State hopes to sell sugar firms before Comesa deadline

Sugarcane is loaded on to a truck at Matulo in Webuye before being delivered to Nzoia Sugar Company in Bungoma on May 22, 2014. FILE PHOTO | JARED NYATAYA |  NATION MEDIA GROUP

In Summary

• Privatisation Commission holding consultations with stakeholders and sugar firms.

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By LILIAN OCHIENG
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Bids will be invited for the purchase of five state owned mills by November ahead of the Common Market for Eastern and Southern Africa (Comesa) safeguard deadline next year.

The Privatisation Commission is rushing to shore up the dwindling fortunes of the sugar industry as the Comesa safeguard deadline set for January 2016 approaches.

The target is to have Nzoia, Miwani, Sony, Chemelil and Muhoroni Sugar privatised before the safeguard is lifted.

“We plan to write off Sh33 billion in debt by five sugar companies to make them attractive to investors. This will open way for the bids,” said National Treasury Cabinet Secretary Henry Rotich.

“We will then identify strategic investors and sign concession agreements with them.”

At the moment, the Privatisation Commission led by CEO Solomon Kitungu and Chairman Henry Obwocha are holding consultations with stakeholders and sugar firms. The process will come to a close mid next month.

Rotich and acting Cabinet Secretary Ministry of Agriculture, Livestock and Fisheries Adan Mohamed are part of the discussions.

Mr Kitungu told Sunday Nation that interested investors will only be known once the Commission advertises for Expressions of Interests (EOIs). Request for EOIs will be undertaken immediately after stakeholder consultations.

FINANCIAL RESOURCES

“In addition to the financial resources, the strategic partner will also be required to have a track record of owning and operating profitable sugar companies for a specified period. The bids will be open to all investors who meet the criteria,” said Mr Kitungu.

The sale agreement states that government will retain 25 per cent of the stake in the mills, 24 per cent will be disposed to farmers and employees through a Farmers and Employees Trust.

The strategic partners who will take over management of the mills will have 51 per cent stake. They must have the ability to buy shares and mobilise resources required to modernise the factories.

“The sale of 51 per cent stake to a strategic partner will comprise of new shares, to enable each of the companies to retain the proceeds from the sale shareholding to rehabilitate and modernise the factories and meet other financial obligations,” said the sale agreement as seen by Sunday Nation.

Kenya has no option but to privatise the mills following pressure by the Opposition on the state of the local mills that has forced imports from Uganda to fill the deficit. Also, Comesa had stated that there would be no extension of the safeguard further.

The plan is a step forward following a long wait after the Parliament in January 2013 passed a resolution for the companies to be privatised ahead of the expiry of the February 2014 Common Market for Eastern and Southern Africa (Comesa) safeguards.

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.