Kenya to sell five state-owned sugar companies to private investors
VENTURES AFRICA – Kenya’s privatization commission revealed earlier this week that it will sell five of the country’s state-owned sugar companies to private investors after writing off a debt of Sh59 billion ($603 million). The companies are perceived to be attractive entities as they collectively account for about 10 percent of the 592,100 tons of sugar produced in the country last year.
Kenya’s sugar industry is finding it hard to address several socio-economic challenges. These range from poor governance and dilapidated factories, to insufficient research. Additionally, domestic production costs are as high as $900 per ton of refined sugar, way above the $300 recorded in countries belonging to the Common Market for Eastern and Southern Africa (COMESA).
Sugar makes up 15 percent of Kenya’s agriculture turnover, which, in turn, accounts for more than a fifth of the country’s $55bn economy, and employing at least 250,000 people. Despite this, the country still has to make up for an annual sugar deficit of about 200,000 tons with imports from the region.
The commission says the sale of these companies, which include Nzoia Sugar, South Nyanza Sugar, Chemelil Sugar, Muhoroni Sugar and Miwani Sugar, will make the industry more viable and open up the sector to greater economic participation and opportunities. “Government reached the decision of bailing them out completely so that the firms would look attractive to investors,” said Henry Obwocha, the Chairman of the Privatization Commission. “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.”
Therefore, privatizing the millers is expected to enhance their competitiveness and better support power generation by upping ethanol production and other value-added products.
The government, which currently owns at least 98 percent of each of the five producers, will retain a 25 percent interest in them after the sale. Local reports speculate that the East African country was also completing plans to sell the state’s stakes in a number of hotels, manufacturing firms and financial institutions.
By Emmanuel Iruobe