By Kepher Otieno - Reporter
Kenya, 25 December 2025 - Kenya’s sugar industry entered a defining phase in 2025 following the government’s decision to lease state-owned sugar mills to private investors for a 30-year period.
The move, implemented under President William Ruto’s administration, marked a shift from direct state control to a regulated, investment-driven model, raising cautious optimism among cane farmers who have endured decades of declining yields, delayed payments, and factory collapse.
For the first time, strategic investors were competitively identified to run SoNy, Nzoia, Chemelil, and Muhoroni sugar factories.
Under the lease agreements, the operators committed to modernising equipment, investing in cane development, and diversifying into by-products such as ethanol and bio-energy.
In return, they pay land rent, concession fees per ton of sugar and molasses produced, and a one-off goodwill payment, with all investments reverting to the state at the end of the lease period.
From a business perspective, the leasing model is designed to inject capital, efficiency, and managerial discipline into an industry that has struggled with high production costs and low productivity.
Government officials argue that the arrangement reduces the fiscal burden on the state while allowing it to focus on regulation and oversight.
Agriculture Cabinet Secretary Mutahi Kagwe has maintained that safeguards are in place to prevent market dominance, noting that no single investor controls more than half of national sugar production.
However, the real test of the reforms lies at the farm level.
Cane farmers remain the primary suppliers of the industry’s raw material, and their productivity directly determines the viability of the mills.
Kenya National Sugarcane Farmers Federation chairman Ezra Okoth says farmers are hopeful but watchful.
Their expectations include prompt payment for delivered cane, better prices per tonne, improved grading of feeder roads to reduce transit losses, and access to high-yielding, early-maturing cane varieties.
It is against this backdrop that Kenya Sugar Board (KSB) CEO Jude Chesire and Agriculture and Food Authority (AFA) Director Samwel Ongou have outlined complementary measures aimed at anchoring the reforms around farmers.
Beginning in 2026, the two institutions plan to support farmers with free subsidized fertiliser to improve cane yields and reduce production costs. They are also pushing for the fast-tracked rollout of early-maturing cane varieties to increase harvest cycles and raise per capita income among growers.
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“Farmers will be central in our reforms of the sugar industry agenda,” Chesire has said, underscoring a policy shift that places farmer welfare and productivity at the core of sector restructuring.
Ongou has backed the approach, describing it as a necessary step to ensure that growers, as the primary suppliers of cane, benefit more directly from the ongoing reforms rather than remaining at the margins of the value chain.
From an industry analysis standpoint, these interventions could significantly alter the cost and supply dynamics of the sugar sector.
Fertiliser accounts for a substantial share of cane production costs, and subsidised inputs could improve margins for farmers while ensuring a steady supply of cane to the mills.
Similarly, early-maturing varieties shorten production cycles, enabling farmers to harvest more frequently and stabilise cash flows—an outcome that also benefits millers through consistent throughput.
Oversight and governance remain critical.
Ongou has called for the fast-tracking of elections for farmers’ representatives to the Kenya Sugar Board, arguing that stronger farmer representation will enhance accountability and ensure that investors meet their contractual obligations.
While farmer leaders support the leasing framework, some have questioned the rigidity of the 30-year lease term, suggesting that performance-based reviews would better align investor incentives with sector transformation.
Labour issues also pose a risk to stability.
The Kenya Union of Sugar Plantation and Allied Workers has raised concerns over unpaid arrears amounting to about KSh 2 billion, warning of industrial action if the matter is not resolved.
Chesire has urged calm, assuring workers that the government is addressing the issue as part of the broader transition.
As Kenya moves into 2026, the sugar sector stands at a crossroads.
The success of the leasing model will depend not only on investor capital and management efficiency but also on whether promised farmer-centric reforms—such as subsidised fertiliser, improved cane varieties, and fair pricing—are delivered.
If effectively implemented, the reforms could lift productivity, improve farmer incomes, and restore confidence in an industry long seen as a symbol of missed opportunity.
