Mumias restructures to shore up cane production

By andrew watila

Mumias Sugar Company (MSC) has embarked on a major restructuring exercise to boost its earnings as well as increase payments to farmers.

The turnaround programme, which started with some of the company’s top management leaving or retiring, will save the company billions of shillings.

It is also expected to at least triple farmers’ earnings by improving sugarcane production quality and quantity.

Chief Executive Officer Peter Kebati said the company has invested more than Sh3 billion in sugarcane development and production programmes.

The amount, he said, covers initiatives in Kakamega, Busia and Bungoma counties.

Market liberalisation

The firm seems to be preparing for market liberalisation ahead of the expiry of Comesa safeguard measures, beginning March next year.

“Our ultimate goal is to ensure our contracted farmers smile perennially all the way to the bank,” he said. “We are also determined to ensure that farmers are not only going to be paid their dues promptly, but also increase their earnings per tonnage of the crop.”

Kebati added that the Kenya Sugar Board (KSB) has also boosted its restructuring programme by agreeing to advance the company more than Sh140 million.

The money will be invested in cane development in the sugarcane belts where Mumias Sugar has contracted farmers.

The chief executive observed that MSC has also established mechanisms to deal with cane theft, which has over the last two years led to a loss of more than Sh7 billion.

“In this restructuring programme, we are not just talking about boosting efficiency at company level, we are talking about high-level efficiency right from the farmers at the grassroots all the way to the top, me included,” Kebati said.

For more than two years, the Western Kenya sugar belt has experienced cane theft, putting KSB on the spot.

At the height of the crisis, of which Mumias Sugar bore the brunt, supplies shrunk forcing the company to sell all its sugar directly to consumers before closing for annual factory maintenance between April and May.

Western Development Initiative Association Director Joseph Barasa said KSB abated cane theft by allowing firms without contracted farmers to buy Mumias cane.

“KSB had no good intentions for the company when it authorised West Kenya to start its operations in Busia and Kakamega sugar belts when it knew MSC had contracted farmers there while West Kenya has none even in its home base,” said Barasa.

Kebati, however, said there will be enough supplies following the reopening of the factory a week ago.

He added that the firm will give priority to the more than 60,000 farmers contracted to supply cane to the company, adding that MSC’s turnaround strategy will up earnings as well as hasten regular payments to farmers.

Kenya’s sugar consumption continues to outpace production.

A report on the sugar sector in Kenya by Foreign Agricultural Service, a US agri-firm, forecasts consumption to remain above 770,000 tonnes this year, with domestic production supplying about 70 per cent of total consumption.

This has been due to population growth and increased industrial demand for sugar to manufacture beverages and confectionary products.

abolish taxes

KSB is lobbying the Government to reduce or abolish taxes on sugar and reduce the cost of production through subsidising farm inputs by 40 per cent to make the sector competitive.

The high cost of production and taxation makes Kenya’s sugar sector uncompetitive compared to sugar producers within Comesa such as Mauritius, Egypt, Malawi and Zambia.

The Government taxes sugar producers 24 per cent of total production cost while most sugar producers within Comesa abolished such rates.

Analysts estimate Kenya’s cost of sugar production to be Sh51,000 per tonne, against a world average of between Sh25,500 and Sh30,000.