National Treasury Cabinet Secretary Njuguna Ndung'u has published a memorandum on action plans to revive and commercialise State-owned sugar companies in Nyanza and Western Kenya.
According to the memorandum issued on Saturday, September 2, the State is seeking to merge Chemelil Sugar Company and Muhoroni Sugar Company into a single zonal capacity.
Chemelil 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 hactares.
By combining the operation area, Ndung'u stated that the merged companies will achieve economies of scale in areas such as purchasing, manufacturing, and distribution of their sugar.
The merger will also streamline operations and eliminate redundancies and enable the merged company to achieve efficiency and productivity. This, the government hopes will lead to faster turnaround times and better customer service.
"The Kenya sugar sub-sector plays a vital role in the agricultural sector and the Kenyan economy. The industry contributes to food security, employment creation, regional development and improved livelihoods for more than 8 million Kenyans.
"Kenya has the potential to produce enough sugar to satisfy her domestic demand and provide surplus for export. Sugarcane is grown in 14 counties spread across Western, Nyanza, Rift Valley and Coastal regions mainly on small-scale farms," Ndung'u stated.
The Cabinet Secretary for Treasury also stated that the merger of the economic areas will allow the companies to get more farmers who are willing to sell their sugarcane at competitive prices.
Ndung'u noted that the government is the single largest shareholder in the two companies which have been posting losses for several years.
According to the Cabinet Secretary, the economic situation was made worse after failed attempt to privatise the two companies following protestations from local leaders.
"The National Assembly in 2015 approved the privatization of the state-owned sugar Companies. The implementation of the privatization process was not concluded as it was opposed by stakeholders especially the communities because of sensitivities around permanent divestiture of land," he added.
He identified main challenges facing the companies to include lack of annual plant maintenance, poor governance, lack of capital and high debt portfolio, ageing plants and equipment.
Other challenges include; obsolete technology and operational inefficiency, declining cane yields, low value addition initiatives, reduced incomes to farmers and weak regulatory framework.
Separately, the National Assembly's Committees on Finance and National Planning, and Agriculture and Livestock, are set to convene a meeting in Kisumu County to examine the National Treasury Memorandum on Action Plans to Revive and Commercialize the State-Owned Sugar Companies, which was tabled in the National Assembly on Friday, August 22.
This follows a directive from the Speaker of the National Assembly Moses Wetang'ula. The Committees chaired by Kuria Kimani and Dr John Mutunga are gearing up for an in-depth analysis of the Memorandum and stakeholder engagement in line with their mandates.
Lawmakers are also expected to meet with the leaders from Western and Nyanza region, farmers’ representatives, Management of state-owned sugar companies, the Competition Authority of Kenya, Kenya Revenue Authority, the National Treasury and the Ministry of Agriculture and Livestock Development.
