The National Treasury has proposed a total of 15 strategic interventions for corporate re-organization and restructuring of public sugar mills.
The proposals are meant to guide the revival of five public sugar mills that have been experiencing financial distress since the late 1990s.
Moreover, the National Treasury in a memorandum submitted before parliament by majority leader Kimani Ichung’wah proposed the merger of struggling companies to save them from collapse among other interventions.
According to the memorandum, merging some of these struggling sugar companies will facilitate leasing arrangements.
The treasury recommended merging of Chemelil and Muhoroni Sugar companies.
“Investors interested in either Chemelil or Muhoroni Sugar Companies will be required to bid for both,” the document reads in part.
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Other Proposed Interventions
The treasury proposed bringing on board private capital, expertise and modernization of sugar mills with adequate sugar to enable them run efficiently and operate on commercial principles,
Likewise, the government want to enhance cane development in both nucleus estates and small-holder out-grower farms,
To acquire utilization of nucleus estate land proceeds and enhance production through payment of loyalty bonuses, the treasury recommends addressing stakeholder and community sensitivities on permanent divestiture of land.
“The proposed lease model shall be executed by unbundling the nucleus estate land and the factory land,” states the treasury.
Furthermore, the government recommends the disposal of existing run-down factories in compliance with existing procurement regulations.
The treasury also recommended retaining the state of Nzoia and South Nyanza Sugar Companies which have cane growing areas of 49,862 hectares and 81,415 hectares respectively,
Other proposals include regulation of factory zones, restructuring of the sugar companies balance sheets, government support for smallholder cane farmers to develop the crop and enhance productivity, and enhancing efficient settlement of disputes.
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Why Lease to Private Sectors
The national treasury in their memorandum explained that the government prefers leasing to privatization because of its benefits.
These benefits include.
- Enhancing the livelihoods of farmers
- Modernizing the sugar mills
- Generating taxes
- Cutting public sector financing
- Improving competitiveness
Nonetheless the government blames the challenges facing public-owned sugar companies on poor governance, lack of capital, high debt portfolio, and declining cane yields.
