Kenya moved to unload the debt that’s choked its sugar companies for years, and will lease the mills as part of a plan that will see the government maintain control in the industry.
The cabinet approved a proposal of leasing five state-owned mills to operators for about 20 years, Agriculture Secretary Peter Munya said in a statement. The plan involves the government bailing out the factories from debt burdens that forced Miwani Sugar Company and Muhoroni Sugar Company into receivership. The entities could get debt relief of as much as 62 billion shillings ($581 million), the Standard newspaper reported on Friday, citing Munya.
The move means President Uhuru Kenyatta’s administration is dropping previous plans to sell off the mills, which together control a third of the nation’s sugar market. The other three are Chemelil Sugar Company, Nzoia Sugar Company and South Nyanza Sugar Company.
Kenya imported 157,529 tons of brown sugar from other African producers in the three months through March, and authorities were yet to process requests to bring into the country an additional 586,000 tons. The East African nation’s consumption of sugar peaked at 639,741 tons in 2016.
“Leaseholders will be expected to revamp and modernize the sugar mills,” Munya said in an earlier statement handed to reporters.
The government also banned the importation of cane and brown sugar, to avoid a potential glut and eventual collapse of the industry, according to Munya. The imports are “a great disincentive to farmers and investors,” he said.