A timeline of four months has been released to the public for expert engagement before the process of privatising sugar firms officially starts.
Privatisation and Initial Public Offerings, especially of public companies, have often elicited mixed reactions. There are always issues of trust, personal interests and procedural means of operation.
Another school of thought has dismissed it entirely citing Mumias Sugar Company’s privatisation as a not successful story, bringing to fore the model that will be adopted by the government. That should government still remain the single largest shareholder or transfer that to a strategic private investor. It is no secret that most of our public sugar factories are faced with perennial loses, poor management and weighed down by accruing debts.
It is also in the public domain that the sugar produced by our factories does not meet the demand and hence we have a shortfall of about 200,000 metric tonnes that we import. This is data provided by the Kenya Sugar Board.
Looking at the sugar industry issue, I would categorise our problems into two. National and policy problems that can be tackled by our national leaders and internal problems at the factory and its immediate environment that affect its running.
National issues include our importation policy and corruption, which allow unscrupulous businessmen to import duty-free twice or three times the cap limit allowed per year.
Local issues surrounding the immediate environment are management of factories, ownership of land surrounding the factories, and sugar nucleus and zoning issue. Privatisation as proposed cuts across these issues.
The government has released a schedule of sugar factories within Kisumu County that are earmarked for privatisation, majorly to raise money and assist in bridging the budget gap and increase efficiency by making the factories self-reliant and sustainable.
These are Miwani, Muhoroni and Chemelil. The initiative is laudable and deserves support.
According to the government, a 51 per cent stake will go to a Strategic Investor, 24 per cent to the farmers and 21 per cent retained by the national government. It is still silent on the ownership of the surrounding land.
Our proposal would hence be 51 per cent to the strategic investor, 25 per cent to the farmers through their co-operative society, 10 per cent to the County Government of Kisumu, who shall also be the trustee for the nucleus land on behalf of the local community and the remaining shares for the national government.
As the process begins, the land issue will come up for debate. Will the strategic partner owns the land and why should they? Should the land be the community’s but held in trust by the County Government? I would support the latter.
The investor should focus on the running of the factory and also plan for cane development for his factory as he works hand in hand with the local community for smallholder cane development.
As the process begins, the county government should complement the process by taking advantage of this initiative to also introduce alternative crops to small-scale farmers.
These are farmers that may be having between 0-5 acres to be considered for the planting of other cash crops and fruit trees. This will also mean ring-fencing existing plantations from the further subdivision. We know that sugar is a plantation crop and that to realize good margins, it makes profitable sense being planted on large tracts of land.
It is also a fact that our problems may have begun when Kenya decided to implement small-scale sugar farming that has always led to the increased cost of production, erratic supply and the oscillation between undersupply and oversupply that has always affected the consistency of production.
That the advantage that other southern Africa countries have is that while one sugar factory can be producing over 500,000 tonnes of sugar per year, that quantity in Kenya is a sum of five factories. Kisumu seeks to be food secure. The county government’s aim and plans are to be self-sustainable.
This will complement the National Government’s Big Four Agenda which has food security as an area of priority.