Government leases four state-owned sugar mills to private firms for 30 years

The government has handed over the operations of four struggling state-owned sugar factories to private firms under a 30-year lease agreement, ending years of debate over the best way to revive the ailing sector.

Agriculture and Livestock Development Cabinet Secretary Mutahi Kagwe on Friday said the lease deal covers Nzoia, Chemelil, Sony, and Muhoroni sugar companies. West Kenya Sugar Company will manage Nzoia, Chemelil has gone to Kibos Sugar and Allied Industries, Sony Sugar will be operated by Busia Sugar Industry Ltd, and West Valley Sugar Company will run Muhoroni.

Kagwe explained that the leasing model was agreed upon after a long period of consultation with key stakeholders, including Parliament, county leaders, farmers, and factory workers.

“Stakeholders in Kisumu, Parliament, and even the courts agreed—leasing was the right model. This is not just about turning profits; it’s about restoring dignity to the thousands of families that depend on sugarcane farming and processing,” he said.

He said the model replaces an earlier plan to privatise the factories, which was shelved following feedback during public consultations and legislative review. The new approach allows private investors to inject capital and introduce modern management practices, while the government retains oversight and asset control.

“The sugar sector has drained billions from taxpayers over the years. Now it’s time we let strategic investment drive its transformation,” said Kagwe.

To assure farmers and workers, Kagwe said the leases do not involve the sale of public assets. Land and infrastructure remain under state ownership, and all revenues will be managed by the Kenya Sugar Board to support community development and cane farming.

“This decision was not made in haste. It follows years of public consultation, legislative approvals, and even legal scrutiny,” he added.

He said the main goal is to allow the factories to become productive again and support livelihoods in the sugar-growing regions. “What we are doing is giving these factories a fighting chance to stand again, for the sake of our farmers, workers, and the country’s economy.”

The government has also pledged to settle outstanding debts owed to sugarcane farmers and factory workers. Kagwe said last year the state paid Sh1.7 billion in arrears, but new debts of Sh500 million have since accumulated. He said this amount will be cleared by July 2025.

Workers have been hit even harder. The Ministry said out of Sh5.3 billion owed in salaries and benefits, only Sh600 million was paid last year. The total has now increased to about Sh5.6 billion.

To address this, the Ministry has signed a Memorandum of Understanding with the Kenya Union of Sugar Plantation and Allied Workers (KUSPAW). Kagwe said the agreement provides for a 12-month transition period, during which the new operators will assess workforce needs.

During this period, the government will remain responsible for all outstanding salary arrears, pensions, and statutory deductions.

“We will begin with Sh1 billion in May—Sh600 million for partial arrears and Sh400 million to cover current salaries. Another Sh1.5 billion will follow in July, with quarterly payments of Sh1.17 billion continuing until June 2026,” said Kagwe.

As the new operators take over, Kagwe said the government will remain involved to ensure that the transition is smooth and that communities benefit from the reforms.

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“This is a shared journey. We have made a bold step, and with continued public support, the sugar belt will thrive once again,” he said.