Kenya's Auditor-General flags tycoon Jaswant Rai's Nzoia Sugar takeover as opaque

Kenya's Auditor-General has described the transfer of Nzoia Sugar's factory and 3,600-hectare nucleus estate to Jaswant Rai's West Kenya Sugar Company as unsupported and opaque, revealing that her office was never provided with a formal handover document, a copy of the lease contract or evidence that the state company's assets were independently valued before being handed over to one of the Rai family's flagship milling businesses.

The findings appear in the Auditor-General's report for the financial year ending June 2025, tabled in Kenya's National Assembly on April 1, 2026. The report marks the first time substantive details of any of the 4 state sugar mill lease agreements have been made public, following months of secrecy that fuelled widespread speculation about the terms on which the government had handed Kenya's struggling publicly-owned mills to private operators.

"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," Auditor-General Nancy Gathungu wrote. "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 from Business Daily Africa about the Auditor-General's findings or whether it has made the promised Sh5.76 billion ($44.3 million) investment into Nzoia.

What the lease terms say

The audit report reveals for the first time the financial structure of the Nzoia concession. West Kenya Sugar Company will pay the government Sh4,000 ($30.77) per tonne of sugar and Sh3,000 ($23.08) per tonne of molasses produced from cane milled at Nzoia Sugar's factory. Molasses is a by-product of cane processing widely used in alcohol production and animal feed.

Alongside those revenue-sharing arrangements, West Kenya committed to a one-off goodwill payment of Sh208.3 million ($1.6 million) and a front-loaded investment of Sh5.76 billion ($44.3 million) within 6 months of signing the contract. Whether that investment has been made is one of the questions West Kenya declined to answer. The lease runs for 30 years.

The competition dynamic

The leasing of Nzoia Sugar to West Kenya is complicated by the history between the 2 companies. Before Nzoia's financial position deteriorated to the point where a private operator was needed to take over, the 2 mills competed aggressively for the same pool of sugarcane farmers in Bungoma and surrounding counties. Nzoia Sugar explicitly blamed West Kenya's Naitiri mill for its declining fortunes, accusing it of cane poaching, a practice in which one miller's agents recruit farmers from another miller's nucleus zone and redirect their cane deliveries.

The question that follows naturally from that history is whether handing Nzoia to its former competitor reduces competition in the region, entrenching the Rai Group's already dominant position in the Kenyan sugar market.

Through West Kenya, Olepito, Sukari and Naitiri, the Rai Group controls approximately 50% of Kenya's private milling capacity. The 4 mills sit under the Rai Group, a holding company covering 23 companies. West Kenya produces the Kabras sugar brand, one of the most recognisable consumer sugar labels in Kenya. Adding Nzoia's factory and nucleus estate to that portfolio strengthens the family's grip on a market already heavily concentrated in their favour.

The broader privatisation

Nzoia is one of 4 state-owned sugar mills the Kenyan government leased out to private operators. Chemelil Sugar has been handed to Kibos Sugar and Allied Industries, which was its main competitor in Kisumu County, replicating the Nzoia-West Kenya dynamic. Muhoroni Sugar went to West Valley Sugar Company, linked to Kipchimchim Group. South Nyanza Sugar, known as Sony, was leased to Busia Sugar Industry, a company associated with the family of the late Salim Ahmed Taib Bajaber, founder of Kitui Flour Mills.

The rationale for the leases is straightforward: the state mills had been haemorrhaging money, failing to pay farmers for their cane deliveries, and relying on repeated government bailouts. Handing management to private operators with operational and financial capacity was presented as the only viable path to rescuing assets that the state could no longer afford to run.

The execution of at least the Nzoia transaction, according to the Auditor-General, was not procedurally sound. The absence of a formal handover document, a lease contract available for public audit and an independent asset valuation means there is no publicly verifiable basis for assessing whether the Rai Group received Nzoia's assets at a fair price or whether the revenue-sharing terms protect the public interest adequately over the 30-year term.

The Rai Group's track record with state assets

This is not the first time the Rai Group has faced scrutiny over the management of a state asset. In 2016, the group took over Webuye Paper Mills through a lease arrangement. The mill, which had been the economic backbone of Webuye town in Bungoma County during its productive years, has not been revived to that earlier status under Rai management. The group has rejected accusations that it has failed to deliver on its commitments at Webuye.

The most politically charged episode in the Rai family's recent history involved the contest for Mumias Sugar, once the largest sugar miller in Kenya. Jaswant Rai and his cousin Sarbjit of Uganda's Sarrai Group became embroiled in prolonged litigation over the right to operate the mill. In 2023, President William Ruto intervened publicly and with unmistakable directness. "We have told those people to move out," he said at a Western Kenya rally. "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."

The Rai cousins eventually withdrew from the Mumias contest.

With Nzoia now under West Kenya's control, the Rai Group manages a substantial and strategically positioned portion of Kenya's sugar infrastructure. Whether the Auditor-General's concerns about the opacity of the Nzoia handover produce a parliamentary or regulatory response will be one of the more consequential questions for Kenya's sugar sector reform programme going into 2026 and beyond.