Cartels. High costs of production. Financial constraints, thus millers’ bad current ratios of as low as 0.03. Perennially unpaid dues. The unspectacular collapse of the Kenya sugar industry reads like a horrific script.
In 1980, Kenya became sugar self-sufficient. But by 2018, Kenya’s domestic sugar production could only satisfy just over half of the country’s consumption needs. Towns such as Kimilili, Ramisi, Nzoia and Mumias, which were supported by sugar farming, are now pale shadows of their former selves.
Where the rains started to beat
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To try to understand what went wrong with the sugar industry, President Uhuru Kenyatta formed a task force that compiled a report, which they submitted in early 2020.
The task force reported that in 2018, local sugar mills produced 491,097 tonnes, 57 per cent of the domestic consumption that by 2020, stood at 850,000 tonnes.
Desperate farmers have ditched sugarcane farming as their standards of living deteriorate. Where did the rain start beating us?
The cost of production of a tonne of sugar in Kenya, the report showed, is $800 (Sh80,000). This dwarfs the cost of production in many other countries in the region: Madagascar at $543.92 (Sh54,400) Malawi at $540.93 (Sh54,093), Zambia at $580.47 (Sh58,047) and, closer home, Uganda at $670.01 (Sh67,000).
Unlevelled playing field
Sugar smuggled into the Kenyan market, together with ‘dumping’ by Common Markets for Eastern and Southern Africa (Comesa) partners, means that Kenya’s product, priced higher due to higher production costs, is unable to compete in the market.
Lack of value addition
Kenya Association of Manufacturing CEO Phyllis Wakiaga in 2020, decried the little, or lack of, value addition to our products. This low-value addition also hurts the sugar industry, even in the pricing of by-products of sugarcane milling.
A lack of adequate research has also greatly hampered sugar production. The 2016 degazettement of the Sugar Development Fund (SDF), which had been running since 1982, hampered research in the industry. Best practices in the sector are vastly dependent on research and subsequent innovation.
Tax hurting millers and farmers
Further, sugar attracts a 16 per cent Value Added Tax, on top of which a similar rate was added as transportation tax. Millers are struggling to make profits and as they struggle, so do farmers.
Delayed payments have also led to farmers disposing of their produce to unscrupulous millers who pay promptly at unfairly low prices. Kenya National Bureau of Statistics (KNBS), in the 2020 Economic Survey, showed that earnings from sugarcane decreased by 16.6 per cent from Sh21.0 billion in 2018 to Sh17.6 billion in 2019.
“The price paid to farmers for sugarcane decreased by 4.3 per cent to Sh3,816 per tonne, in 2019. The decline was partly attributable to stiff competition from cheap sugar imports accumulated from 2017. However, the price decrease is in tandem with the decreasing ex-factory sugar prices which sugar price is the only variable in calculating cane price,” read the survey.
Tractors queue at Sukari industry waiting to be offloaded on July 21, 2021. [Caleb Kingwara, Standard]
Impact of Mumias closure
The area under cane production decreased by 2.5 per cent from 202.4 thousand hectares in 2018 to 197.3 thousand hectares in 2019.
“The decrease was largely attributed to the closure of Mumias Sugar Factory in early 2018. Area harvested also decreased from 73.1 thousand hectares in 2018 to 71.9 thousand hectares in 2019 mainly due to the lengthy closure of Kwale Sugar Company, and Mumias Sugar Factory,” KNBS said. Consequently, total cane production decreased by 12.5 per cent from 5.3 million tonnes in 2018 to 4.6 million tonnes in 2019, due to low cane supply.
An average yield of 51 tonnes a hectare was the lowest of any year in the last five years.
Taskforce report
The implementation of the recommendations in the sugar taskforce report failed, however, as court cases stopped it, said Kakamega Governor Wycliffe Oparanya.
“It is a very serious thing here and we should ensure that we empower our people by stopping cartels terrorising farmers in terms of importing cheap sugar,” Migori Governor Okoth Obado said.
But though Kenya’s example is a sorry state, there are countries that seem to have gotten it right:
Brazil: The sugar sector success story
As Kenya suffers, Brazil, the world’s biggest sugar exporter, is thriving. According to Raboresearch, Brazil’s sugar exports in 2020 reached 30.9 million metric tonnes, a new record for the country. It was an increase of 70 per cent on 2019 exports.
The Brazilian Confederation of Agriculture and Livestock (CNA), an employers’ organization that represents over two million small, medium and large-scale farmers engaged in various areas of agriculture and livestock, in 2018 reported that Brazil, as the world’s top producer and exporter of sugarcane, supplied 50 per cent of the world’s sugar, producing 654.8 million tonnes of sugarcane, 41.25 million tonnes of processed sugar and 29.7 billion litres of ethanol annually.
