There have been ongoing efforts to privatise Kenya’s state-owned sugar companies through long-term lease agreements with private entities. This initiative aims to revitalise the struggling sugar sector by transferring operations and management to private investors, thereby restoring efficiency, improving production, and enhancing farmers’ livelihoods.

For years, Kenya’s sugar industry has struggled with structural inefficiencies, including chronic mismanagement, ageing equipment, mounting debts, and the influx of cheaper sugar imports. Many state-owned factories have either collapsed or remained inactive, resulting in widespread job losses, unpaid dues to farmers, and stagnation across local economies.

Several of these state-owned factories are located within Kenya’s sugar belt, particularly in the Kisumu region. In areas such as Miwani, Chemelil, and Muhoroni, dormant state-run mills are now surrounded by Kibos Sugar, owned by Raghbir Chatte — currently the only profitable sugar company in that region. In South Nyanza, Sukari Ltd, owned by Jaswant Rai, remains the sole profitable mill and shares its zone with a state-owned competitor. Meanwhile, in the Kakamega region, Mumias Sugar is under the management of Sarbjit Rai, Jaswant Rai’s younger brother. The mill is flanked by Rai-owned West Kenya Sugar (South Kabras), Olepito Sugar (Busia), and Butali Sugar, owned by Jayanti Patel. This clustering has raised concerns over competition and market fairness.

The Council of Governors has endorsed the privatisation initiative, citing private investment as the most viable path to sector reform. Health Cabinet Secretary Mutahi Kagwe recently announced a Ksh 12.29 billion investment by four private companies, which have been awarded 30-year leases for four state-run factories. These funds will be used to rehabilitate the facilities, upgrade processing systems, safeguard employment, increase sugar production, and raise farmer earnings.

To support the transition, the government has committed over Ksh 1.7 billion to settle outstanding arrears owed to sugarcane farmers, with an additional Ksh 500 million to be disbursed in July. A partnership with the Kenya Union of Sugar Plantation and Allied Workers (KUSPAW) will address staff salary arrears. Ksh 600 million has been allocated for wage payments starting in May 2025, with a further Ksh 1.17 billion scheduled for quarterly payments beginning in July.

The success of Kenya’s sugar sector privatisation hinges on achieving measurable outcomes and maintaining sustained momentum. The government expects all four leased factories to resume operations within 12 to 18 months, supported by an initial investment of Ksh 12.29 billion, focused on plant rehabilitation and modernisation. The overarching goal is to increase national sugar production by at least 30% over five years, reduce dependency on imports, and promote product diversification, including ethanol and electricity generation. The initiative also aims to preserve or create more than 20,000 direct and indirect jobs, with a focus on reemploying skilled labour, empowering youth and women, and enforcing labour rights under union oversight.

Farmers are at the heart of the reform strategy, with promises of timely payments, transparent pricing, and more substantial support for out-grower schemes and capacity-building initiatives. Over Ksh 3.97 billion has been earmarked to settle historical debts to farmers and workers, with Ksh 1.17 billion to be paid out in phased quarterly instalments starting in July. A new Sugar Sector Oversight Committee will be responsible for monitoring implementation, ensuring investor compliance, and conducting annual performance reviews. In parallel, legislative reforms — including a proposed Sugar Industry Bill — aim to enhance regulatory oversight, prevent monopolistic practices, and boost transparency in industry operations.

While the privatisation plan offers hope for revival, it also carries significant risks that must be proactively addressed. Chief among them is the growing concentration of ownership in the hands of a few dominant players, particularly the Rai family, who control multiple mills across key regions. This market consolidation could reduce competition, depress cane prices, and marginalise smallholder farmers. There are also concerns about whether private investors will honour long-term development commitments or instead prioritise short-term profit. The opacity surrounding lease allocations has led to calls for greater transparency and accountability. Furthermore, the transition period may result in temporary disruptions in labour, farmer payments, and cane supply chains if not carefully managed.

Kenya’s bold decision to privatise its underperforming sugar sector marks a critical turning point in its agricultural and industrial policy. The initiative combines substantial private capital with strong government backing, a phased debt resolution strategy, and institutional reforms designed to foster long-term sustainability. However, the actual test will lie in implementation, particularly the ability to enforce investor commitments, uphold labour and farmer protections, and maintain public trust through transparency and inclusion. If executed effectively, this effort could serve as a model for restructuring other struggling state-dependent industries, unlocking new opportunities for growth, competitiveness, and rural development.