NAIROBI - Huge debts and a raft of legal tussles threaten to delay efforts to privatise sugar factories in western Kenya.
A report by Ernst & Young, consultants appointed by the Kenya Privatisation Commission to act as transaction advisers, says the mills are embroiled in many court battles involving land disputes and ownership besides being weighed down by debts.
The consultants estimate that the millers’ joint debt owed mainly to the government, Kenya Sugar Board, and other creditors is about Sh38 billion.
Miwani Sugar Company that is under receivership is engaged in a drawn-out legal war with Crossley Holdings over land.
Land belonging to the miller was allegedly obtained by the firm but the receiver managers challenged a court order to that effect and was granted a stay.
However Crossley Holdings appealed against the decision and the matter is yet to be determined.
“The receivers and lawyers should ensure that the appeal is heard urgently for the transaction to be disposed of,” the consultants said in a draft report on due diligence that was presented at a stakeholders’ workshop in Kisumu last weekend.
Chemelil Sugar Company is facing the challenge over its land given out for construction of schools, churches, and other social amenities.
Thanks to this state of affairs, a section of land belonging to the miller has been encroached on by squatters.
This could become a bottleneck in the privatisation since interested buyers would want a clear definition of the land under the firm.
About this, the consultants want the management and the local authority to work out the amount of land owned by the factory.
Nzoia Sugar Company, the report says, lacks title deeds for land it was allocated in the mid 1980s when it was set up, and are still using allotment letters.
Recent attempts to correct the anomaly was impeded by demands for huge rates and penalties that have accumulated over time.
The consultants have proposed that the Privatisation Commission obtain a waiver on these accumulated rates for a smooth process.
Apart from these, the Commission has recommended that lawsuits involving other creditors be determined to ascertain liabilities and a settlement formula worked out.