NAIROBI - The government plans to offload a 51 percent stake in five sugar companies to strategic investors and give another 30 percent to farmers, Agriculture Minister William Ruto said on Wednesday.

The government will then sell the remaining 19 percent stake in the Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies in an initial public offer once the factories are profitable.

"The target strategic investors are expected to bring in private sector skills on modernising technology and investing in the expansion of the existing mills," Ruto told a news conference.

Bidders' prequalification will be done in February and completion of the sale and signing of transaction arrangements is scheduled in June, Ruto said.

The millers owe the government and the Kenya Sugar Board 42 billion shillings. It plans to write of 33 billion and convert the remaining 9 billion into equity, which will be distributed among the factories pro rata.

"I have already signed a sessional paper recommending the write off of part of the debt which has remained a major stumbling block to the financial viability of the millers," he said.

Investors from Brazil, Mauritius and Turkey have shown interest in bidding for the factories, the government says.

"In as much as we encourage local investors to bid, they will not be any special favours for them. They will have to do so competitively against other foreign investors who may show interest," Ruto said.

Critics say high production costs, lack of credit for inputs stifle Kenya's sugar industry, leading to low yields. Consequently the country has an annual sugar deficit of about 200,000 tonnes.

According to the Kenya Sugar Board's latest statistics, production increased by 14 percent to 153,769 tonnes in the first quarter of 2009 and Kenya manufactured 517,667 tonnes in 2008.

source: reuters

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