NAIROBI, Kenya – President William Ruto’s recent decision to cancel Sh12.4 billion in sugar companies’ debts is under scrutiny following an audit by the Auditor General.
The move, which was approved in March 2024 by the National Treasury, has raised concerns about the impact on the Commodities Fund, a key government financial resource meant to support agricultural development.
Auditor General Nancy Gathungu has flagged the debt cancellation as a significant blow to the Fund, which operates under the State Department for Agriculture.
According to Gathungu’s latest audit, the write-off has severely weakened the financial reserves of the Fund, potentially undermining its ability to support agricultural stakeholders in the future.
“These write-offs represent a direct reduction in the Fund’s reserves, potentially limiting its capacity to extend future financial support to agricultural stakeholders,” Gathungu warned in her report.
While the debt cancellation followed proper procedures, with approvals from Parliament and the Treasury, the Auditor General raised concerns that the management of the Fund did not adequately assess the long-term effects of this decision.
She warned that the Fund’s ability to function as a viable entity may be jeopardized, and its objective of supporting agricultural development could be compromised.
The audit, which was released amid ongoing efforts by President Ruto to prioritize agriculture in his Bottom-Up Economic Transformation Agenda, also highlights significant discrepancies in the sugar companies’ financial records.
The write-offs were meant to relieve the burden on struggling sugar firms, but auditors found major inconsistencies in the amounts recorded as written off compared to the actual debts owed by these companies.
For instance, Nzoia Sugar Company showed a Sh219 million gap, while Muhoroni Sugar had a discrepancy of Sh7.3 million.
Miwani Sugar reported an overstatement of Sh134 million, and Chemelil Sugar had a Sh93 million error.
These variances raised doubts about the accuracy of the companies’ financial records and created difficulties in verifying the legitimacy of Sh1.6 billion in loans and advances.
Gathungu emphasized the vulnerability of the Commodities Fund, noting that unless these discrepancies and financial practices are urgently reviewed, the Fund could be exposed to further risks.
President Ruto has made agricultural reform a cornerstone of his administration, with a focus on revitalizing key sectors such as sugar, tea, coffee, milk, macadamia, and avocado farming.
However, the findings of the audit raise questions about the management of the Fund and whether the current approach to agricultural financing is sustainable in the long term.
