Tycoon Jaswant Rai’s takeover of Nzoia Sugar’s factory and nucleus is under scrutiny over alleged concealment of key details in the 30-year concession, even as he pledged to share a portion of sugar and molasses output with the State and inject Sh5.76 billion.
Auditor-General Nancy Gathungu has flagged the leasing of Nzoia Sugar to Rai’s West Kenya Sugar Company as opaque, saying her office was not furnished with a formal handover document or asset valuation report, raising concerns the assets may have been undervalued.
West Kenya is the maker of the Kabras brand.
Under the leadership of Jaswant, the Rai family will manage and operate Nzoia Sugar’s factory and nucleus estate of 3,600 hectares for the next 30 years.
In the audit report for the year ending June last year, Ms Gathungu revealed that under the leasing agreement, West Kenya would pay Sh4,000 per tonne for sugar and Sh3,000 per tonne for molasses, a by-product of cane milling largely used in the production of alcohol, produced from the cane milled at Nzoia Sugar.
“The process of leasing was successfully completed and a handing over between the awarded winner of the lease for the Company and the management of the Company was done on May 10, 2025 at the Company premises,” said the Auditor-General in the report tabled in the National Assembly on April 1, 2026.
“However, no formal handing over document was provided for audit review, neither was a lease contract provided. In addition, it could not be established whether the company’s assets were valued to inform the leasing arrangement. In the circumstances, the regularity of the leasing process could not be confirmed.”
West Kenya did not respond to questions on the claims by the Auditor-General and whether it has injected the Sh5.76 billion into Nzoia.
West Kenya had also promised to pay a one-off goodwill payment of Sh208,305,000 and make an initial investment of Sh5,764,000,000 within six months after signing the contract.
This marks the first time details of one of the leasing agreements have been made public, with the information having remained secret since the government leased out four state-owned sugar mills to private investors.
The four state-owned companies had been haemorrhaging, failing to pay growers and compelling the government to perennially come to their rescue through bailouts. A lasting solution, the government reckoned, was to hand over their management and operations to private investors through leasing agreements.
However, details of the agreements were never made public, kicking off a wave of speculation.
Even as the details of the leasing agreement were revealed, Ms Gathungu flagged the opaque manner in which Nzoia’s assets, including the factory and nucleus estate, were handed over to West Kenya.
The Rai family is one of the sugar barons that emerged from the liberalisation of the sugar industry in the 1990s, rising to dominate private milling as State millers fell on their knees.
Through their holding company, the Rai Group, under which there is a total of 23 companies, the family controls close to 50 percent of the sugar market in the country through its milling factories.
The family owns West Kenya, Olepito, Sukari and Naitiri, whose combined capacity gives the family a strong grip on the sugar market.
But it is the leasing of Nzoia Sugar, once a fierce competitor of West Kenya, that has raised eyebrows. West Kenya’s fight with Bungoma-based Nzoia Sugar over cane poaching was at some point brutal.
As its financial woes worsened, Nzoia Sugar blamed West Kenya’s Naitiri for its losses, accusing it of cane poaching.
Besides West Kenya’s leasing of Nzoia, other fledgling State millers have also been given out largely to their erstwhile competitors. While West Kenya squared it out with Nzoia, Kibos Sugar and Allied Industries scrambled for the same cane farmers with Chemelil.
Under the latest leasing agreement, Chemelil is being operated by Kibos for the next 30 years.
West Valley, which is in Kericho County, took over its neighbour Muhoroni Sugar. The only exception is South Nyanza Sugar Company (Sony), which has been leased to Busia Sugar Industry, associated with the family of the late Salim Ahmed Taib Bajaber, the founder of Kitui Flour Mills, which owns Dola Maize Flour.
But it is the leasing of Nzoia Sugar by West Kenya that has captured the attention of the Auditor-General, who described it as “unsupported leasing.”
Mr Rai is not new to controversy regarding the takeover of State assets. In 2016, the Rai Group took over Webuye Paper Mills through a lease agreement. However, critics have noted that the family has not been able to revive the company, which was once the economic backbone of Webuye town. The Rai Group has denied the accusations.
Jaswant and his cousin Sarbjit of Uganda’s Sarrai Group in 2023 found themselves on the receiving end of President William Ruto’s tongue-lashing over their legal battles for the control of Mumias Sugar Company, the ailing sugar milling giant.
“We have told those people (Jaswant and Sarbjit) to move out. Mumias belongs to the people and we shall plan for the revival of the sugar mill afresh,” said the President during his visit to Western Kenya.
“Let them withdraw the court case and move out. I have told them there are only three options left: they either move out, go to jail or embark on the journey to heaven.”