KENYA – Kenya risks missing the February deadline set by the Common Market for Eastern and Central Africa (Comesa) for sale of five public sugar firms following an announcement that the process will take another year.
Acting Agriculture secretary Adan Mohamed said the sale process will take 12 months, adding that Kenya will decide next year whether to seek another extension to limits on sugar imports from the regional trade bloc.
Kenya was in February granted a one-year extension to restrict imports from Comesa to enable the country to complete reforms that will make its sugar industry competitive.
The country was expected to privatise the five sugar millers to reduce inefficiency before the end of the Comesa trade safeguards.
“We expect that the process of selling these State-owned companies will take 12 months and we are doing our best to achieve this within the set timelines,” said Mr Mohamed.
“On whether we will seek for another extension on safeguards, I think we will cross the bridge when we get there.”
Kenya requested for a fourth extension this year arguing that the local sugar sector was not ready for competition.
The tariffs were scheduled to fall to zero in March, but Kenya sought an extension to give it more time to improve infrastructure and carry out other reforms.
Mr Mohamed said the government will in two weeks ask investors to show interest in buying majority stakes in the loss-making sugar firms.
The government will sell a 51 per cent stake in Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies to strategic investors and reserve another 24 per cent for farmers and employees.
The government will then sell the remaining 25 per cent stake in the five firms in an initial public offering once the factories are profitable. Muhoroni and Miwani are under receivership.
The companies are in urgent need of modernisation to survive competition from new sugar producers and the impending end to limits on sugar imports from the Comesa.
“In this respect, as the safeguards will now be lapsing on February 28, 2016, I am requesting each one of you with a role to play in the privatisation process to do so expeditiously,” said Mr Mohamed at a stakeholders briefing on the sale of the millers.
Critics have blamed the high cost of production for the woes facing Kenya’s sugar industry.
Poorly funded government factories have aging machines that are prone to breaking down.
New shares will be offered to the strategic investors and ensure that the sale proceeds are injected in the firms and not in government coffers, Treasury secretary Henry Rotich said. He added that the government will write off debts in excess of Sh33 billion owned by the firms.