Bitter reality of neglected sugar industry amidst political pledges

President William Ruto, Speaker of the National Assembly Moses Wetangula and Bungoma Governor Ken Lusaka at Nzoia sugar company on August 28, 2023. [Benjamin Sakwa, Standard]

For years, the sugar sub-sector has been used as a campaign tool every electioneering period.

Successive governments, starting from the late President Mwai Kibaki, former President Uhuru Kenyatta, and now William Ruto, have promised to revive the sugar sector, which was once the top employer and contributed over 10 per cent to the country’s GDP.

Once in power, they forget their promises, except for last-minute bailouts before elections.

Sugar politics came to the fore in last year’s General Election with politicians from all sides promising locals prosperity, but it turned out to be empty rhetoric. For instance, on June 24, 2014, Uhuru visited Mumias Sugar and gave a bailout of Sh1 billion. In July 2017, he gave another Sh500 million, just days before elections.

This money was used for salaries and paying farmers’ debts. In total, he brought Sh4 billion to the sugar factory, a small fraction of what was needed.

In Uhuru’s second term, Mumias Sugar was placed under receivership by Kenya Commercial Bank. Ponangipalli Venkata Ramana Rao became the receiver manager in September 2019, as the sugar mill struggled.

The company’s private security left, and over 1,500 staff were declared redundant. The Capital Markets Authority then suspended the company from trading at the Nairobi Stock Exchange (NSC).

Efforts to revive the company have faced numerous court cases until President Ruto, during his regional tour, vowed to tackle sugar cartels.

“I have ordered those people (sugar cartels) to get out of Mumias and withdraw all cases they have filed against Mumias Sugar as we shall entertain no court case again,” said Ruto in Mumias West constituency where he launched the Mumias-Musanda road on Sunday.

He added, “You have three choices: leave Kenya, face jail, or go to heaven.”

Billionaire Jaswant Rai, owner of West Kenya Sugar Company, and brother Sarbjit Singh Rai of Uganda’s Sarrai Group have been fighting for control of Mumias Sugar.

Sarbjit managed the sugar mill about one year ago, but Rai contested the lease arrangement in court.

Ruto, however, insists he will not allow the Rai brothers to hinder efforts to revive the factory. “This is public property, and we will not allow individuals to grab property belonging to the people,” he said.

A June 4, 2021, report by Rao, the receiver manager, showed that Mumias Sugar had assets of Sh15.7 billion and liabilities of Sh30.1 billion.

“The net assets/owners’ equity stood at negative Sh14.4 billion, which implies that the company could not meet its short-term and long-term financial obligations and therefore insolvent,” reads part of the report presented to the Senate.

Nzoia Sugar is also on its knees. According to Ruto, the sugar sector’s debts exceed Sh117 billion, with Nzoia Sugar accounting for Sh53 billion.

“We already have a Bill in Parliament seeking to write off the debts and then we start the journey to recovery,” he said.

Ruto has promised a new Sh5 billion milling machine for Nzoia Sugar and another one for Mumias Sugar. Time will tell if he keeps his word.

It was around 2010 when the State-owned sugar mills ran into trouble. Salaries were delayed, employee allowances halted, and debts owed to farmers and suppliers grew.

Since then, tales of Western and Nyanza sugar factories’ rise and fall have become legendary.

They spark debates about abandoned mill towns, where structures now house monkeys and squirrels.

Mumias, Muhoroni, and Miwani are in receivership, while Nzoia, Chemilil, and Sony are on life support, awaiting final closure.

Miwani could not be leased as its land was auctioned in 2007 due to a debt from 1987 that had ballooned to over Sh1 billion.

“Cartels orchestrated the collapse of sugar factories by first killing outgrower companies that supplied cane. When outgrower companies collapsed, the sugar companies started going down,” said Gamaliel Anamanjia, the CEO of Mumias Outgrowers Company.

Mr Anamanjia said the sugar firms planned to get cane directly from farmers but did not pay them.

“No sugar company can operate without an outgrower company. The outgrower companies were destroyed by powerful forces so that they could sneak cheap sugar into the country for repackaging,” said Anamanjia.

Sugarcane farmer Jack Munialo said that sugar barons aimed to exploit isolated farmers and control sugarcane prices.

Mr Munialo, a cane farmer with Nzoia Outgrowers Company (Noco), said when the outgrower company and Nzoia Sugar used to work together, locals got jobs, farmers had money, and roads were built in the sugar belt.

“We were able to take our children to good schools but that’s a thing of the past. Its Noco that ensured Nzoia Sugar remained afloat and now it is struggling. Its previous managers and those of Noco are responsible for this mess,” he said.

According to Byron Ochieng, an economist from the University of Nairobi, “The sugar industry has a productivity problem. This is the reason despite reprieves Comesa gave the sugar millers, there is nothing to smile about. Even policymakers have stuck to the protectionist thinking that the industry was built on.”

Mr Ochieng said the problems bedeviling the sector range from low productivity, poverty, poor management, corruption and embezzlement of funds, and lack of resources to invest in irrigation and the latest technologies.

“All the State-owned sugar factories are insolvent and the government as well as stakeholders in the sugar sector have turned a blind eye on the issue for reasons best known by themselves,” he said. He went on: “Cane farming has the potential of creating employing in rural areas, but it does not generate the capacity needed for absorbing jobless people as an alternative economic activity.”

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