By WINSLEY MASESE
KENYA: Kenyans love sugar. To prove it, serve them with any beverage that lacks the ingredient.
The quizzing eyes around will communicate the glaring gap. This love has created a shortage of about 200,000 tonnes per year.
Current figures indicate that consumption stands at 800,000 tonnes per year. This is against production of about 600,000 tonnes. For decades however, the main source of this sugar has been Western Kenya and Nyanza sugar belts.
But rather than taste its sweetness, majority of the farmers have had bitter taste instead, thanks to sugar politics, inefficiency and a host of other factors.
To bridge the deficit, Trans Mara region, in Narok County has emerged as a key area that can boost the country’s production capacity. The region could relegate the Western and Nyanza as major cane belts.
The are is endowed with huge track and fertile land and has been billed as a key area than can be instrumental in sugar production in the country and help bridge the deficit. The cane matures faster in Trans Mara, taking between 11 to 14 months compared to between 18-24 months by Western and Nyanza belts.
With the high cost of maize production, a number of farmers in the region have shifted to sugar cane production.
Mr Samson Nairenge a cane farmer in Transmara told Weekend in Business that a number of farmers in the region have turned to sugar cane production.
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“Though it takes a long period to harvest, compared to maize, the cost of production is lower and the returns are promising,” he said.
Nairenge said that a sugar factory is less than 10km and with the promise of better yields, he reduced land under maize cultivation to grow cane by about 200 per cent.
Narok County Governor, Samuel Oletunai Kuntai recently announced that a Brazilian investor is set to invest about Sh2.1 billion in a sugar miller in Lolgorian, which will bring the total number of millers to three.
Last November, Indian investor Bajarambapu Group and Narok County signed an agreement for the construction of a sugar factory at Lolgorian town in Trans Mara at a cost of Sh10 billion. Deputy President William Ruto graced the ceremony. Trans Mara Sugar Company at Enoosaen has been in operation in the last four years and was the first to be established in the county.
Nancy Muthoka, acting head of productive division at the Kenya Institute for Public Policy Research and Analysis (Kippra) sees a huge potential in sugar production in Trans Mara, if only they set the right foundation.
One advantage, according to analysts the new entrants would seize on is that they would debt free since the current millers re debt ridden. Besides, they can take advantage of the new technology to improve on their production.
“Investors setting millers in the region can take advantage of improved technology and early maturing cane varieties to become competitive in the global scene,” she noted.With Comesa safeguards coming into effect next month, Kenyan sugar will face stiff competition and might be out of favour with imports.
The new comers, according to Muthoka will find a sector that is already developed and privy to the challenges bedeviling the sector, hence making it easier to avoid them.“The new millers will operate from a point of knowledge and avoid the pitfalls of other companies,” she argued.
Besides, they can use the new technology to generate electricity for use by the companies and reduce the high cost of energy. High energy costs, besides unfavourable production factors have blunted the competitive edge of local goods. In an economy where sugar hoarding is common and importation of contraband is well documented, Muthoka believes that the setting up of millers would be a relief. Caroline Kiragu, an investment analyst with Old Mutual said that though the development is positive the newcomers must get the basics right.
“The firms must get the right people, with qualifications to run the companies,” she urged.
Besides, she said that prospective investors and their partners have to involve the people to have a sense of ownership to eliminate any resistance.”
Former World Bank lead economist to Kenya, Wolfgang Fengler, noted that sugar prices in Kenya are more than double the international market price. Locally, he pointed out, a kilo of sugar costs Sh120; in the US and Europe it is about Sh60.
With more players in the market, this is likely to bring about stiff competition and eventually lower the prices. By reducing the price, there is improved efficiency in the sector.
As Comesa safeguards beckon, the newcomers can start on the right footing and play a key role in the country’s economic growth prospects as sugarcane production. Consequently, the shift offers fresh hope in the sector owing to its significant role in contributing to the country’s economy.
According to Fengler, Kenyan sugar fields produce an average of 60 tons of sugar cane per hectare. This is about half of the productivity in Zambia (113 tons) or Malawi (105 tons). Once the new cane varieties are adopted in this new region, it means that productivity can be enhanced.
With the shrinking plot sizes in parts of Western Kenya, analysts argue that Trans Mara offers an alternative. With new machines, the new millers can reduce production costs by at least 39 per cent to be in line with EAC partner states and Comesa sugar producing countries.
Some of the sugar factories currently use obsolete equipment that has upped production costs.
Kenya spends between $700 (Sh60, 600) to $800 (Sh69, 600) spent to produce one tonne of sugar. According to the Privatisation Commission of Kenya, it costs $300 (Sh26,100) to produce one tonne of sugar in Zimbabwe, $310 (Sh26,950) in Malawi, $340 (Sh29,500) in Swaziland and $340 in Sudan.
The cost of production in Brazil is said to be about $20 (Sh1,800) according to the recent World Bank report. The Kenyan sugarcane industry is a major employer and contributor to the national economy. Sugarcane is one of the most important crops in the economy alongside tea, coffee, horticulture and maize.
By far, the largest contribution of the sugarcane industry is its silent contribution to the fabric of communities and rural economies in the sugar belts. Besides the socio-economic contributions, the industry also provides raw materials for other industries such as bagasse for power co-generation and molasses for a wide range of industrial products including ethanol.
Molasses is also a key ingredient in the manufacturing of various industrial products such as beverages, confectionery and pharmaceuticals.
A past research by the Food and Agriculture Organisation shows that a 10 per cent growth in the agricultural sector leads to three per cent growth in a country’s GDP.