MPs reject plan to merge Muhoroni, Chemilil sugar factories

Tractors line up to offload sugar cane at the Chemelil Sugar Factory

Tractors line up to offload sugar cane at the Chemelil Sugar Factory in Kisumu in January 2020. MPs have rejected a plan to merge the miller with Muhoroni Sugar. 

Photo credit: File | Nation Media Group

Parliament has rejected the proposed merger of Chemilil and Muhoroni sugar companies saying it would lead to job losses and adversely affect competition in the industry.

The National Assembly adopted the recommendation of the joint committee of the Finance and National Planning and Agriculture committees to have the two sugar millers leased as separate entities.

Through the move, the lawmakers overturned the proposed merger of the two ailing sugar mills as contained in the National Treasury’s Memorandum on Action Plans to Revive and Commercialise the State-Owned Sugar Companies.

Treasury wanted a single investor to bid for both Chemilil and Muhoroni

“The joint committee recommends that the House reject the proposed merger of Chemilil Sugar Company and Muhorni Sugar Company and that the two companies be leased as separate entities,” MP Kuria Kimani, who chairs the Finance and National Planning committee, said in the report.

“The proposal to merge Chemilil Sugar Company and Muhoroni Sugar Company was vehemently opposed by most stakeholders because it would impact negatively on competition in the industry and would also lead to job losses,” the report adds.

The joint committee said most stakeholders were of the view that besides the nucleus estates, the two companies had contracted farmers who supply them with sugar cane and their acreage was therefore more than what had been provided in the Treasury memorandum.

The joint committee report came after it scrutinised a Cabinet memorandum on the write-off of Sh117.64 billion owed by public sugar mills as part of efforts to revive and commercialise them.

The companies owe the money in bank loans, tax arrears and penalties, and farmers and employees’ dues.

The other State-owned sugar companies earmarked for leasing are Nzoia Sugar, Mumias Sugar, South Nyanza (Sony) Sugar, and Miwani Sugar.

Parliament approved a leasing model that will bring on board private capital, expertise and modernisation of the mills.

Treasury Director-General for Public Investment and Portfolio Management Lawrence Kibet had told the joint committee that the government intends to create a competitive sugar sector that can withstand the withdrawal of the Common Market for Eastern and Southern Africa (Comesa) safeguards.

He said this would be done by creating financially viable sugar companies able to access adequate cane—a minimum of 29,914 hectares of cane is required per factory.

“Chemilil Sugar Company and Muhoroni Sugar Company, which have cane growing areas of 18,437 hectares and 22,134 hectares, respectively, to be merged to form one zone with a total cane growing area of 40,571 hectares,” Mr Kibet said.

“Investors will be required to bid for both Chemilili Sugar and Muhoroni Sugar to facilitate a leasing arrangement for the two factories/zones merging.”

Chemilil Sugar Company interim managing director Jacqueline Katonya opposed the proposed merger, stating that the company has a nucleus estate 2,272 hectares of land and is surrounded by out-grower farms with a total 20,759 hectares of cane in Nyando, Tindiret and Nandi sub-counties.

“Further, the company has existing areas in Nyakach sub-county and Ahero areas in Nyando sub-county that present massive opportunities for expansion of cane area to cover 29,000 hectares,” she said.

Muhoroni Sugar Company Joint Receiver Manager Harun Kirui told MPs the firm’s land is 2,002 hectares of which 1,600 hectares is the nucleus estate.