Govt Moves to Merge Loss-making Companies
Cabinet Secretary of the National Treasury, Njuguna Ndung’u, has released a memorandum outlining action plans to revitalize and commercialize state-owned sugar companies in Nyanza and Western Kenya.
According to a document released on Saturday, September 2nd, the State intends to combine Chemelil Sugar Company and Muhoroni Sugar Company into a single zone.
Chemelil Sugar Company and Muhoroni Sugar Company will merge to establish a zone with a total cane-growing area of 40,571 hectares.
Ndung’u stated that the merged companies will achieve economies of scale in areas such as procuring, manufacturing, and distribution of their sugar by combining their operational areas.
In addition to streamlining operations and eliminating redundancies, the merger will allow the amalgamated company to attain efficiency and productivity. The government believes that this will result in quicker turnaround times and improved customer service.
“The Kenya sugar sub-sector plays a vital role in the agricultural sector and the Kenyan economy. The industry contributes to food security, employment creation, regional development, and improved livelihoods for more than 8 million Kenyans.
“Kenya has the potential to produce enough sugar to satisfy her domestic demand and provide a surplus for export. Sugarcane is grown in 14 counties spread across Western, Nyanza, Rift Valley, and Coastal regions mainly on small-scale farms,” Ndung’u stated.
The Cabinet Secretary for Treasury also stated that the merger of the economic areas will enable companies to recruit more sugarcane producers willing to sell at competitive prices.
Ndung’u remarked that the government is the largest shareholder in the two enterprises that have incurred losses for many years.
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According to the Cabinet Secretary, the economic situation deteriorated following the failure of an attempt to privatize two companies in response to protests from local officials.
“The National Assembly in 2015 approved the privatization of the state-owned sugar Companies. The implementation of the privatization process was not concluded as it was opposed by stakeholders especially the communities because of sensitivities around permanent divestiture of land,” he added.
He identified the primary challenges confronting the companies as a lack of annual plant maintenance, poor governance, a lack of capital and a high debt portfolio, and aging equipment and plants.
Other obstacles include obsolete technology and operational inefficiency, declining cane yields, initiatives with low-value additions, decreased agricultural incomes, and a weak regulatory framework.
Separately, the National Assembly’s Committees on Finance and National Planning and Agriculture and Livestock will hold a meeting in Kisumu County to examine the National Treasury Memorandum on Action Plans to Revitalize and Commercialize State-Owned Sugar Companies, which was presented to the National Assembly on Friday, August 22.
This follows a directive from National Assembly Speaker Moses Wetang’ula. By their mandates, the Committees chaired by Kuria Kimani and Dr. John Mutunga are preparing for an in-depth analysis of the Memorandum and engagement with stakeholders.
Legislators are also anticipated to meet with leaders from the Western and Nyanza regions, farmers’ representatives, the Competition Authority of Kenya, the Kenya Revenue Authority, the National Treasury, and the Ministry of Agriculture and Livestock Development.
Govt Moves to Merge Loss-making Companies
