Kenya: The sugar industry is grappling with serious challenges such as high costs of inputs

Writes Leo Odera Omolo In Kisumu City

The sugar industry in Kenya is the source of livelihood to 6 million people and employed about 500,000, but it faces myriads of problems plus challenges including stiffest competition from low cost producers.

The industry is facing upward pressure on high crude oil prices and demand on bio-fuel. It significantly dependant on fossil fuel for raw cane transportation, development its key market such EU, Brazil and India.

However, the industry currently produces 68 per cent of Kenya’s domestic sugar requirements making the country a net importer of sugar.

These remarks were some of the few points outlined by the Acting Chief Executive Officer {CEO} of the Kenya Sugar Board Solomon Odera, when he addressed journalist during a breakfast session at a Kisumu Hotel.

The breakfast exchange with newsmen took place at the New Kisumu Hotel. It was also attended by member of the KSB, CEOs of sugar mills, top manager of the out-growers companies from eight existing sugar factories, transporters, Treasury representatives and the representatives of the corporation inspectorate.

He said the deficit in production is not imports from both COMESA and non-COMESA countries. The industry at a glance, he added, however, is significant to the nation’s economy.

Odera said the role of the KSB is regulatory, including facing the challenges, strategic direction, milestone the future, because the industry contributes 15 per cent to agricultural GDP and 15 per cent of the national GDP respectively. It provides employment to 500,000 workers along the entire value chain

“Economically, the industry reach and supports over 6 million Kenyans {which is approximately 16 per cent of the entire Kenyan population} depend directly or indirectly on the sugar sub-sector of the economy.”

In 2010, the number of raw cane growing farmers was estimated to be approximately 250,000delivering raw cane for processing to the 8 functioning mills, an average of 3,000 tons of cane per day. The area under cane plantation was about 154,198 hectares. The annual market value of sugar in 2009 was Kshs 6 billion up from Kshs 24.3 billion in 2004/2005.In this context, the industry saved the economy in an average of USD 325 million in foreign exchange.

The sugar industry contributes tax revenues to the Exchequer {VAT, corporate tax, personal income taxes and excise levies.

The industry contributed immensely towards infrastructure development through road construction, maintenance of bridges and social amenities such as education, health, sports and recreation facilities.

The industry, said Odera, also provides materials for other industries such as bio-gas {bagasse}, for power co-generation and molasses for wide range of industrial products including ethanol. It is intricately weaved into the rural economies of most area in Western and Nyanza and part of the Rift Valley Provinces.

Odera’s breakfast exchange with journalists was also attended by the CEOs of SONYSUGAR Paul Odolla, Chemelil Sugar Company Ltd Eng. Edwin Musebe, the co-receiver managers of Muhoroni Sugar Company and Miwani Sugar Mills Eng Martin Owiti and Mr Kipng’etich Bett.

Others in attendance were CEO of the out-growers companies from Chemelil, Muhoroni, West Kenya, Nzoia, Nandi, Miwani, Kibos, and SONYSUGAR. There were representative of the Treasury and the State Corporation Inspectorate Unit in the office of the president.

Other issues touched in the debate include privatization of the public owned sugar companies and its short and long term implications, employment of foreign workers in the industry, financial woes of the out-growers companies and their management, high costs of fuel and its implication in regards to the cost of sugar production, high cost of cane transportation.

Newsmen also queried about the excessive corruption that has been bedevilling the industry for a long time, and makes it referred to derogatorily as the “milking cows”, irregular harvesting of mature cane and many other myriad of problems.

The Acting KSB CEO explained that the production of sugar in the country has achieved 39 per cent of the growth. However, over the last ten years for example the figures show that 377,438 tons in 2001 to 523,052 tons in 2010, representing 23 per cent growth.

The KSB, said Odera is only a regulatory body of the country’s sugar industry. It was established by an Act if Parliament on 1st April 2002 under the Sugar Act of 2001. The board’s mandate is to regulate, develop and promote the Kenya sugar industry. It has a vision to be the best regulator of a world class multi-product sugar cane industry. It aims at facilitating a multi-product sugar cane industry that is efficient, diversified and globally competitive.

The KSB other mandate is to develop the industry through the internally generated funds under the Sugar Development Fund {SDF} with which it uses for funding the research, extension activities through the industry’s research wing {KESREF}. The KSB is also involved in sugar cane development {direct to individual farmers or through the out-grower institutions, infrastructure development and factory rehabilitation programs.

The regulatory body is financed through levy which is charged at 4 per cent of value of both locally manufactured and imported sugar. The Kenya Revenue Authority {KRA} collects the levy on behalf of the JKSB. This is shared out as follows; Development of infrastructure 0.29 per cent, factory rehabilitation 0.71 per cent, research 0.94 per cent, and the administration at 1.40 per cent brings u the total at 4 per cent.

The board’s other duties are that, being the link between the government and the industry, it lobbies fr favorable marketing conditions for the industry. The bard’s other responsibilities include that of ensuring up-coming sugar mills, licensing of importers and exporters, industry project approval and implementation. And also to ensure that the industry adheres to acceptable production and environmental standards, negotiating and ensuring compliance with sugar cane prices.

The industry is also faces other serious challenges, which include high cost of inputs, high taxation regime, diminishing land sizes, over reliance on rain-fed canes production, poor state of infrastructure, low adoption of new technologies, inadequate capital and high debt portfolio.

Odera said the KSB aims at making strategic direction to enhance the industry’s competitiveness through efficient farming and making operations and streamlined corporate governance.

Kenya at the moment has eight functioning sugar factories, but more are coming up in Ndhiwa and one in Trans-Mara district and also the one proposed for the coast and the rehabilitated Ramis Sugar at the coast could boost the number to about 12 in the near future.


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