On Friday, the government announced the completion of the lease four public sugar factories—Nzoia, Chemelil, Sony, and Muhoroni—to private millers.
The move, detailed in a press statement by Cabinet Secretary Mutahi Kagwe, marks a pivotal moment in the government’s long-standing efforts to resuscitate the country’s ailing sugar industry.
But while the initiative promises economic revitalisation and relief for sugarcane farmers and factory workers, it also raises critical questions about its long-term implications for Kenya’s agricultural landscape and public assets.
Kenya’s sugar industry has been plagued by inefficiencies, mismanagement, and mounting debts for decades.
Public sugar factories have struggled to remain competitive against cheaper imports, leaving farmers unpaid for cane deliveries and workers grappling with salary arrears.
The government’s press statement reveals the scale of the crisis: last year alone, it disbursed Sh1.7 billion to clear farmers’ arrears and Sh600 million toward workers’ dues, with outstanding debts still looming at Sh500 million for farmers and a staggering Sh5.6 billion for workers.
The decision to lease the factories follows a Sh117 billion debt write-off and an additional Sh2.5 billion injection to stabilise the sector.
These figures underscore the immense burden the sugar industry has placed on taxpayers, prompting the government to seek private-sector intervention through a leasing model approved by Parliament in 2023.
The Leasing Agreement: Key Provisions
Under the new agreement, the government has committed to clearing all arrears owed to farmers and workers before the factories are handed over to private millers.
Farmers are set to receive Sh500 million in July 2025, while workers will benefit from a phased payment plan: Sh1 billion upon takeover, Sh1.5 billion in July 2025, and quarterly payments of Sh1.17 billion until June 2026.
The Kenya Union of Sugar Plantation and Allied Workers (KUSPAW) has signed a Memorandum of Understanding (MOU) ensuring a 12-month transition period during which private millers will assess workforce needs and determine employee retention criteria.
The four factories have been leased for 30 years to the following companies:
- Nzoia Sugar Company to West Kenya Sugar Company (Kakamega)
- Chemelil Sugar Company to Sugar & Allied Industries Ltd (Kisumu)
- Sony Sugar Company to Busia Sugar Industry Ltd (Busia)
- Muhoroni Sugar Company to West Valley Sugar Company Ltd (Kericho)
Crucially, the government has assured stakeholders that no public land will be sold or acquired.
Assets, including land, will remain under national ownership, with lease proceeds managed by the Kenya Sugar Board for reinvestment into cane development and local communities.
The leasing decision stems from extensive stakeholder engagement dating back to 2015, when Parliament first approved privatisation efforts.
A 2018 task force recommended mobilizing private capital, a proposal that gained traction in 2023 through consultations with governors, MPs, and sugar-sector stakeholders in Kisumu.
The National Assembly’s rejection of a privatization model in favor of leasing, coupled with a High Court ruling affirming the legality of the process under the Public Private Partnership Act, has paved the way for this transition.
The leasing model offers several potential upsides.
First, it shifts the operational burden from the government to private millers, who are expected to bring capital, expertise, and efficiency to the factories.
This could enhance productivity, stabilize cane supply chains, and improve competitiveness against imported sugar.
Second, the government’s commitment to clearing arrears provides immediate relief to farmers and workers, who have borne the brunt of the sector’s dysfunction.
Finally, reinvesting lease proceeds into cane development and community projects could foster sustainable growth in sugar-growing regions.
Lingering Concerns
However, the initiative is not without risks.
The 30-year lease term raises questions about the long-term control of strategic public assets.
While the government retains ownership, the private millers’ influence over operations could reshape the sector’s priorities, potentially prioritizing profits over social obligations.
The 12-month workforce evaluation period also introduces uncertainty for factory workers, many of whom face the risk of retrenchment if deemed surplus to the lessees’ needs.
Moreover, the government’s financial commitments—Sh500 million to farmers and over Sh5.6 billion to workers—place a significant burden on public coffers, especially given the sector’s history of requiring bailouts.
Critics may argue that these funds could be better allocated to modernising the factories or supporting alternative agricultural ventures.
The leasing of Kenya’s sugar factories represents a bold attempt to break the cycle of decline that has crippled the industry.
By involving private players, the government hopes to inject vitality into a sector that remains a lifeline for thousands of farmers and workers in western Kenya.
Yet, the success of this gamble hinges on rigorous oversight to ensure that private millers deliver on efficiency without compromising the interests of local communities.
As the transition unfolds, stakeholders will be watching closely to see whether this move heralds a new era of prosperity for Kenya’s sugar industry or merely postpones its challenges.
For now, the government’s assurances of transparency and public benefit must be matched by action to maintain trust in this transformative endeavor.
