KENYA: Mill privatisation bogged down by controversy

Published: 04/02/2018, 11:57:21 AM

More than a decade after the privatisation of State owned sugar factories was mooted, the process has been bogged down by controversy due to competing interests, according to Kenya's Standard newspaper.

This has been suspended several times after disagreements by stakeholders and even formation of the Privatisation Commission to help spearhead the process has not made matters easy.

The privatisation of millers has further been complicated by demands of governors from the sugar belt. While the commission and farmers seem to be reading from the same script and want the firms privatised, the governors and MPs want this delayed to allow the State to address pressing matters.

The MPs want the government to disclose the worth of the factories, their assets and liabilities. Muhoroni MP James Onyango K'Oyoo claimed the state is planning to sell off the millers to the lowest bidders with powerful connections.

Following fears that the privatisation process was flawed, the Treasury Secretary Esther Koimet challenged the governors to propose preferred investors to buy the 51% stake held by the Government.

Koimet said the government will only write off sugar millers' debts amounting to KES89 billion (US$884.2 million) under the framework of the planned sale of Chemelil, Sony, Trans Nzoia, defunct Miwani and Muhoroni which is in receivership. She said bailout was a temporary solution that would not yield much if isolated from efforts to fix problems bedeviling the sector that supports nearly 250,000 farmers.

"If we write off debt before agreeing on the process, debt will continue to accrue," she said. The Privatisation Commission roped in the National Lands Commission after calls by governors to have the land audited. The move was also calculated at assuring the county bosses that the millers' nucleus lands which are part of the 51% stake were in safe hands.

"We have wasted too much time on these talks because every time we come here we talk about the same things. We have made actionable deliberations, let us set timeliness and start with those so that we can move forward," said Nandi Governor Stephen Sang, during a stakeholders meeting in Kisumu on March 12. Governors from Western, Nyanza, Nandi and Kericho sugar belts attended.

The Privatisation Commission sought the blessings of politicians to proceed with consultations with farmers and factory workers over the planned sale of the five State controlled millers. Governor Sang argued that the process which started in 2009 could drag on for another decade if deliberations made at "these meetings are not implemented."

Migori Governor Okoth Obado, who is also the Council of Governors' Agriculture Committee chair said they had agreed during a meeting chaired by Deputy President William Ruto that pressing issues be addressed through technical committees to fast track the privatisation. Issues raised are the fate of a 25% stake reserved as a fall back measure by the government, gazettement of sugar regulations, debt write off plan, and ownership of the land on which the factories stand.

"Intergovernmental Business and Economic Committee has tasked the National Treasury and the Privatisation Commission with formulating a revenue sharing plan to split the reserve shares between the two levels of the government. The same committee is also expected to find ways of incorporating the counties in the licensing role," Obado read the resolutions.

These resolutions meant that the Privatization Commission was free to hold talks with the stakeholders over the planned sale of millers beginning Monday next week. But on March 13, leaders from Migori County including the governor, Woman Representative Pamela Odhiambo and Uriri MP Mark Nyamita told the commission they would not allow South Nyanza Sugar Company (Sony) to be sold.

"There is no disagreement between the two levels of government regarding who is the custodian of public investment, but Agriculture is a devolved function and if resources follow functions, then it is our position that Sony should be handed over to the county because the National Government has no interest in it," Obado said.

"The resale value of Sony is currently near just 2% but the nucleus land it stands on is worth millions of shillings. Instead of selling it at a throw away price, transfer it over to us then we will talk about a strategic partner later," he added.

And although the Privatisation Commission and the Treasury blamed Mumias's owes on lack of a strategic investor, the governors maintained there were other viable options not explored and questions that had not been exhaustively unanswered.

Kisumu Governor Anyang' Nyong'o and his Bungoma counterpart Wycliffe Wangamati had earlier said privatisation "is not necessarily the solution to the problems facing the industry which has for a long time been run by the National Government."

Kenya National Sugarcane Farmers Union Deputy Secretary Atiang' Atyang' argued governors were using land issues as a decoy to force the government onto the negotiating table in a bid to take over the running of factories instead of selling them.