Team drafts radical measurers to revive ailing sugar industry

The committee was set up following a directive by President Uhuru Kenyatta to bail out the struggling public millers. [Photo, Standard]

A team to revive the sugar industry wants millers locked out from sugar importation and cane poaching banned as part of its radical proposals to revamp the ailing sector.

The Sugar Taskforce has also proposed privatisation of state-owed millers by selling out 51 per cent stake to private investors. The team wants the process to commence by June this year.

In a raft of recommendations, the team that started its sittings last year December also proposes prompt payment to farmers, and has recommended enforcement of provisions that requires millers to make payment within a week of cane delivery.

Consequently, millers that will not make payments within the set period would be liable to an interest to be calculated at prevailing market rate.

Late payments for canes delivery, smuggling of contraband sugar, cane poaching, debts are some of the key issues that have continued to sink the sector, with farmers complaining that they cannot continue with their farming activities when factories are holding their money.

The team further wants full automation of weighbridges to enhance transparency on cane tonnage to end claims of manipulation of the quantity of cane delivered the factories.

The proposals obtained by The Standard are contained in a report by the team co-chaired by Agriculture Cabinet Secretary Mwangi Kiunjri and Kakamega Governor Wycliffe Oparanya.

The committee was set up following a directive by President Uhuru Kenyatta to bail out the struggling public millers.

“Millers should not be licenced to import sugar. A strong regulatory framework that defines distinct roles of all players in the value chain and mitigates against conflict of interest,” reads part of the eight action pillars by the team.

The report also proposes a clearly defined guidelines and regulations for sugar imports and export to curb excessive importation and ensure a stable market.

The team also wants enhanced inter-agency surveillance to curb sugar smuggling as well as develop a marketing framework which ensures access of local sugar in the entire country at competitive prices.

It wants millers to deal with cane development and let traders import the commodity under the control of state agencies.

The stakeholders argue that if millers were allowed to import, they will abandon cane growing and flood the market with cheap non-Comesa sugar.

It emerged during the contraband sugar investigations by MPs that private millers had imported cheap sugar worth billions of shillings, flooding the market for the locally produced sweetener.

The imported sugar are also sold at relatively cheap price thus edging out the locally produced ones at the shelves.

The team says all efforts should be put in promoting cane growing to ensure the country is self-sufficient in sugar production by 2021 on a cost-effective basis.

It further recommends that the national and county governments institute measures that support efficient sugarcane production systems by rationalization of taxes, provision of affordable credit and risk mitigation measures.

The team also want the State to review the taxation regime to create a tax friendly investment environment, including duty waivers on high end industry inputs such as fertilizer, diesel, farm implements, and plant and factory equipment.

It wants the collapsed giant miller – Mumias Sugar Company – to identify a private investor as part of a “comprehensive balance sheet restructuring.”

In the proposals, the team wants 51 per cent sold out to a private partner, 25 per cent retained by the government and 24 by farmers and employees trust.

“Procure a strategic partner through sale of 51 per cent shareholding in each of the public sector mills. The strategic partner to be identified through a competitive process from companies that demonstrate they have the required experience in operating sugar companies and the financial capacity,” reads the document.

It adds, “Implement the debt restructuring as approved by the National Assembly in 2013 as part of a comprehensive balance sheet restructuring. Convert the additional debt by the Government to the factories from July 2009 to equity.”

On cane poaching, the team has proposed that farmers have a contract with specific miller of their choice.

Poaching has been at the centre of fierce battle between private and public millers as the latter has always complained of losing billions of shillings spent in  supporting farmers only for the private millers to harvest the canes.

"Clusters of factories within a defined region(s) to facilitate synchrony in planning production and cane supplies. Farmers within defined region shall have a contract with an individual miller of their choice," proposes the report.

"Enforce farmer miller contracts to ensure cane harvesting at optimal age. Establish a stakeholders’ body, comprising representatives of key stakeholders, growers, millers, regulator, sugar research institution, the County and national Governments with presence in each of the regions/cluster for self-governance," it adds.