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Why future is dim for Kenya’s sugar industry

Tuesday June 5 2018

Kenya sugar sector

A truck ferries sugarcane along Kamagambo- Nyansembe road. The Kenyan sugar sector is hurtling towards an uncertain future as the deadline on Comesa safety nets looms large. PHOTO | BENSON MOMANYI | NMG 

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That Kenya is a sugar deficit country is not in doubt; the question remains how long the annual deficit will be covered on cheap imports, which have had a negative effect the life of local millers.

But despite the shortage, factories are paradoxically hanging onto huge stocks, which they are unable to dispose of thanks to last year imports.

Last week Muhoroni was shut down under the weight of debts and unpaid taxes sending workers packing.

The future doesn’t look rosy either with the expected coming to an end of the Common Market for Eastern and Southern Africa (Comesa) safeguards that have been protecting millers from cheap regional sugar.

Inadequate sugarcane to mill and obsolete technology have always been the fall guys when it comes to poor performance by local factories.

Sugarcane development in Kenya is majorly rain fed, but the changing weather pattern has made it difficult for millers to develop enough raw material to meet their milling capacity.

One company is seeing matters differently; Kwale International Sugar Company Limited (Kiscol) has come up with a model that it is currently implementing in its nucleus estate.

The firm is pumping in millions of shillings in raw material development through irrigation as it parts ways from the tradition of relying on rains.

Rainwater boreholes

Kiscol general manager Pamela Ogada says they have so far put 1,195 hectares under irrigation and intend to achieve 4,200 hectares by September.

“What we are doing now is to build our capacity of raw material by turning to irrigation, which ensures that water is there throughout the year and so is the raw material,” she said.

The firm’s agricultural operations manager Ravi Chandaran says they are getting more yields on the farm, which is under irrigation than the one that relies on rain for productivity.

“On irrigated land we get 84 tonnes of sugarcane per hectare. This is against 57 tonnes that we would get from the same size of land under rain fed farming,” said Mr Chandaran.

He said outgrowers harvest an average of 51 tonnes from one hectare with production being a bit low due to lack of proper agronomical practices.

With full installation of irrigation, the firm will have to operate optimally-270 days a year as opposed to the current status where it only runs for 180 days annually.

Kiscol has constructed high capacity dams that can run the entire farm for more than six months without running dry.

One of the seven dams has a capacity to hold 2.7 million cubic litres of water.

The company is also using drips as opposed to flooding or sprinkler, ensuring that an acre consumes just about 50 cubic metres, which is half the volume that would have been spent when using other types of irrigation.

“Drips are very efficient as they use water economically, minimising wastage that comes with other methods of irrigation.

Furrow irrigation

On its part, Nzoia Sugar Company invested Sh11 million in furrow irrigation to boost sugarcane production.

The miller last year said the move was necessitated by a decline in raw materials over the past two years due to drought and poaching. These are perhaps the only two firms with an eye of feeding its mills.

In the last financial year, Kenya registered a shortage of 1.9 million tonnes of sugarcane shortage as drought that affected most parts of the country took a toll on production.

The effects of the dearth, which is expected to ease in the next two years, saw the Treasury scrap duty on the sweetener coming in outside the regional market.

The move allowed traders to import 980,000 tonnes of sugar, which was three times more than the limits that the country is required to bring in a year.

Recent data from the Sugar Directorate indicates millers have been holding in excess of 20,000 tonnes of sugar as they grapple with getting market for their commodity.

Kenya is yet to meet the required conditions set by Comesa before the safeguards are lifted next year in February. The country has over a decade been seeking extensions with very little to show in terms of meeting the conditions.

The Privatisation Commission, which had initially planned to complete the sale of five state-owned sugar mills by August, may be engaged in a losing race as governors say selling the millers is not the way to go.

Instead, they want the factories to be handed over to the devolved units citing the disposal and subsequent woes facing Mumias as their reason for opposing handing over the millers to private entities.

Perennial fight

But even if the sale were to push through, ageing machines and a perennial fight for dwindling raw materials would still conspire to kill local millers.

Production costs would also not spare the old factories.

While it costs about $400 to produce a tonne of sugar in Mauritius, it takes $800 to manufacture the same in Kenya.

And in a country where price, rather that quality, matters most, millers should prepare for tough times if they eventually find suitors.

This manufacturing cost difference implies that Kenya’s sugar will be edged out of the market with the onset of cheap imports from the Common Market for Eastern and Southern Africa (Comesa) countries, due to their competitiveness.

It remains to be seen who will have his way between governors and the privatisation commission but one thing is for sure, the future for local millers is not sweet.