Government commission plans to privatize five sugar companies

Kenya’s privatization commission has said it has approved the sale of government stakes in five local sugar companies to make the sector more viable and competitive.

The government is seeking to privatize Nzoia, Sony, Chemelil, Miwani and Muhoroni millers to help increase efficiency through the entire cane and sugar production value chain, improve the state of infrastructure and strengthen research. The country’s commission said it plans to sell 51 per cent of each of the sugar companies to strategic investors to address the excess debt position afflicting the companies so as to create healthy balance sheets.

“The proceeds of the sale will fund the rehabilitation and modernization needs of the sugar companies,” it said.

The government will dispose of 75 per cent stakes in transactions that privatization commission said will have to be completed in the next nine to 12 months.

The commission said government will retain the remaining 25 per cent shareholding of each of the sugar companies which it may decide to sell later through an Initial Public Offer (IPO) or any other method determined at the time of sale to meet the sugar industry’s and the country’s strategic objectives.

“In this future sale, six per cent shareholding will be reserved for the farmers depending on their ability to buy and the needs of the companies,” it said.

The commission said the transactions are aimed at creating financially viable sugar companies able to access adequate cane considering the break-even crushing factory capacity required per annum, the average cane yield per hectare, cane maturity period and the planted cane area required to break even.

The sale of the state owned sugar companies has been on the cards for more than 10 years but has never give given a definite time frame.

The process has been rocked by political meddling and government bureaucracy that has slowed reforms in the sugar sector. Several investors have shown interest in buying the sugar companies The local sugar sector is currently facing several problems.

The licensing of new millers has led to the emergence of extensive levels of cane poaching. This has seen utilization of mill capacity fall, with serious financial problems emerging.

Local media reports indicate that the combined losses of state-owned sugar mills have reached over 60 million U.S. dollars.

Analysts say these “massive losses” are eroding the attractiveness of government mills for potential strategic partners

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