In a bold effort to rescue the ailing sugar industry, the Kenyan government has officially leased four state-owned sugar mills to private investors. The strategic move, announced on May 9 by the Ministry of Agriculture and Livestock Development, marks a significant shift in the management of key agro-industrial assets that have long been mired in inefficiency, debt, and mismanagement.
The factories involved in the deal are Nzoia Sugar, Miwani Sugar, Muhoroni Sugar, and Chemelil Sugar — all located in the western sugar belt, a region historically dependent on cane farming for economic livelihood.
Private Investors to Inject New Capital and Management Expertise
Under the new arrangement, the private millers are expected to rehabilitate the aging factories, clear longstanding wage arrears, and inject fresh capital to modernize operations. The lease agreements, which span an initial period of 20 years, are performance-based and include benchmarks for output, farmer payment timelines, and factory turnaround time.
The millers were selected through a competitive tender process overseen by the Sugar Industry Privatization Committee. While the names of the winning bidders have not been publicly disclosed yet, sources indicate that at least one foreign investor and two local agro-industrial firms are among the new lessees.
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Settling Debts and Rebuilding Trust
For decades, sugarcane farmers in Kenya have suffered from delayed payments, low cane prices, and mounting debt. Many state-owned mills have operated at below 30% capacity, crippled by obsolete machinery and political interference.
As part of the restructuring plan, the Ministry of Agriculture has entered into formal agreements with sugarcane farmers’ cooperatives and workers’ unions to settle all outstanding arrears — a move aimed at restoring trust and reviving cane cultivation.
Treasury Cabinet Secretary Njuguna Ndung’u has allocated KSh 3.5 billion toward settling wage arrears, farmer dues, and employee severance packages. A further KSh 2 billion will be made available through the Agriculture Finance Corporation (AFC) to provide low-interest loans to farmers for cane development.
Industry Context: A History of Decline
Kenya’s sugar industry has for years teetered on the brink of collapse. Despite having over 300,000 registered cane farmers and 15 operational mills, the country remains a net importer of sugar. The annual national consumption stands at over 1 million metric tons, while domestic production has struggled to exceed 650,000 metric tons.
The challenges include:
- High production costs compared to COMESA neighbors like Uganda and Sudan
- Widespread cane poaching among millers, disrupting contract farming
- Corruption and mismanagement in state mills
- Frequent breakdowns due to outdated machinery
- Delayed payments to both farmers and factory workers
In 2023, Kenya imported more than 400,000 metric tons of sugar to bridge the deficit, raising concerns over food security and foreign exchange strain.
Reactions from Farmers and Unions
The response to the leasing deal has been mixed but largely hopeful.
The Kenya National Federation of Sugarcane Farmers welcomed the move but warned against “opaque dealings and land-grabbing schemes” that have previously dogged sugar reform attempts.
“We’ve been burnt before. Our priority is simple: let farmers get paid on time, and let mills operate efficiently,” said federation chairperson John Wekesa.
On their part, union leaders representing factory workers have endorsed the government’s decision, citing the assurance of wage clearance and re-employment under new management terms. However, they have requested guarantees that all labor laws and benefits will be honored by the incoming lessees.
Safeguards and Oversight
To prevent the re-emergence of past scandals, the government has created a Sugar Sector Oversight Authority (SSOA), a statutory body mandated to:
- Monitor compliance with lease agreements
- Conduct annual performance audits of the lessees
- Resolve disputes between farmers, workers, and millers
- Coordinate research and extension services across the sugar value chain
Additionally, a review clause has been embedded in each lease to allow contract reassessment every five years, based on productivity and social impact metrics.
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A Model for Other Failing Parastatals?
The sugar leasing initiative is being closely watched as a possible model for reforming other struggling state-owned enterprises (SOEs), such as Mumias Sugar (which is under receivership), Kenya Meat Commission, and various regional development authorities.
Economists say the model—if properly implemented—could inject vitality into moribund industries and reduce the fiscal burden on the Exchequer.
“Privatization doesn’t have to mean loss of control or exploitation,” said Dr. Hellen Mugambi, an agricultural economist . “With strong oversight, the public can still benefit from private-sector competence.”
New Hope or More of the Same?
The leasing of four state-owned sugar mills could mark the beginning of a new era for Kenya’s sugar industry—or merely another chapter in a long history of stalled reforms. Much will depend on transparency, the performance of the lessees, and the government’s willingness to enforce the terms of engagement.
For the thousands of farmers and workers who have endured years of neglect and empty promises, the only proof will come when the factories roar back to life, and the payments start flowing again.
As the sugarcane starts to grow again in the fields of western Kenya, so too does the hope that this time, the sweetness will return to an industry long soured by failure.
