The doomed sugar sector; why sugar barons are succeeding in killing local sugar mills

Kenya’s sugar sector is doomed as floodgates of cheap sugar imports from Uganda have been opened. Sugarcane farmers in Western and Nyanza should change to horticultural farming, as this development spells doom to their core economic activity.

On the employment side, there will be massive job losses in all sugar factories; Mumias, Sony, Awendo, Miwani Chemilil, Muhoroni, Kibos, Kiscol, Butali sugar factories, and thousands of farmers will lose their income due to these imports.

Uganda produces about 465,000 tonnes of sugar against a consumption of 320,000 tonnes, leaving it with a 145,000-tonne surplus. Kenya produces 650,000 tonnes of sugar against a demand of 860,000 tonnes, leaving a 210,000-tonne deficit. It is not mandatory that we must fill this gap with imports from Uganda only.

The most important questions that we should ask ourselves are: why can’t this country meet its sugar demand despite all these many sugar factories operating under capacity? Why is Kenyan sugar still very expensive and non competitive?

A majority all sugar factories in Kenya, Mumias, Butali, Kibos, Kiscol and Transmara were made by the same Indian contractor using same equipment procured from the same makers in India as sugar factories like Kalira and others in Uganda. All these plants have co-generation plants that produce their daily electricity needs and most are even selling the same to the national grid. This greatly reduces production cost on energy.

Most are distilling molasses to ethanol that is a hot cake in both markets. In fact the same Indian company made the second largest factory in the world that is based in Sudan using the same technology as Mumias Sugar Company and others. This bring additional revenue to these factories.

Therefore,  production technology can not be the cause of high cost of Kenyans sugar or the under capacity operations often blamed by many people.

Sugarcane production is also another false proposition. A farmer in Busia or Muhoroni earns approximately the same as a farmer in Kaliro in Uganda. Moreover, many farmers have been suffering from lack of payments from their cane deliveries. Western and Coast regions still have potential to produce enough sugarcane, even for export.

We are only left with one issue on the table now, the management of these sugar companies.  How comes, as we speak Butali, that is privately owned is now doing their distillery and sugar refinery while Mumias which is large and can leverage on economies of scale is on its knees?

How comes, Kibos Sugar Company that’s a small private factory is currently doing their boiler expansion yet Sony Sugar that is
bigger and government supported is struggling?

Here are the answers: 1. We are excessively greedy, sugar cartels work in cahoots with sugar company management to bring down the companies to create windows for importation of the commodity cheaply from COMESA countries, Brazil, Egypt and from Kismayu.

Indeed, there are politicians among sugar barons in the country smuggling sugar. The illegal Kismayu-Liboi-Nairobi sugar smuggling  ring is rumored be owned by a politicians. Those cartels importing sugar from Brazil, then branded as COMESA sugar don’t want sugar factories in the country producing enough sugar.

2. We have no business supporting an emotional business. Government’s involvement in the sugar sector is not feasible and an impediment to its growth. Let the government fully privatize these companies and earn revenues only from taxes. It will minimize political and cartel interference in sugar production.

3. The Kenya Sugar Board is part of the causes of sugar chaos. It has not effectively regulated the industry. This board needs total overhaul. It’s has no value currently in the sector and plays the tunes of sugar cartels; oblivious of the suffering sugarcane farmer.

It is not advisable to kill a whole economic activity for over  six million Kenyans just because of trying to correct balance of trade of a friendly nation. Cartels are currently jostling to start this cheap importation. Some of this sugar will be imported from Brazil, then repacked as Ugandan sugar and brought into Kenya. I don’t see how the purported deal will benefit the Kenyan farmer!!