NAIROBI, Kenya — A joint report by the World Bank Group and the Competition Authority of Kenya (CAK) has raised concerns that 30-year leases of Kenya’s state-owned sugar mills could entrench market dominance and keep consumer sugar prices elevated unless structural reforms are implemented.
The report, released on Monday, warned that previous government interventions—debt write-offs and cash grants to Nzoia, Muhoroni, Sony, and Chemelil sugar mills—have distorted competition, leaving consumers at risk of paying higher prices.
“The Government has sought to increase private investment and market discipline through the leasing of State-owned mills, although competition concerns remain in the implementation of leasing processes,” the report stated.
According to the findings, past government support—including a Sh117 billion debt waiver in 2023 covering loans and tax arrears, a Sh62 billion write-off in 2020, and direct cash transfers to farmers and mills—has shielded inefficient state operators and prevented private mills from expanding.
“Such transfers from Kenyan taxpayers to state-owned mills create an unlevel playing field between private and state-owned mills, preventing more efficient firms from expanding and putting resources to higher-value use,” the agencies said.
The report also highlighted structural challenges in the sector, including high domestic production costs relative to imports. Domestic ex-factory sugar prices surged more than 40pc annually in 2022 and 2023, outpacing both cane prices and global trends.
The benefits of higher prices, the report noted, largely accrued to millers rather than farmers.
Further complicating market dynamics, restrictive trade policies have limited imports, preventing retail sugar prices from falling.
The government has leased Nzoia to West Kenya Sugar Company, Chemelil to Kibos Sugar & Allied Industries Ltd, Sony to Busia Sugar Industry Ltd, and Muhoroni to West Valley Sugar Company Ltd, intending to attract private investment and improve efficiency.
However, CAK’s Director for Competition and Consumer Protection, Amenya Omari, cautioned that legal gaps limit oversight during the privatisation process.
“The greatest challenge is the lack of an enabling legal provision that enables the Competition Authority to have a bigger role in the privatisation process,” he said, warning that the sector remains at risk of entrenched market dominance.
The report underscores the need for targeted reforms to ensure that leasing agreements translate into competitive markets and affordable sugar for Kenyan consumers.
