The dwindling state of government owned sugar factories in Kenya

KENYA – Kenya’s state-owned sugar mills characterized by huge debts, poor governance, ageing and obsolete equipment, coupled with outdated technology, have returned losses, dampening recovery prospects at a time government is banking on capital injection by private investors to revive them.

According to the government investment report for the financial year ended last June, the factories’ liabilities are now Sh78.45 billion (US$717.9m) more than the value of assets, making the millers technically insolvent.

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The mills on the spot light are Chemelil, Miwani which is under receivership, Muhoroni also under receivership, Nzoia and Sony Sugar company.

Nzoia Sugar netted a loss of US$31.8m while Sony, Muhoroni and Chemilil posted US$14.09m, US$7.2m and US$5.2m loss, respectively.

The insolvency of Chemilil, Muhoroni, Nzoia and Sony Sugar, as indicated by Business Daily, has grown by 19.7 per cent from Sh65.56 billion (US$599.9m) at the end of June 2018.

Nzoia Sugar’s insolvency is the largest at Ksh45.04 billion (US$412.1m) followed by Muhoroni Ksh27.93 billion (US$255.5m), Chemilil Ksh2.8 billion (US$25.6m) and Sony Ksh2.68 billion (US$24.5m).

The latest report does not, however, disclose the status of Miwani Sugar, which in June 2018 had insolvency of Ksh22.9 billion (US$209.5m).

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In terms of earnings, Nzoia Sugar netted a loss of Ksh3.48 billion (US$31.8m) during the review period while Sony, Muhoroni and Chemilil posted Ksh1.54 billion (US$14.09m), Ksh795 million (US$7.2m) and Ksh577 million (US$5.2m) loss, respectively.

The debt owed by the millers had risen to Sh90.4 billion (US$827.25m) at the end of June 2018, with the amount being made up of outstanding loans, dues to farmers, taxes, penalties and fines.

As a move to remove the companies in the dire situation, the government has regularly approved the written off of debts by the millers and has undertook capital injections.

But the efforts seem to be futile with the state resorting to leasing them in a bid to increase value addition, farmers’ incomes and improve competitiveness and service delivery in the sugar Sector.

Agriculture ministry in August said it had received leading bids from 29 companies.

The bidders include two firms linked to tycoon Jaswant Rai — West Kenya Sugar Company and Sukari Industries. Others are China CAMC Engineering Company, Shenzhen Start Instruments, Mehta Group, Kiboss Sugar, Butali Sugar Mills, Mini Bakeries and Kuguru Food Complex.

The state-owned sugar mills are not the only ones feeling the pinch of dwindling performance as the general sector in the country is grappling with influx of the cheap sweetener in the domestic market.

The National Crime Research Centre data recently showed that 48 per cent of all incidents of smuggling involved sugar with about 789 cases reported over the last year.

Concurring with the findings, shadowy companies are reported to have imported excess sugar into the country, superseding the 2020 quota from the Common Market for East and Central Africa (Comesa), in spite of a government ban since July.

Stakeholders are puzzled by the sudden exhaustion of import quota, after the Agriculture and Food Authority on Monday warned the government would now levy full duty on further imports, reports The Nation.

The country’s import quota for the year ending December 2020 from Comesa member states was pegged at 250,000 tonnes. This was negotiated based on the annual national consumption as well as projected sugar production.

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