KenyaÔÇÖs government has announced it will sell stakes in five sugar companies in order to boost competitiveness and meet free trade requirements.
A 51 per cent stake in each of the companies is to be sold to strategic investors, with another 30 per cent being sold to sugar farmers.
The remaining 19 per cent will be sold in initial public offerings once the profitability of the refineries has improved.
The companies in question are the Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies. Combined, they currently owe the government and the Kenya Sugar Board 42 billion Kenyan shillings. Of that, 33 billion will be written off, with the remaining nine billion to be converted into equity.
It is hoped that the target strategic investors will bring in private sector skills on modernising technology and expanding the existing mills. Prequalification of bidders will be conducted in February and completion of the sale and signing of transaction arrangements will be in June, according to KenyaÔÇÖs agriculture minister, William Ruto.
Investors from Brazil, Mauritius and Turkey have so far shown interest in bidding for the factories.
Ruto has said that although local companies will be encouraged to bid for stakes in the millers, they will be evaluated on exactly the same parameters as foreign investors.
Kenya's sugar industry has been held back by high production costs and a lack of credit for input, leading to low yields and an annual national sugar deficit of around 200,000 tonnes.
The debt write-off plan will provide a much needed boost to the industry, and has been welcomed by the Kenya Sugarcane Growers Association.
Sugar production in Kenya increased by 7.8 per cent to 405,835 metric tons in the nine months until September, from 376,624 tons a year earlier.
The volume of sugarcane delivered to factories rose to 1.14 million tons from one million tons a year earlier.
It is thought that the millers may now seek capital for expansion into additional income streams, such as electricity generation or the production of ethanol.
The preferential trade agreements that Kenya has been enjoying from its partners in the Common Market for East and Southern Africa (Comesa) are expected to end in February 2012ÔÇöwhich is KenyaÔÇÖs deadline for restructuring its sugar industry and returning the millers to profitability.
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