State to clear cane farmers, staff arrears before leasing handover

The government has promised to clear arrears owed to sugar cane farmers for the crop delivered to the four State-owned factories and staff before handing them over for leasing.

Agriculture Cabinet Secretary Mutahi Kagwe said in a statement sent to newsrooms on Friday, that West Kenya Sugar Company will lease Nzoia Sugar Company, while Kibos Sugar and Allied Industries Ltd will operate Chemilili Sugar Company for 30 years.

Busia Sugar Industry Ltd will operate Sony Sugar Company, while Kericho-based West Valley Sugar Company Ltd will be in charge of Muhoroni Sugar Company.

The CS said the Ministry has agreed with sugarcane farmers and workers unions to pay for the cane delivery and salary arrears owed to both farmers and workers.

The move comes after some cane farmers and workers held demonstrations accusing the government of leasing the factories without public participation. 

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“The agreement is aimed at securing the future of cane farmers and sugar factory workers as the government leases out four sugar factories to private millers,” said Kagwe.

Under the agreement, he said the government will settle the arrears owed to both farmers and workers before the handover of the four factories to private millers.

Last year, he said the government paid out over Sh1.7 billion to sugarcane farmers to clear arrears owed by the millers. “Since then, the factories have accrued Sh500 million for cane delivered by farmers. Under the agreement, the government will pay farmers the Sh500 million in July this year,” he said.

The CS said the government paid over Sh600 million to factory workers last year, out of the Sh5.3 billion owed to workers, leaving Sh4.7 billion in arrears.

“Since then, the arrears owed to factory workers have accrued to an estimated Sh5.6 billion,”  he added.

Kagwe said following lengthy negotiations, the government has agreed with the Kenya Union of Sugar Plantation and Allied Workers (KUSPAW) to safeguard the interests of sugar factory workers.

He said KUSPAW has signed a Memorandum of Understanding (MOU) under which the government (as the lessor) will undertake to do three actions.

First, there will be a 12-month transition period during which the four lessees shall evaluate their workforce needs and determine the criteria for the retention of current employees.

Two, he said the Ministry shall remain responsible for all unpaid salary arrears, pension contributions, and statutory deductions up to the lease handover date.

Three, a phased payment schedule shall be adopted whereby Sh1 billion will be paid to workers upon takeover (600 million to pay part of the staff arrears and the remaining 400 million to pay salary as from May 2025).

Twe Sh1.5 billion will be released in July 2025 to be used for the payment of staff salaries and arrears. The government will continue to pay salaries arrears at the rate of Sh1.17 billion (to be verified) every quarter until June 30, 2026

CS Kagwe said the move to lease the struggling sugar companies was reached after the broad-based consultations.

 “I would like to assure the public and all stakeholders that the negotiated terms represent the best possible outcome to ensure the revival of the sugar sector,” said Kagwe.

The decision to lease out the four sugar factories, Kagwe said was arrived at after lengthy consultations with key stakeholders across the sugar sector including farmers, sugar factory workers, unions, Members of Parliament, Governors and approvals by the Cabinet.

Last year, the CS said the government wrote off over Sh117 billion to bail out the local sugar industry and injected an additional Sh2.5 billion to clear arrears owed to farmers and workers.