How to turn around ailing sugar firms

Last year was another miserable one for our pioneer sugar factories of Muhoroni, Chemelil, Sony and Nzioa as they stumbled from bad to worse.

Their stories have the same ring about them. They have hardly made a profit since the turn of the century or before.

POTENTIAL

Payment arrears to farmers and employees often go back a couple of years and relief usually comes on the back of government bailouts.

Maintenance and repair has been of the band aid variety for years. Factory crushing capacity is in such a bad shape that it takes about 60 per cent more cane than average to obtain one tonne of sugar. 

As a result, the cost of producing sugar is way above the domestic wholesale price.

So imagine the unthinkable becomes reality: Kenya becomes self-sufficient in sugar from the rehabilitated factories of Nzioa, Mumias, Muhoroni, Sony and Chemelil within a couple of years. 

This is not a New Year pipe dream. It is feasible and possible. The firms have acreage and smallholder outreach capacity to supply more than enough cane to enable them operate at optimum capacity. Look at it another way. 

There is a lot of idle land to grow cane and produce sugar to fill the shortfall gap. Indeed, there is the potential to produce surpluses.

REALISTIC

This would be good for our balance of trade and would stimulate vast areas of Nyanza and Western Kenya that are literally oceans of poverty. The increased economic activity would create numerous jobs and gainful activities which are currently in short supply.

The two keys to this are increasing cane production and getting the factories back into shape.

It is doable if there is clear and determined political will complete with workable and realistic policies. This has been the missing link in the past. Would it cost the government yet more money?

Not necessarily as the onus would be on those contracted to run the factories to restore them. After years of deliberating, procrastinating and delaying time has come for the government to make some clear and sound decisions about the future of these ailing operations.

Is restoring them the right course or should we consider other options? 

INTERFERENCE

Considering we have this productive capacity and need to import about a third of our sugar needs, it makes sense to make them productive and viable. Another factor has come into play. The progress in cane development is such that we are able to fine-tune strains to get optimum productivity. If we are to go down this route we need a bold three-pronged approach delinked from national and local political pressures.

This must be the overriding consideration as the factories have been bedevilled by political interference for decades to the extent that they effectively operated as fiefdoms rather than commercial operations. 

Coupled with this must be a clear and transparent tendering process for the running of the operations conducted by professional recruiting agencies. 

Potential bidders must be able to show audited accounts for three years and have a credible track record in the running of sugar production operations.

PRIVATISATION

In order to attract serious eligible players from around the world, international firms with experience in sugar production must be allowed to compete.

Kenya is regarded as an inefficient and expensive producer. What is required is an infusion of best international sugar production practices. The privatisation process must be accompanied by the restoration of, and increase in, cane production for the revamped operations.

The government will have to invest money to encourage farmers to put more acreage under cane production.

This incentive could include re-introduction of the Sugar Development Levy and soft loans. 

This support is essential considering the length of time it takes to grow the crop and the inputs needed.

CRONYISM

Finally, we need to get rid of the common myth that growing cane is a fast lane to poverty. It is actually regarded as one of the highest paid cash crops in the world, which means that it can bring prosperity as opposed to poverty.

In conclusion, reviving and rehabilitating the ailing firms in a professional and transparent manner devoid of politics and cronyism could revive the fortunes of much of Western and Nyanza.

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