TA threatens to block sale of State sugar firms in court

The planned sale of five State-owned sugar companies faces delays as the Transition Authority (TA) prepares to block the auction in court because it was not consulted as demanded by the Constitution.

The authority reckons that the Privatisation Commission overlooked its input in the plan to dispose of the millers, adding that it is in breach of the law.

“If need be, we will move to court to stop this process because we feel that the law has not been followed in the privatisation of these millers,” said Mr Bakari Omara, the TA commissioner in charge of assets.

He added that the sale cannot proceed without their input.

The government will in coming weeks ask investors to show interest in buying a 51 per cent stake in Sony, Chemelil, Nzoia, Muhoroni and Miwani milling companies to strategic investors.

The sale is expected to be concluded by mid next year, but risks being declared invalid should it fail to get the nod of TA.

Section 35 of the TA Act states that government assets and liabilities should not be transferred during the transition period without the approval of TA.

The transition period ends three years after the first General Election under the current Constitution that took effect in 2010.

This means TA has the mandate over transfer of government assets until March, putting the sale at risk of being stopped by the authority or a petitioner. 

“Any transfer of assets or liabilities made in contravention of subsection (1) shall be invalid,” notes the TA Act.

The Privatisation Commission, which is guiding the sale, says the office of the Attorney- General offered an opinion that it was exempted from article 35 of the TA Act.

READ: Wamwangi clashes with privatisation team over sugar mills

“We are not selling the assets. We are just selling new shares to different players and the Transition Authority is aware of this,” said Mr Solomon Kitungu, adding that the sale has been approved by Parliament and the national government.

But the TA is digging in for a fight.

“We will challenge the opinion of the Attorney-General in court because the law is very clear on transition of assets,” said Mr Omara.

The legal hitch looks set to complicate further the sale given county governments where the sugar factories are based have opposed the distribution of the millers’ shares.

Twenty-four per cent ownership of the mills will be reserved for farmers and employees. The government will sell a remaining 25 per cent stake in the five sugar companies in an initial public offering once the factories are profitable. Muhoroni and Miwani, are under receivership.

The five companies are in urgent need of modernisation to survive competition from the entry of other sugar producers and the impending end to sugar import limits from the Common Market for East and Southern Africa (Comesa).

Kenya was in February granted a one-year extension to restrict imports from Comesa to enable the country to complete reforms that will make its sugar industry competitive.

Critics have blamed a high cost of production for the woes facing Kenya’s sugar industry. Poorly funded government factories have aging machinery that is prone to break down.

New shares will be offered to the strategic investors and ensure the sale proceeds are injected in the firms and not in government coffers.