NAIROBI: Kenya would offer five state-owned sugar companies for sale to private investors over the next year after writing off 59 billion shillings (R7.1 billion) of debt, the Privatisation Commission said recently.
The government planned to sell its stakes in Nzoia Sugar, South Nyanza Sugar, Chemelil Sugar, Muhoroni Sugar and Miwani Sugar to make the industry “more viable”, the commission said in a May 15 statement. The companies accounted for about 10 percent of the 592 100 tons of sugar produced in Kenya last year, according to Kestrel Capital (East Africa), a Nairobi-based brokerage.
“Government reached the decision of bailing them out completely so that the firms would look attractive to investors,” Henry Obwocha, the chairman of the commission, said on Monday in Nairobi.
Kenya is trying to overhaul its sugar industry, which the Food and Agriculture Organisation (FAO) says is beset by problems including dilapidated factories, poor governance, insufficient funding and inadequate research. Domestic production costs could be as high as $900 (R10 705) a ton of refined sugar, compared with as little as $300 a ton in countries in the 19-nation Common Market for Eastern and Southern Africa bloc, according to Kenya’s state-run Sugar Directorate.
Production of the sweetener accounts for 15 percent of Kenyan agriculture, which makes up more than a fifth of the country’s $55bn economy, Sugar Directorate data shows. The industry employs at least 250 000 people, the FAO says. The country usually fills an annual sugar deficit of about 200 000 tons with imports from the region.
The objectives of privatising the millers included enhancing competitiveness and diversifying into “co-generation of power, ethanol production and other value-added products”, according to the commission. The government approved the sale of the sugar companies in 2010.
The government planned to sell 51 percent stakes in the companies to a “strategic partner”, and a further 24 percent to both growers and employees, Obwocha said. The government, which currently owns at least 98 percent of each of the five producers, would retain a 25 percent interest in them, he said. Kenya was also completing plans to sell the state’s stakes in a number of hotels, he said. Manufacturing firms and financial institutions would be next.
