Let’s make sugar millers worthy operations

We have a golden opportunity to reinvigorate economic activity in swathes of Nyanza and western Kenya.

At long last, the government will release the State’s throttling hold on some of the country’s ancient sugar factories: Nzoia, Chemelil, Muhoroni and Sony (South Nyanza Sugar Co).

Along with Ramisi, Miwani and Mumias, these factories were intended to make the country self-sufficient in sugar and provide gainful economic activity in the areas. Sony alone sources sugarcane from 20,000 growers in 10 districts.

SUGAR

Overall, it has been a relative failure with the country having to import over a third of its sugar needs and some of those areas recording high degrees of poverty and unemployment.

The irony is compounded by the fact that the production cost of Kenyan sugar was among the highest, even though it is grown in some of the most favourable conditions.

Indeed, these companies were largely regarded as extensions of the State and run as mismanaged sinecures rather than commercial operations. Many of the smallholders became modern-day serfs of the State as they waited for their delayed payments for months.

Sugar imports were constricted by the tariff regime, aided and abetted by the Comesa standby provisions. It was a form of protection which, under the current WTO rules and regulations, is now difficult.

To make things worse, vast amounts of State resources have been pumped into these ailing, inefficient and overstaffed operations over the years with little to show for it.

At the same time, other more modern, efficient and nimbler sugar factories have started and have become significant suppliers to the local market.

BARRIERS

More recently, the import barriers and duties have been relaxed, allowing imports to make up the difference between domestic supply and demand. Considering the cost of sugar produced elsewhere is much lower than here, the cold wind of competition is now biting the domestic industry.

That is another reason the future of these operations must be thought out carefully and implemented judiciously so that they become opportunities and not just carcasses.

It is not just a question of selling to the highest bidder per se. The danger is, they could be asset-stripped of land and left as rusting skeletons. Nzoia has 3,600 hectares (a considerable asset in its own right) and an outgrower zone of 23,500ha.

There is also the issue of the debt burden. The government would need to write off much of these debts for the companies to have any kind of a future.

Any outcome must benefit the majority of the people dependent on these factories. It has to be emphasised that it is not just current and former workers but all the people and entities that depend on them.

MARKET

Also, whilst sugar is their core operation, such future operations could be diversified into additional activities.

What is clear is that there is a huge and growing domestic market for sugar and its by-products, especially if one can produce efficiently. The process would, undoubtedly, need outside expertise; so, the State should get sound advice.

The government will be pressured and lobbied by many. Local counties are demanding a stake in the operation with employees reminding all that they are also stakeholders.

That said, the State must have a focused, inclusive vision. It must listen to and take on board the relevant opinions but not succumb to them.

For years, decisions to delink the State from these operations has been postponed repeatedly. Not only is this the time to move but also an opportunity to give the companies a welcome new lease of life with the resultant multiplier effect on the local economy.

Mr Shaw is an economic and public policy analyst. [email protected].