Kenyan govt offers lifeline to Mumias Sugar by waiving US$103.4m owed to revenue authority

KENYA – In bid to revive the ailing sugar sector, the government of Kenya has waived ksh.11 billion (US$103.4m) in tax arrears which the troubled state-owned sugar mill, Mumias Sugar owed the Kenya Revenue Authority (KRA).

According to reports by The Star, the state has further agreed to waive Sh300m (US$2.8m) that Nzoia Sugar Company owed the agency.

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KRA stopped Mumias from producing ethanol in April demanding payment of the debt. The company is currently under receivership by the Kenya Commercial Bank over a Sh12 billion (US$112.8m) debt.  

The developments are part of the recommendations made by the Sugar Taskforce team, co-chaired by former Agriculture Cabinet Secretary Mwangi Kiunjuri and Kakamega Governor Wycliffe Oparanya.

“Negotiations are on-going to have other debts the companies owe government agencies and other institutions like Kenya Power written off to facilitate the revival plan,” Oparanya said.

Mumias Sugar Company owes creditors more than Sh23 billion (US$216.3m). The company has not been milling cane for the more than 15 months after it closed down due to shortage of raw material and a huge debt portfolio.

According to Mumias Sugar receiver manager P.V.R Rao the waiver is not enough to help in reviving the industry and revealed that the company has finalised evaluation of requirements for repairs at the mill to restart milling sugar.

“We have done the evaluation and ascertained the material required but importation has become a challenge because of the Covid-19 pandemic. It will cost close to ksh. 1 billion (US$9.4m),” he told the Star.

Oparanya said that the Sugar Act that will be presented to the cabinet by Agriculture Cabinet Sectary Peter Munya will provide a permanent solution to the industry’s woes and streamline running of the sector.

“A legislation will guide revitalisation of the sugar factories alongside streamlining management of the same. The good news is that the Sugar Act is ready and will be presented to the cabinet for approval,” he said.

He said the Act allows for privatisation of the state owned sugar factories for effective management. It also allows counties interested in running the factories to take over.

Sugar Imports

According to the Sugar Directorate, Kenya’s sugar imports between January and May stood at 207,814 tonnes against 172,213 tonnes last year rising by 21%, reports Business Daily.

Enhanced imports came amid a 15% increase in local production, with growth in local yields attributed to a slight improvement in sugar cane supply to private millers. All the private mills registered improved productivity in the review period.

“Sugar imported in January–May 2020 amounted to 184,677 tonnes against 150,302 tonnes in the same period last year, a 21 percent increase, attributed to high table sugar imports in the review period to bridge the local deficit,” said the directorate.

According to the regulator, May registered a decline of 13 percent in imports due to logistics hitch brought about by Covid-19. In April there was a 14 percent decline.

In the review period, table sugar imports stood at 157,593 tonnes while industrial /refined sweetener was at 100,815 tonnes.

Common Market for Eastern and Southern Africa countries supplied Kenya with 13,755 while East African Community provided 1,180 tonnes with the rest of the world providing 7,702 tonnes.

Total sugar sales in the review period were 243,083 tonnes compared with 210,015 tonnes last year.

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