State leases four sugar factories to private firms

The government has officially leased four state-owned sugar factories to private firms for a period of 30 years, setting in motion a new plan to revive Kenya’s struggling sugar industry while keeping key assets under public ownership.

Agriculture and Livestock Development Cabinet Secretary Mutahi Kagwe on Friday announced that Nzoia, Chemelil, Sony, and Muhoroni sugar factories have been handed over to private millers through a long-term lease agreement aimed at injecting capital and improving efficiency.

Under the new arrangement, West Kenya Sugar Company will operate Nzoia Sugar, Kibos Sugar, and Allied Industries has taken over Chemelil, Sony Sugar will be managed by Busia Sugar Industry Ltd, and Muhoroni has been leased to West Valley Sugar Company.

"Stakeholders in Kisumu, Parliament, and even the courts agreed—leasing was the right model. This is not just about turning profits; it’s about restoring dignity to the thousands of families that depend on sugar farming and processing," said Kagwe.

He said the move marks a shift from the earlier proposal to privatise the factories, which was dropped following further consultations and review.

Instead of selling public assets, the government has opted to retain ownership of land and infrastructure while allowing private millers to bring in the required investment and expertise.

The government will continue to play a supervisory role to ensure accountability and service delivery.

"The sugar sector has drained billions from taxpayers over the years. Now it’s time we let strategic investment drive its transformation," said Kagwe.

The Cabinet Secretary explained that the lease deal is the result of discussions that started in 2015, involving lawmakers, county officials, farmers, and factory workers.

He said the model was designed to protect public interests while reviving the sector through private-sector participation.

"This decision was not made in haste. It follows years of public consultation, legislative approvals, and even legal scrutiny," Kagwe added.

He said the government is determined to address the challenges facing sugarcane farmers and factory workers, including the burden of unpaid dues.

In 2023, the state cleared more than Sh1.7 billion in arrears owed to farmers.

However, new debts have emerged since then, with the factories now owing farmers an additional Sh500 million, which the government plans to pay in July 2025.

Workers at the four factories have also been affected by mounting salary arrears.

Of the Sh5.3 billion owed in unpaid salaries and benefits, only Sh600 million was settled last year.

The outstanding amount has since grown to an estimated Sh5.6 billion.

To address this, the Ministry of Agriculture has signed a Memorandum of Understanding with the Kenya Union of Sugar Plantation and Allied Workers (KUSPAW), outlining a transition period of 12 months for the new lessees to review and determine their staffing needs.

During this one-year transition, the government will take responsibility for paying all pending salary arrears, pensions, and statutory deductions.

"We will begin with Sh1 billion in May—Sh600 million for partial arrears and Sh400 million to cover current salaries. Another Sh1.5 billion will follow in July, with quarterly payments of Sh1.17 billion continuing until June 2026," Kagwe said.

He assured the public that this leasing model is not a sale of public property.

The factories remain government-owned, and the leases are based on market rates, with revenue being channelled through the Kenya Sugar Board for reinvestment in cane farming and community development.