The bitter truth about Kenyan sugar

There are 16 sugar factories in Kenya, of which only 12 are operational. This sector has a high potential, but continues to take serious beating from various factors that stifle it. The country produces about 600,000 tonnes a year, but it is not enough for local consumption, a situation that has pushed Betty Maina, the Cabinet Secretary for Industry, Trade and…

Out of 55 countries in Africa, 33 are engaged in sugar production. There are 16 sugar factories in Kenya, of which only 12 are operational. The government owns five of these while seven are privately owned making up a sector that collectively supports more than eight million Kenyans.

This sector has a high potential, but continues to take serious beating from various factors that stifle it. The country produces about 600,000 tonnes a year, but it is not enough for local consumption, a situation that has pushed Betty Maina, the Cabinet Secretary for Industry, Trade and Enterprise Development to announce plans to import 90,000 tonnes of sugar from Uganda to bridge the deficit, the reason why the Kenya Association of Manufacturers (KAM) has called for the revival of the sugar industry. 

These figures have however been altered by the current global pandemic that has depressed the demand for the commodity from the food and beverage service and manufacturing sectors.

It is against this backdrop that the KAM has called for the revival of the sugar industry.  This took place during the launch of the KAM Sugar Sub-Sector Strategic Plan, which seeks to guide the industry’s growth, resilience and sustainability. Speaking during the launch, Ministry of Industrialization, Trade and Enterprise Development Chief Administrative Secretary Dr. Lawrence Karanja noted that the government remains committed to reviving the sugar industry. 

The country is currently able to produce 600,000 tons, but the deficit of 90,000 still lingers. This is because there are some impediments to meeting this target, which include low sugar productivity at the farm level due to poor seed of long maturing varieties, smut disease which dwindles the sugar produce as well as high costs of inputs and delayed payments to farmers.

According to an analysis by Scientific Research Publishing (SCRIP), sugar–cane in western Kenya takes 18 to 24 months in the field. By contrast Sudan grows early maturing cane varieties that mature within 14 months. Also, the production costs of sugar have increased, from about US$676 per tonne in 2014 to US$1007 per tonne in 2018. This compares poorly with production costs of US$350 per tonne in Malawi and US$400 per tonne in Zambia.

Mismanagement in processing factories has contributed to inefficiencies. Most of the state-owned sugar mills are operating below capacity and are burdened by huge debt. They have inefficient, poorly maintained machinery which suffer frequent breakdowns, says the study. Although the government has privatized most of the sugar factories as in the case of Mumias, they still make losses.

As a result, locally produced sugar remains uncompetitive with the cost of production reportedly being 60 per cent higher than in Uganda and Tanzania, and 50 per cent higher than in Zambia. Instability in world sugar prices and trade barriers impact the sugar industry which also faces competition from low-cost sugar produced within COMESA and low world market prices.

The country is working on several mechanisms to return the sector to its former productive days.

According to SCRIP, there is need to motivate smallholder out-growers by revamping extension services, improving cane varieties, field operations, transport, marketing and timely payments. Generally, the laws to protect farmers or support the sugar industry are in place. What has been lacking is professionalism and accountability across all levels of the sugar value chain. The revised Crops Act covering regulations for the sugar sector have been enacted, but it has to be fully applied. There is need for overhaul of the sector to enforce laws and best practices. There is scope to expand sugar production in the Kenyan coastal region.

However, a number of issues must first be resolved such as land rights, developing irrigation infrastructure, improving in-field water management and developing viable sugar value chain to include: input and output markets, factories, transport, socio-economic safeguards, and policy and institutional support for sugar production to be sustainable.

Illegal trafficking was found to prevail in most border points and the most prominent commodities that were involved included sugar at 48.8%. This is according to a study by borderland-related crimes and security threats in Kenya which also noted that goods (such as contraband sugar from Brazil) were being smuggled in and out of the country through both licit and illicit channels.

Well, borderland-related crimes and security threats in Kenya suggest that in order to minimize incidents of concealed and/or illegal goods entering or leaving the country, an import and export tracking protocol needs to be worked out and/or strengthened by relevant government agencies.

Kenya link.org suggests a reduction in taxes on farm inputs and refined sugar to significantly increase the competitiveness of Kenyan sugar in both the domestic and foreign markets. There is also need to allow sugar companies to utilize the cess fund paid to local authorities to improve road infrastructure in cane growing areas. Currently, local authorities in cane growing areas do not utilize funds obtained from sugar factories to maintain access roads. Poor roads constitute a significant impediment to transporting cane to processing factories.

Speedy divestiture of government from the management of sugar companies and the inclusion of cane growers as shareholders in sugar companies would provide the necessary incentive for increase in output. The case of Mumias Sugar Company is an example of what a sugar company, commercially–oriented and free from government shareholding and political interference, can achieve. Mergers of poor performers with successful companies should be encouraged.

Zealous enforcement of sugar quotas and imposition of taxes and duties on imported sugar, to enable local sugar factories to reduce their inventories and acquire breathing space to implement necessary changes to improve their performance could be the spur needed to overhaul productivity and management.

The sector is expected to see a quick recovery of the food and beverage manufacturing and service sectors from the impact of COVID-19; however this turn of events could see a spike in retail price which could be counterproductive.

The demand for sugar in Kenya is growing and the potential to more than meet the demand is evident. At the same time, the sugar industry requires a number of reforms to turn it around and to improve productivity and profitability. There is need to motivate smallholder out-growers by revamping extension services, improving cane varieties, field operations, transport, marketing and timely payments.

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