Kenya Sugar Distributors Sue State Over Sh173.6mn Debt

• Six sugar distributors and businesses have sued the Kenyan State over Sh173.58 million in outstanding debt owed by South Nyanza, Chemelil, and Muhoroni sugar companies.
• The debts accumulated after the mills were leased to private operators under a 30-year agreement.
• The petitioners claim that their property interests in the leased assets and proceeds have been compromised due to opaque corporate arrangements.
• The combined claim of the six petitioners stands at Sh173.58 million, with individual amounts owed by each mill ranging from Sh32.76 million to Sh75.72 million.

The upshot of this lease arrangement is that the property of the Petitioners contained in the assets of the 8th, 9th and 10th Respondents has been handed over to third parties by the state without any hope of compensation.

Six sugar distributors and businesses have filed a petition against the Kenyan State over Sh173.58 million in outstanding debt owed by South Nyanza, Chemelil, and Muhoroni sugar companies. The debts accumulated after the mills were leased to private operators under a 30-year agreement. The leasing programme was cleared by the High Court in February 2025, allowing the Government to proceed with the transfer of ownership. However, the petitioners claim that their property interests in the leased assets and proceeds have been compromised due to opaque corporate arrangements. They argue that the State has handed over the assets to third parties without any hope of compensation for the outstanding debts. The combined claim of the six petitioners stands at Sh173.58 million, with individual amounts owed by each mill ranging from Sh32.76 million to Sh75.72 million.

The leasing programme was implemented under the Public Private Partnership Act, which aims to modernise state-owned enterprises and reduce debts. However, the petitioners argue that the leasing process did not adequately protect their property interests in the leased assets and proceeds. The case follows an earlier legal challenge filed by activist Martin Nyongesa Baraza in February 2024, which questioned the public participation in the decision-making process. Although Justice Chacha Mwita dismissed the petition in February 2025, ruling that public participation had been adequate, the current petition raises concerns about the treatment of creditors' claims during the leasing process.

The outcome of this case could have significant implications for businesses with outstanding claims against the sugar companies. If the petitioners succeed in declaring their enforceable property interests in the leased assets and proceeds, it may lead to changes in the way creditors' claims are treated during the leasing process. Lawyers advising clients with outstanding claims against the sugar companies should watch for potential developments in this case and consider seeking compensation for any losses incurred due to the leasing programme.

Lawyers advising clients with outstanding claims against the sugar companies should watch for potential changes to their property interests and seek compensation, as the petitioners are seeking to declare their enforceable rights in the leased assets and proceeds.

Source: Original reporting via Briefly