Sugar regulator slowly suffocating industry

The former Kenya Sugar Board (KSB), which is now the Sugar Directorate under Agriculture, Fisheries and Food Authority (AFFA), is systematically and ruthlessly killing the country’s sugar industry that it is mandated to protect and regulate either by default or deliberate design.

This state of affairs is still prevailing and getting worse as the cartels tighten their stranglehold on the country’s sugar industry even after the Government has, for the last four years, lobbied for the Common Market for Eastern and Southern Africa (Comesa) member states to extend the Comesa safeguards on Kenya’s sugar.

These safeguards were meant to give Kenya time to put its house in order by putting in place and executing strategies to lower the production costs of sugar, among other factors, making it at par with other Comesa member states whose production costs are very low.

In Kenya, the sugar industry is one of the first three largest contributors to the agriculture sector, accounting for 15 per cent of the Gross Domestic Product and supporting almost 10 million Kenyans.

The industry provides direct employment to 40,000 workers and indirectly to over half a million cane field workers, and generates over Sh12 billion annually including saving the Treasury in excess of Sh19 billion annually through import substitution.

However, KSB, which was supposed to play a central role in the planning and implementation of these strategies to get back the sub-sector back on its feet, not only failed consistently but also continued to carry out activities that have undermined the industry.

One of the major ways that the sugar regulator is undermining the sub-sector is through (ir)regular licensing of new millers to start processing and producing sugar by flagrantly flouting its own regulations and rules as stipulated in the Sugar Act 2012.

Apart from the environmental impact assessment requirements, one of the regulations stipulates that each individual factory must operate within a specific radius of 40 square kilometres, depending on its production capacity, away from a competing factory.

This is a zone within which a factory will also contract its farmers to supply it with sugarcane.

The sugar regulator is abusing these regulations by lumping competitors together in overlapping zones.

An example is in Busia County where the board is known to have given licences to multiple applicants to build sugar-processing facilities yet some of them had completely failed to meet the legal requirements.

For instance, West Kenya Sugar has been allowed to build a sugar factory in Olepito area hardly 10km from Busia Sugar Industry whose construction of a sugar factory is ongoing in Busibwabo.

The other critical area where the regulator is abusing laid down requirements is the haphazard and chaotic way in which it is licensing millers to build sugarcane weighbridges or cane-buying centres.

This has created a scenario where one miller is reaping where it never sowed from farmers contracted to a competitor.

This in turn has led to the current sugarcane “poaching crisis” that has crippled the operations of the giant Mumias Sugar Company and created conflict between Mumias Sugar, West Kenya and Butali Sugar companies in the region.

The story of the sugar regulator messing up the sub-sector does not stop there.

There is also the irregular licensing of cartels to import cheap sugar, including local millers who import the same cheap sugar disguised as their own after being re-packaged.

That is going on despite the fact that the regulator is acutely aware of the fact that huge stockpiles of locally produced sugar have been rotting in the stores of the local millers.

With sugarcane development programmes lying dormant, there is an acute shortage of sugarcane in almost all the sugarcane growing counties of the former Nyanza and Western provinces, a situation that has been worsened by the “cane poaching” crisis.

This state of affairs means that diversification by millers to produce other by-products - like Mumias Sugar has done with electricity, ethanol and bottled water - is doomed because of the acute scarcity of the necessary raw material to produce these products.

And the situation could worsen, forcing thousands of farmers in the cane-growing areas to turn to planting alternative crops because of these frustrations.

Perhaps of all the inconveniences, delayed payments rank among the worst.

With prohibitively high production costs in farm inputs, land preparation, crop husbandry and transport costs, the dejection being felt by most farmers is justified.

The serious state of affairs at Mumias could spread to the other millers, with devastating consequences.

Unless the Government takes drastic action to save the sugar industry from what is killing it slowly but surely, the country will have nothing to talk about locally produced sugar in the next few years.