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State should help cane farmers own sugar millers

BUSINESS
By Emmanuel Wangwe | May 24th 2015 | 3 min read
By Emmanuel Wangwe | May 24th 2015
BUSINESS

A majority of cane farmers in Western Kenya still recall with nostalgia the once powerful Mumias Outgrowers Company (MOCO) that used to ably represent their interests.

Formed in 1998, MOCO ensured sugarcane producers got farm inputs on time and were paid for their produce. The sugar millers could not dictate their terms on farmers because MOCO was in control. However, towards the beginning of the 2000s, MOCO was systematically weakened and farmers began suffering.

Now, as the Government begins to offload its shares in all the sugar millers, farmers should form strong groups and buy into these public entities. This is because when farmers have a direct ownership of the millers, they will be able to deal with incompetent management and corrupt managers that have brought the millers to their knees.

Strategic investor

Cane farmers have suffered for many years due to incompetent and corrupt individuals heading the sugar millers. The managers were only answerable to the Government and not directly to the cane producers. They could therefore afford even to disrespect farmers by delaying their pay or paying them peanuts.

I propose that the Privatisation Commission help well-structured cane farmers’ organisations buy substantial share holdings in the seven millers. The State-owned millers to be privatised include Nzoia Sugar Company, South Nyanza Sugar Company, Chemilil Sugar, Muhoroni Sugar Company and Miwani Sugar Company (both in receivership).

The privatisation strategy involves sale of new shares comprising 51 per cent shareholding of each of the sugar firms to a strategic investor. The proceeds of the sale will fund rehabilitation and modernisation needs of the sugar firms. There will be sale of 24 per cent of the remaining shares to outgrowers and employees through investment trusts to be formed for that purpose.

The Government will retain 25 per cent stake in the sugar millers which it may decide to sell later through an Initial Public Offer (IPO) or any other method. In this future sale, six per cent shareholding will be reserved for farmers depending on their ability and needs of the factory.

Empowerment

The sugar millers have the potential to turn around the fortunes of long suffering cane producers in Western Kenya. Unity of purpose and good will from political, religious and business leaders will be greatly needed. The economic impact from the near collapse of the sugar sector has been adverse in Western.

Farmers, who used to educate and bring up their families on cane farming alone, are a disillusioned lot today. Helping them own and participate actively in running of the sugar millers will change their lives drastically.

This is also in light of the competition about to come up in the sector when the Comesa safeguards lapse in about two years. The sugar imports from the Comesa countries will give our sugar millers a run for their money and those found weak will be forced to close shop.

As leaders from Western, we should always work towards economic empowerment of our people and the sugar sector is one of the most important. Economically empowered farmers will help grow the region and address challenges such as youth unemployment and abject poverty.

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