By Dominic Odipo
Will sugar cane continue to be the most important economic commodity in western Kenya over the next decade?
Only three years ago, the answer to this question would have been obvious. “King Sugar” looked like it would continue to dominate the economy of that region for years to come. In effect it was Jamaica at the beginning of the 18th Century but, of course, without slaves.
Today, most of the sugar industry extrapolations do not look quite so Jamaican. Urgent corrective measures need to be taken by the sugar milling companies themselves, the Kenya Sugar Board as the industry regulator, the relevant county governments and the national government if the sugar industry in the region (and the country as a whole) is to sweeten and prosper.
Two seemingly unrelated developments, one internal and the other external, appear to be converging to shake up the sugar industry in the region with far-reaching, unintended results. The first is rampant sugar cane poaching while the second is the looming impact of the Comesa sugar sector protective tariffs which are due to expire in February, 2014, only eight months away. According to Mr. Peter Kebati, the managing director of Mumias Sugar Company, the largest sugar producer in this country, his company has lost more than 150,000 tonnes of sugar cane since the beginning of this year through poaching by uncontracted sugar cane millers. Apparently, certain millers in the region who have not contracted or developed any farmers of their own have managed to dupe thousands of farmers already contracted to Mumias Sugar into selling off their sugar cane at effectively much lower prices and without any concomitant contractual obligations.
On the face of it, these transactions look like they only constitute a financial loss to Mumias Sugar Company alone, not the country as a whole, since the other companies which “steal” the sugar cane are Kenyan companies located in the same region. In fact, this argument conceals at least two fallacies.
Lower costs
Since Mumias is the country’s largest cane developer, contractor and miller, it processes its sugar cane at much lower unit costs which are then passed on as lower unit retail prices. Because it produces almost 60 per cent of the country’s refined sugar, its lower production costs eventually impact on the average retail price of Kenyan sugar, pushing it down and thus making it more competitive and cheaper for the Kenyan consumer.
The second issue is that because thousands of farmers are now breaking their contractual obligations to Mumias or any other contracting sugar miller, they generally fail to access the necessary funds for planting sugar cane during subsequent seasons, thus substantially lowering the aggregate volumes of sugar cane produced in the whole country.
One easily sees then that sugar cane poaching is not just a major concern to Mumias and the other affected millers alone. It is a national issue, no less. The other development now menacingly looming over the sugar industry in western Kenya is the Comesa tariff regime which is due to expire in February, 2014.
In effect, sugar from any of the Comesa member states will begin flowing into Kenya duty-free from February, next year. Because certain countries within the Comesa trading block like Zambia can produce a kilo of sugar at about half of what it takes to produce one kilo in Kenya, our sugar will be unable to compete with that from the Comesa region from early next year.
This development could threaten the survival of the entire sugar industry in this country, leading to the loss of hundreds of thousands of jobs in that sector. With so little time left for re-engineering the industry, what should the immediate way forward now be? The first remedial interventions need to be made by the sugar millers themselves so as to increase aggregate production while lowering unit production costs. According to Kebati, Mumias is introducing new sugar cane varieties which will mature in just over 14 months.
It is also introducing new sugar cane-specific fertilisers which should raise the average production per hectare from about 50 to 70 tonnes. It is initiatives like these which now stand to aggressively re-position the Kenyan sugar industry and make it more sustainable and internationally competitive. The second intervention should be focussed directly upon sugar cane poaching. As we have seen, such poaching is much more dangerous to the country as a whole than it appears.
Forgotten farmers
According to Joseph Barasa, the head of the Western Development Initiative Association (WEDIA), it is the sugar cane farmer who sits squarely at the centre of this poaching crisis. He has not yet understood the real, long term risks of selling off his sugar cane to these rogue millers.If the Kenya Sugar Board could resolve to deal with this problem directly, the matter could be sorted out within no more than two weeks.
The last set of interventions need to be variously at the relevant county and national government levels. Government at all levels needs to understand that hundreds of thousands of people in the western Kenya sugar belt stand to lose their jobs and livelihoods if the sugar industry in that region is not steam-lined and prioritized.
If the Comesa deadlines cannot be pushed back any more, the sugar industry in this country could be facing a crisis which the sugar millers on their own might be unable to handle. Bottom line is that the sugar industry requires much more national attention than it is currently getting.
