World Bank–CAK report flags government bailouts for state sugar mills as threat to private-sector competition in Kenya
A new World Bank–CAK survey warns that major state bailouts for public sugar mills distort competition and stall sector efficiency reforms.
KENYA – A new report by the World Bank and the Competition Authority of Kenya (CAK) has found that sustained government funding for state-owned sugar companies is eroding fair competition, shielding inefficient mills from market pressure, and limiting private-sector participation.
The survey notes that public sugar mills, which control about 15% of the domestic sugar market, continue to post financial losses and struggle with low operational efficiency.
The report argues that protective policies and recurring exchequer support have insulated these firms from market dynamics, weakening overall sector performance and affecting both farmers and consumers.
The findings come against a backdrop of large public debt interventions. In 2023, the government cancelled about KES 117 billion (US$902.08M) in liabilities held by state-run millers, including loans from the Sugar Development Fund and accumulated tax-related penalties. This followed an earlier KES 62 billion (US$478.03M) debt clearance in 2020.
Beyond debt forgiveness, recurrent grants have also been issued. In 2022, the state disbursed approximately KES 150 million (US$1.16M) to sugar cane farmers previously contracted to Mumias Sugar, while in 2020 an estimated KES 166 million (US$1.08M) non-repayable allocation was extended to the now-defunct Muhoroni Sugar mill to offset arrears due to growers and suppliers.
To reverse competition bottlenecks, the World Bank–CAK report proposes a series of structural reforms. Key recommendations include reducing restrictive non-tariff barriers (NTBs) administered by the Sugar Board, which currently limits direct sugar imports by individual firms.
The survey also calls for a review of regional trade conditions, including relaxation of duty-free import ceilings on COMESA sugar and reassessment of Kenya’s 100% tariff on non-COMESA sugar imports, which the report identifies as a disincentive to competitive sourcing.
The report further advocates for removing cane zone supply limitations and revisiting regulated farm-gate cane prices, arguing that enabling farmers to contract with buyers of their choosing could improve fairness, maturity in contract enforcement, and allow more efficient mills to scale.
The survey adds that improved financing access for farm inputs and transparent contractual safeguards should be instituted to discourage exploitative or unfair recruitment practices by processors.
The report coincided with the recent restart of Chemilil Sugar Company, a government-owned mill that had halted operations. The factory has returned to production following a modernisation programme delivered through a leasing arrangement with Kibos Sugar and Allied Industries Limited (KSAIL), part of the Kibos Group.
Kibos Group Managing Director Bhire Chatthe described the restart as a milestone following months of negotiations, equipment overhauls, and technical coordination.
He stated that the leasing partnership would prioritise stable cane supply, support payment reliability for farmers, and engage authorities including the Sugar Development Levy board to accelerate road network rehabilitation in cane-producing areas.
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