AFA-Kenya forgoes US$573.6M debt owed by state-owned sugar millers

KENYA – The cabinet in Kenya has approved a waiver of KES 83 billion (US$573.6m) in debt owed to the Agriculture and Food Authority (AFA) by state-owned sugar millers.

The amount is said to have accumulated through unremitted Sugar Development Levy payments, which were being charged at 4 percent of the ex-factory value of locally manufactured sugar before it was scrapped in 2016. The millers’ financial downturns resulted in defaulting on payment.

“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 AFA chairman Cornelly Serem.

He added that the government intends to support the struggling millers to settle the accrued dues such as for the National Social Security Fund and National Health Insurance Fund dues as well as pays owed to retired workers.

The state-owned millers are Mumias Sugar Company, Nzoia Sugar Factory, South Nyanza Sugar Company, Muhoroni Sugar Company, and Chemelil Sugar Factory.

The National Treasury is also pursuing a plan of compelling the Parliament to approve the write-off of Sh117.64 billion also owed by five state-owned sugar millers. The said plan aims at reviving and commercializing the ailing companies.

The Legislation House is also being asked to approve a periodic plan, which the Ministry of Agriculture and Treasury will work out and process the Sh1.72 billion payment balance owed to farmers.

Majority Leader Kimani Ichung’wah, while tabling Treasury’s memorandum, pointed out that the Treasury has further requested the approval of a lease model for the five public sugar millers Nzoia Sugar, Chemilil, Miwani, South Nyanza, and Muhoroni.

“The National Treasury is seeking a waiver of the privatization model approved by the National Assembly in 2015,” he added.

“The benefits of leasing will be to improve the livelihoods of farmers, employees, and communities, and to make sugar farming profitable and sustainable. This will lead to the modernization of sugar mills, thereby improving efficiency and profitability,” part of the memo read.

In 2015, the National Assembly granted approval for the privatization of government-owned sugar companies; however, the execution of this decision has been delayed due to opposition from various stakeholders.

At the start of this month, the Cabinet abandoned the approval, focusing instead on developing a leasing model for the state-owned sugar mills.

In a meeting bringing together private and public sugar millers and other stakeholders to discuss the suspension of local sugar milling, the millers called on the government to allow them to reopen and crush the available mature cane and be allowed to import duty-free sugar to enable them to preserve jobs.

The government, through the Crop Development Principal Secretary, Kello Harsama, said it will do a cane census to establish the quantity of available mature cane before recommending new guidance.

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