Kenya’s sugar sector on auto pilot, and farmers, citizens are paying the price

Saturday August 22 2015

Sugarcane harvested on a farm being loaded onto a tractor before the produce is transported to Nzoia Sugar Company.  FILE PHOTO |

Sugarcane harvested on a farm being loaded onto a tractor before the produce is transported to Nzoia Sugar Company in western Kenya. FILE PHOTO | NATION MEDIA GROUP

By Paul Mbuni

For a decade and a half, Kenya’s sugar sector has been grappling with production and marketing challenges, that have left it in a crisis.

Problems in the sector started in the year 2000 when the cost of production of sugar rose to uncompetitive levels — about $600 per tonne while it cost Egypt $300 at the time.

The Kenyan sugar could not stand competition from Comesa member states. In 2003, the government stepped in and sought protectionist measures from Comesa for one year. Although Comesa agreed, no effort was made to address the production and institutional challenges in the sector.

At the expiry of the safeguard in 2004, the sector was still in the doldrums. The government requested, yet another extension of two years, which was granted, and once again, the situation was forgotten and it was business as usual.

The government was expected to utilise the period to institute the necessary reforms to turn the industry around. The requests were then repeated year after year and beyond the maximum allowable period of 10 years as per the World Trade Organisation regulations.

This is a clear indication of the lack of seriousness in addressing the challenges in the sugar sector.

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It is common knowledge that the sugar sector is ailing from haphazard imports that crowd out local produce.

Although the country has to import at least 200,000 tonnes of sugar every year to meet the shortfall, the imports have never been co-ordinated. The so-called shortfall imports is let in anytime in the year even when local factories are at peak production.

This distorts the market, factory processing and cane-harvesting programmes, causing farmers to hold on to the cane on their farms for as long as 36 months, and stock-piling of processed sugar in godowns.

This ultimately pushes the costs of production to levels far higher than our regional and international competitors. Unfortunately, the victims of these imports — the farmers have no say in these practices.

Importation of sugar whether from Uganda, Brazil, Egypt or Malawi is not really the problem, the issue lies in importing the sugar without regard for our production parameters.

Unfortunately, there is no indication that the trend is going to change any time soon. This practice has a devastating effect on farmers and those whose livelihoods are directly and indirectly dependent on sugar.

Ideally, sugar companies and sugar outgrower associations are in a better position to import the shortfall as they are unlikely to jeopardise their own interests. This was suggested a few years ago but the idea seems to have been abandoned due to pressure from the sugar barons.

The Ministry of Agriculture has powers to institute such a policy and ensure that sugar companies take charge of any sugar imported into the country rather than private individuals.

Sugar is imported into the country purely to satisfy private commercial interests as opposed to a national need. For this reason, the situation is likely to be compounded by any bilateral arrangement of sugar imports from Uganda outside the Comesa framework, as that is more susceptible to misuse and misapplication.

Due to the prevailing challenges in the sector, some stakeholders are dismissing sugar as unproductive and advising farmers to seek alternative crops.

Sugarcane farming can be productive and profitable under the right environment. Our current policies, production systems, breeds, processing technologies (low conversion rates) and worse still marketing practices, are all wrong. In the mix of all these, we have the corruption factor.

However, these are challenges that the government has the capacity to deal with in order to cushion farmers and the six million Kenyans who directly and indirectly derive their livelihoods from the sugar industry.

This is one sector the country cannot afford to abandon in favour of imports. Like other crops such as rice and maize, although costs of production are higher here in Kenya compared with Pakistan or the US for example, local production benefits outweigh those from imports.

However, for the sugar sector, the level of operation has a bearing on the productivity and profitability of the crop. For the past 20 years, sugar zones have witnessed land fragmentation and partitioning that has reduced the average acreage of land under sugar to as low as five acres.

This has inevitably denied the farmers any advantages of economies of scale. Although there is no fixed figure on optimal land size for sugar growing, costs incurred on a farm of less than 20 acres tend to be very significant. Farmers with smallholdings need to be advised to venture into other agricultural activities.

To turn around this sector, the government should move away from its fixation that privatisation is a panacea for all sugar sector problems.

There is a compelling need for government support for sugar farmers through a comprehensive subsidy programme as happens in other countries. Haphazard imports should be stopped and sugar companies be empowered as sole sugar importers in the country.

The sugar sector requires technical and financial assistance to withstand regional and global competition. There is also a need to restructure the Agriculture, Food and Fisheries Authority to play a role in managing related imports and exports.

We cannot afford to surrender the sugar sector to auto pilot otherwise we shall all lose out in the long run. We must direct this sector. Something needs to be done urgently.

Paul Mbuni is the national chairman of the Kenya Society for Agricultural Professionals.

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