Kenya : Government outlines five key conditions in leasing of four state-owned sugar mills
The Kenyan government outlined five conditions for leasing four State-owned sugar mills, requiring investors to use nuclear land only for cane, invest in cane development and mill modernisation, diversify into ethanol and power, and ensure farmer benefits. All investments revert to the State, with operations regulated by the Kenya Sugar Board.
The government has revealed five key conditions it laid out with private firms on leasing four State-owned sugar companies, aimed at protecting farmers and ensuring local communities benefit from the operations.
In a status report to the National Assembly regarding the leasing of the companies, Agriculture Cabinet Secretary Mutahi Kagwe said the conditions in the agreements guarantee the interests of farmers.
He said the agreements provide strong safeguards against misuse and require investors to invest in the sector’s development.
“The Ministry leased out all the land, buildings, plant and machinery. In other words, it is a complete package covering the entire ecosystem. Only motor vehicles and livestock were exempted from the list of items leased,” Kagwe said.
Among the key conditions included in the lease agreements, nuclear land must be used solely for cane development and cannot be used as collateral. Lessees are also required to invest in cane development and modernisation of the sugar mills, as well as diversify into cogeneration of power, bioethanol production and allied products.
All initial and additional investments revert to the lessor at the end of the lease term, and the management and maintenance of nuclear estates and out-grower systems must ensure that proceeds benefit local communities through the payment of bonuses to farmers.
The four State-owned sugar companies were leased on May 10, 2025, to private investors. South Nyanza Sugar Company was leased to Busia Sugar Industries Limited, Nzoia Sugar Company to West Kenya Sugar Company Limited, Chemelil Sugar Company to Kibos Sugar and Allied Industries Limited, and Muhoroni Sugar Company to West Sugar Company Limited.
Addressing concerns from legislators who accused the government of secrecy during the process, Kagwe said the lease agreements leave no room for manipulation that could disadvantage farmers or the local communities hosting the factories.
“The nuclear estate and standing sugar cane were not valued separately since these were considered part of the leased asset portfolio that was already predetermined,” he said.
He clarified that the nuclear land under the agreements shall only be used for cane development and cannot be used as collateral by the lessees, addressing MPs’ worries that companies could use leases to secure loans, which might push the mills into financial distress.
“Under the agreements, lessees are expected to invest in cane development and modernisation of the sugar mills through rehabilitation, upgrading of machinery and adoption of new technologies to improve operational efficiency,” he said.
The CS also highlighted that lessees are expected to diversify into cogeneration of power, production of bioethanol, and allied products, with all initial and additional investments reverting to the lessor at the expiry of the lease term.
Another key condition requires management and maintenance of the nuclear estates and out-grower systems to ensure proceeds benefit local communities through the payment of bonuses to farmers. Annual lease rentals for Chemelil, Muhoroni, and Sony Sugar are set at Sh40,000 per hectare, while Nzoia Sugar Company pays Sh45,000 per hectare per year. Concessional fees include Sh4,000 per tonne of sugar and Sh3,000 per tonne of molasses produced.
Operations of the leased companies are regulated by the Kenya Sugar Board, established under the Sugar Act of 2024. The Act grants the board powers to monitor the market, regulate compliance, curb unfair trade practices and oversee cane harvesting, milling, farmer protection, and sugar pricing. The leased factories also operate under the Competition Act.
Despite the safeguards, Muhoroni MP Onyango K’Oyoo expressed concerns over transparency.
“The entire leasing process has been shrouded in secrecy, with details of the investors remaining unknown to most stakeholders,” he said, warning that the approach raises questions on whether the intended objectives will be achieved.
The leasing follows recommendations from a 2019 sugar industry task force set up by former President Uhuru Kenyatta, which proposed corporate reorganisation, financial restructuring and privatisation to rescue the struggling mills.
The task force recommended merging Chemelil and Muhoroni companies, which have cane-growing areas of 18,437 hectares and 22,134 hectares, respectively, to form one zone, while Nzoia and South Nyanza, with cane-growing areas of 49,862 hectares and 81,415 hectares, would remain separate entities.
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Source : East Leigh Voice
