Sugar industry in Kenya

Last Updated 13 years ago by Kenya Engineer

Sugarcane is one of the country’s major cash crops alongside tea, coffee and others. According to the strategic report by Kenya Sugar Board of Kenya 2010-14, the sugarcane industry is a major source of livelihood for communities along the sugar belt region in Western Kenya. According to the report, the sugarcane industry accounts for about 15 per cent of agricultural GDP.

Today, the sugar business has faced economical, political and social challenges that have left sugar extrapolations pointing down.

History
The industry is inextricably linked to our history. The Asian were the authors of sugar cane farming in Kenya. The first sugar production on a commercial basis was started in Kibos, today’s Nyanza, when the Miwani Sugar Mills was established on a medium scale at Miwani in Kisumu District of Nyanza Province, in 1922.

The second sugar mill was established in 1927 by the Associated Sugar Company Limited at Ramisi in Kwale District of the Coast Province and managed by the Madhvani Group International of India.

The post-independence period saw the post-colonial state begin to participate directly in the sugar industry with the government aggressively boosting sugar production with the aim of making the country self-sufficient in sugar production.

To this end the state’s strategy to develop the sugar industry was guided by two policy documents. The first was the Swynnerton Plan of 1954 and the second was Sessional Paper No.10 of 1965, a policy document in which the government stated its version of African Socialism. The African Socialism and its Application to Planning in Kenya as is titled has remained the country’s development “bible” since its adoption.

“Kenya Sugar Industry Strategic Plan 2010-2014”
In 2008/2009, the industry produced close to 520,000 tonnes of sugar operating at 56 percent of the installed capacity. The industry has the potential of producing over 1 million tonnes of sugar if operated at 89 percent of the installed capacity. This would meet the domestic needs, currently standing at about 700,000 tonnes, and provide a sustained surplus for export.

As of 2011, the industry faced several challenges including capacity under-utilization, lack of regular factory
maintenance, poor transport infrastructure and weak corporate governance. Consequently, most factories have accumulated large debts amounting to KSh.58 billion.

In the 2010-2014 strategic plan, the industry would require KSh.51.1 billion. KSh.15.3 billion would be used to initiate power co-generation projects in various factories. KSh.12.8 billion would be used to initiate ethanol production projects. The remaining KSh.23 billion would be used to carry out other activities outlined in this Plan.

The Strategic Plan is intended to be the basis of facilitating the transformation required in the sugar subsector. It sets out the framework that will enable the industry achieve its vision of being ‘a world class multi-product sugarcane industry’ in the next five years.

Despite the challenges the industry faces, this Plan underlines the industry’s commitment of being efficient, diversified and globally competitive.

Current status
The parliament has put Kenya Sugar Board on notice over a KSh.1 billion cane testing project which according to the parliamentary committee was not a priority. The project saw some testing machines; one costing KSh.150 million placed at Nzoia and Sony Sugar factories. They argued that the project was ill-timed when majority of sugar millers were struggling to pay farmers. The two millers recently reported a combined loss of up to KSh.6.1 billion.

The State millers are earmarked for sale, a step that is expected to inject efficiency in a sector that currently hinges on COMESA safeguards that limit imports.

The industry’s main source of woes is attributed to the country’s importation of sugar whereas there are firms producing sugar locally. This creates unhealthy competition that in turn injures the economy and the consumers not forgetting fellow competitors. The country’s current demand for sugar annually stands at 700,000 tonnes while only 500,000 tonnes is produced locally. The balance is imported from the COMESA regional bloc.

Lack of sugarcane is also blamed for the sector’s poor performance despite increase in number of hectares under the crop over the years. However, in a move to curb this, a new breed of the crop has been introduced. The new cane breed is fast-maturing taking 12 months to be ready unlike the current one that takes up to 24 months.

To fully utilize the potential in the industry, some essential reforms have been identified in the Agricultural Sector Development Strategy 2009-2020.They include enhancing access to input markets, raising cane yields, reducing post-harvest losses, upgrading factory capacity, increase to credit facilities for farmers, increasing value addition by more processing and product diversification as well as strengthening corporate governance in the industry.

There are also plan to privatize some sugar companies such as Nzoia, Chemelil, South Nyanza and Miwani factories. The factory crushing capacities are also an area that needs re-touch as many new factories have crushing capacity of less than 2,000 metric tonnes in a day. The largest sugar company in Kenya currently is with a crushing capacity of 10,000 metric tonnes.