Investors to inject Ksh 12.29B in leased sugar factories

The Ministry of Agriculture and Livestock Development has secured a Ksh. 12.29 billion investment to go towards the revival of Nzoia Sugar, Chemilil Sugar, Sony Sugar, and Muhoroni Sugar.

The investment will be made by four companies that were awarded 30-year leases to revamp the four mills and secure earnings for farmers and sugar factory workers.

Under the lease agreement, the following investments will be made;

  1. West Kenya Sugar Company, which won the lease for Nzoia Sugar Company, will invest Ksh. 5,764,331,333 into the factory.
  2. Kibos Sugar & Allied Industries Ltd., which won the lease for Chemilil Sugar Company, will invest Ksh. 4,500,000,000 into the factory.
  3. West Valley Sugar Company Ltd., which won the lease for Muhoroni Sugar Company, will invest Ksh. 1,023,000,000 into the factory.
  4. Busia Sugar Industry Ltd., which won the lease for Sony Sugar Company, will invest Ksh. 1,000,000,000 into the factory.

The funds will be invested directly into the four mills to ensure that they are operational and can meet their inbuilt threshing and sugar production capacity.

The rehabilitation of the four sugar companies will enable the lessees to operate at optimal capacity, thereby safeguarding employment opportunities and enabling farmers to deliver more cane and increase their earnings.

In addition to the Ksh 12.29 billion, the four lessees will pay a total of Ksh 521,971,400 in goodwill for the leasing of land belonging to the four mills.

The payment is calculated based on the annual cost of leasing land per hectare. The costs are broken down as follows:

  1. West Kenya Sugar Company will pay a goodwill of Ksh 208,305,000 for the 4,629 Ha owned by Nzoia Sugar Company, calculated at a rate of Ksh 45,000 per Ha.
  2. Kibos Sugar & Allied Industries Ltd. will pay a goodwill of Ksh 111,190,000 for the 2,779.75 Ha owned by Chemilil Sugar Company, calculated at a rate of Ksh 40,000 per Ha.
  3. Busia Sugar Industry Ltd. will pay a goodwill of Ksh 122,396,400 for the 3,059.91 Ha owned by Sony Sugar Company, calculated at a rate of Ksh 40,000 per Ha. 4.

West Valley Sugar Company Ltd. will pay a goodwill of Ksh 80,080,000 for the 2,002 Ha owned by Muhoroni Sugar Company, calculated at a rate of Ksh. 40,000 per Ha.

Beyond the over Ksh 522 million to be paid on goodwill, the four lessees will pay an annual lease for the land owned by the four factories at the beginning of each year.

The funds will be invested in cane development and cater for the welfare of communities living around the factories.

The government will also use the funds to offset unpaid dues owed to farmers and Sugar factory workers.

The Kenya Sugar Board (KSB) will also collect Ksh 1.5Billion concession Fees at a rate of Ksh. 4,000 per ton (Ksh 4 per kg) of sugar produced and Ksh 240 Million concession fees at the rate of ,3000 per Ton (Ksh 3 per Kg) of Molasses produced.

The funds will be paid back to farmers in the form of annual bonuses based on the amount of sugar supplied by each farmer to the factories.

The government has already paid out over Ksh 1.7 billion to sugarcane farmers to clear arrears owed to them by sugar factories. Since then, the factories have accrued Ksh 500 million for cane delivered by farmers, which the government has committed to pay in July this year.

Further, the government has entered into an agreement with the Kenya Union of Sugar Plantation and Allied Workers (KUSPAW) to safeguard the interests of sugar factory workers.

Under the agreement, the government will pay workers Ksh 600 million to settle part of the staff arrears and Ksh 400 million to pay salaries for six months starting from May 2025.

The government has also committed to settling all arrears owed to workers through a phased payment plan.

Under the plan, the government will pay Ksh 1.5 billion to workers in July and make quarterly payments of Ksh 1.17 billion to settle all arrears owed to workers in the four factories.

Agriculture Cabinet Secretary assured farmers, workers, and members of the public that no sugar factory has been sold.

“The factories have been leased as per the process approved by Parliament. Following the process set out by Parliament, various stakeholders were consulted before leasing was selected as a viable model,” he said.