Sugar politics ignores bitter truth on the industry’s steady collapse

Behind the heated political rhetoric surrounding the sugar industry is the risk of its imminent collapse.

What the Western Kenya politicians are not telling their folks is the impending sad reality, occasioned in part by their leaders’ greed and past disregard for the crop. The 11 sugar factories in the region, six of which are privately owned, face critical challenges that are unlikely to be addressed anytime soon.

Over 250,000 small-scale farmers provide for more than 92 per cent of all the sugarcane production, which directly or indirectly supports six million Kenyans, or roughly 16 per cent of our population.

Now, that’s a key constituency for the country to ignore, or handle casually. Its collapse is likely to significantly and adversely impact on the nation’s economic growth, because the sugar industry accounts for 15 per cent of the agricultural sector’s GDP.

The main miller, Mumias Sugar Company, has over 145,000 shareholders, with the government owning 20 per cent.

The industry has long enjoyed government protection from cheap imports. In 2002, Comesa extended this protection to offer relief to local millers, and to allow the country to undertake key reforms to make the industry competitive. Since then, Comesa has continued to provide exemption from duty free imports each year as Kenya sought extensions but literally did nothing to comply with the Comesa conditions.

The factories annually produce around 600,000 metric tonnes of sugar, leaving a shortfall of about 200,000 metric tonnes that is imported from Comesa countries.

This is the shortfall that the President wants imported from our largest trading partner, Uganda. Presently, we import less than five per cent from EAC, with 95 per cent coming in from other COMESA countries. Hence, it makes sense to import from Uganda to reduce our trade imbalance.

Our cost of production of sugar is about US$700 per metric tonne, nearly three times the cost in Tanzania, and double the cost in other Comesa countries. Top sugar producing countries harvest their cane ten times before replanting, compared to only twice in Kenya.

Neighbouring Tanzania does five to eight harvests before replanting. The average yield per Ha is 60 metric tonnes compared to over 100 metric tonnes in some top producer countries. The production costs in privately owned millers in Western Kenya averages about two thirds of that of the public owned millers such as Mumias.

Similarly, private millers such as Butali mill about 10 tonnes of cane to produce a tonne of sugar. In the public companies, the ratio is nearly double, translating to significantly higher production costs.

These costs are attributed to mismanagement, capacity underutilization, poor infrastructure and dilapidated mills, among others.

Low cane prices and delays in payment also meant increasingly less acreage under cane. Yet, the Kenya Sugar Board provided loans for cane development; research institutions were to develop varieties with high sucrose content; and farmers organisations and the millers all failed the farmers.

Some of their leaders became illegal sugar importers through Mombasa; a weak KRA increasingly failed to manage in recent years.

By 2012, it was clear that the industry was sinking pretty fast, reporting a combined loss of Sh6 billion. It is not about Uhuru or Uganda; the industry’s 2010-14 strategic plan sold to Comesa was never implemented. And the local leaders are either clueless on the state of the industry, or simply complicit in the contractors’ cartels that continue to fleece the public millers. To save this industry requires a lot more than the political heat fouling our airwaves.