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Team proposes radical measures to revive ailing sugar industry

By Moses Nyamori | Feb 28th 2019 | 3 min read
Agriculture CS Mwangi Kiunjuri (right) addresses a press conference alongside Kakamega Governor Wickliffe Oparanya during the launch of sugar task force. [David Njaaga/Standard]

A team set up to revive the sugar industry wants millers barred from importing the commodity and a ban on cane poaching, as part of measures to revamp the ailing sector.

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

The committee, which was set up as a result of a directive by President Uhuru Kenyatta to bail out the struggling public millers, has come up with eight action pillars.

“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 the report.

The sugar task force has also proposed the privatisation of State-owed millers through the sale of a 51 per cent stake to private investors. The team wants the process to start by June this year.

The committee, which started its sittings in December last year, wants farmers to be paid promptly. It has also recommended the enforcement of provisions that require millers to make payments within a week of cane delivery.

Consequently, millers that do not make payments within the set period would be liable for interest charges to be calculated at the prevailing market rates.

Sugarcane farmers have long complained that they are often left to struggle, or even abandon their farms, yet the factories are holding their money.

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

Clear guidelines

The report proposes that there should be clearly defined guidelines and regulations for sugar imports and exports 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 to ensure local sugar is available in the entire country at competitive prices.

It wants millers to deal with cane development and let traders import the commodity under the close watch of State agencies.

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

A parliamentary probe into sugar imports last year revealed that private millers had imported cheap sugar worth billions of shillings and flooded the market, effectively hobbling the sale of the locally produced sweetener.

The team says more effort 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 to support efficient sugarcane production systems through rationalisation of taxes and provision of affordable credit and risk mitigation measures.

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

The committee also suggests that collapsed giant miller Mumias Sugar Company identify a private investor as part of a “comprehensive balance sheet restructuring".

In the proposals, the team wants 51 per cent of the miller sold to a private partner, 25 per cent retained by the Government, while 24 per cent should be held by farmers and employees in trust.

Strategic partner

“Procure a strategic partner through sale of 51 per cent shareholding in each of the public sector mills. The strategic partner is 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 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 wants farmers to have iron-clad contracts with millers of their choice. Public millers have protested that they spend millions of shillings to support sugarcane farmers, only for private millers to unfairly benefit from the harvest.

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