State seeks MPs’ nod to waive Sh117bn sugar millers’ debt

Parliament Sitting

Members of the National Assembly during a past sitting. 

Photo credit: File I Nation Media Group

The National Treasury wants Parliament to approve the write-off of Sh117.64 billion owed by five state-owned sugar millers as part of a new plan to revive and commercialise the ailing companies.

Treasury has tabled the plan asking the National Assembly to approve the write-off of loans owed to the government and the Kenya Sugar Board amounting to Sh65.8 billion and tax penalties and interest amounting to Sh50.14 billion as at June 30. It also wants MPs to write off all accrued interest as at the date of approval.

MPs are also being asked to approve a payment plan for the Sh1.72 billion balance owed to farmers, to be worked out by the Ministry of Agriculture and Treasury.

“The National Treasury is seeking a waiver of the privatisation model approved by the National Assembly in 2015,” said Majority Leader Kimani Ichung’wah while tabling Treasury’s memorandum. “The National Treasury is requesting the National Assembly to approve a lease model for the five public sugar millers Nzoia Sugar, Chemilil, Miwani, South Nyanza and Muhoroni.”

The National Assembly approved the privatisation of the state-owned sugar companies in 2015, but the implementation has not been finalised due to opposition from stakeholders. The Cabinet this month dropped the plan as the government works on a leasing model for the public sugar millers.

“The benefits of leasing will be to improve the livelihoods of farmers, employees and communities, and to make sugar farming profitable and sustainable,” Treasury said in the memo to Parliament. “This will lead to the modernisation of sugar mills, thereby improving efficiency and profitability.”

Treasury said the government supports the leasing model for Mumias Sugar that was used by KCB Bank to turn around the company by inviting a private firm to take over operations.

Speaker Moses Wetang’ula directed the Joint Committee on Finance and Agriculture to urgently examine the Treasury memo and submit a report within 14 days.

“I have directed that the Sugar Bill, 2023 be finalised for second reading tomorrow (today) and third reading on Thursday,” he said in response to concerns raised by Minority Leader Opiyo Wandayi, who called for the Bill to be fast-tracked.

At the same time, Agriculture and Food Authority (AFA) chairman Cornelly Serem yesterday said the Cabinet approved the waiver of a Sh83 billion debt it is owed by public sugar millers. The amount is said to have accumulated through unremitted Sugar Development Levy payments. The levy, which was scrapped in 2016, was charged at 4 per cent of ex-factory value of locally manufactured sugar, but the firms, mired in financial woes, defaulted on payment.

Mr Serem made the revelation when he chaired a meeting bringing together private and public sugar millers, farmers and other stakeholders in Nairobi to discuss the suspension of local sugar milling.

The State-owned millers are Nzoia Sugar, South Nyanza (Sony) Sugar, Chemelil Sugar, Mumias Sugar, Muhoroni Sugar and Miwani Sugar, with the latter two under receivership.

“Their books are in a mess. We have been in discussions with Treasury to see what can be done. In 2018, there was a conditional waiver on the value of the assets that were there,” said Mr Serem. He added that the government’s support to the struggling millers also extends to settling their accumulated National Social Security Fund and National Health Insurance Fund dues as well as monies owed to retired workers.

In the meeting, millers called on the government to allow them to reopen and crush available mature cane. AFA last month suspended milling for four months to allow cane to mature. The millers also asked to be allowed to import duty-free sugar to enable them to preserve jobs.

Crop Development Principal Secretary Kello Harsama said the government will do a cane census to establish the quantity of available mature cane.