy.

According to the sale agreement, the government will retain only 25 per cent of the stake it currently holds in Chemelil, Muhoroni, Miwani, Nzoia and Sony Sugar companies and sell 51 per cent to a strategic investors.

The remaining 24 per cent will be disposed of to farmers and employees of the respective sugar companies.


The government has sweetened the deal by saying that it will pump back all the money it makes from the sale of the five mills into the companies to make them solvent. This will give them enough cash reserves to invest in new machinery and equipment that is expected to drastically bring down production costs in the country.

The country’s millers only produce around 500,000 tonnes per year against a demand of 800,000 with the deficit filled by imports.

Meanwhile, Kenya and Uganda are working on a system that will address potential abuse of the common market protocol by unscrupulous traders at entry points that include installing scanners for surveillance.

Uganda, Rwanda and Burundi have their own customs officials at the Mombasa port and other entry points and collaboration will be enhanced to rein in such traders.


Kenya Revenue Authority Commissioner-General John Njiraini said Uganda and Kenya had met challenges in managing trade flow at border points and were working on systems to ensure the rule of origin that is enshrined in the trade protocol is respected by the traders.

Just like Kenya with sugar imports, Uganda has been raising issues with the rice coming from Kenya with suspicion that it is imported from elsewhere and re-exported to Uganda. That is why we are working with authorities there to deal with these issues to enable trade across borders to continue as envisaged in the common market protocol, he said.

He said the controversy over deal on sugar imports from Uganda was exaggerated as there is no evidence that huge volumes of sugar were coming from that country adding that the fears being expressed were unfounded.


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