The proportion of Brazilian land that is dedicated to sugarcane production, however, is just one per cent (8.66m ha) of the country’s total land area.
Smallholder farmers run the industry in this country.
“Sugarcane production in Brazil is a key sector from a social and developmental perspective. Around 40 per cent of the sugarcane processed by Brazilian mills are supplied by some 76,000 independent farmers, in turn supporting hundreds of thousands of people,” CNA wrote.
With the National Rural Learning Service (SENAR), an institution that provides training programmes, social promotion and technical assistance to the rural areas, which joins the CNA to form the CNA system, CNA says the Brazilian policy also helps Sugarcane Act as a driver for social development.
Right policies and value addition
The underprivileged farmers are given a priority.
“For example, one piece of legislation stipulates that sugar exports from Brazil to Europe be sourced in the northeast region of Brazil, one of the most developmentally challenged areas of the country,” says CAN.
Sugarcane is used to make cachac?a, one of the most consumed distilled spirits in the world and produced exclusively in Brazil. Cachac?a is made by fermenting sugarcane juice by over 1,000 distilleries all over Brazil, according to the employees’ organisation.
More than 40,000 smallholder farmers across the country cultivate sugarcane only for the production of cachaça. Much like wine, the variety of flavours and aromas of each cachac?a reflects the characteristics of the region it was produced. This is due to the freshness and flavours of the locally grown sugarcane or to the local variety of wood used for the casks where cachac?a ages.
Unlike in Kenya, sugarcane is mostly cultivated for industrial use in Brazil. And for making the most famous distilled alcoholic beverage in the country, it means that there is always a good market for the crop.
Renewable source of energy
Sugarcane has also come to the fore as a highly sustainable renewable source of energy that aids in the fight against climate change. Brazilian sugarcane ethanol makes up 18 per cent of the country’s renewable energy output, CNA says. It has over 70 per cent fewer carbon dioxide emissions than petrol.
“Thanks to sugarcane ethanol, Brazil has cut 40 per cent of its petrol consumption for road transportation. In 13 years this led to a carbon dioxide-equivalent emissions saving of 370m tonnes in Brazil’s flex-fuel fleet alone. That’s an average saving of 28.5m tonnes of carbon dioxide per year. Sugarcane is also critical in reducing dependence on petroleum-based plastics,” says CNA.
Water conservation
The Brazilians have also found ways of farming that ensure optimisation of water and land available.
Bevap Bioenergia, a company that produces ethanol, sugar and electricity cogeneration in Brazil, approached Netafim, an Israeli global leader in precision agriculture and sustainable farming, to help expand its cane energy production.
“Working within specific water and land resource constraints, Netafim designed and implemented a fully automated growing solution that allowed Bevap to maximise vertical cane yields while achieving 100 per cent water efficiency and land utilisation,” Netafim says.
“Subsurface drip irrigation goes beneath the soil to deliver water and nutrients straight to the root zone of each plant, boosting yields, elevating sucrose content, extending ratoon life and lowering operational costs.”
Kenya can borrow a few lessons from that Brazilian story.
Tanzania case study
In Tanzania, sugar production is expected to rise by about 33 per cent in four years following the approval of six new sugarcane varieties, according to The Citizen.
The country currently produces about 470,000 tonnes of sugar annually, but the government is optimistic that production will increase to 700,000 tonnes by the 2024/25 farming season after the new varieties are ready for harvesting.
Cane nurseries
African Wildlife Foundation, which partnered with Morogoro-based Kilombero Sugar Company, says that the establishment of cane nurseries has also helped in increasing productivity.
“To boost the productivity of the region’s sugarcane outgrowers, one of the first steps was to establish more cane nurseries close to their farms — located, in many cases, too far away for farmers to transport seed canes from Kilombero Sugar Company’s plantations,” says the AWF.
“This allowed the multiplication of seed cane production by easing access and reducing transport costs. The programme has distributed 8,010 tonnes of treated seeds to 735 farmers since 2016.”
The seed is considered a vital tool in the climate-centered transformation of farming in southern Tanzania, where conditions are not favourable for farming. The seed is drought-tolerant and a short-seasoned variety best suited to mitigate weather and climate changes. These seeds, AWF says, deliver better yields with almost double the sucrose content.
“Cane farmers who received the 8,010 tonnes of clean seeds have increased yields from 44 to 75 tonnes per hectare — a 70 per cent productivity increase. Their income has risen from TZS 4, 224,000 (Sh197, 083) to TZS 7,200,000 (Sh335,937) per hectare with the same production cost of TZS 3,900,000 (Sh181,966).”
This adoption of climate-smart agriculture and other sustainable agriculture best practices has ensured that Tanzania continues to produce sufficient sugarcane.
The Land Portal reported that agricultural business models which utilize partnerships between plantations and out-growers remain more successful than single large-scale investments in land or plantations.
“The sugarcane production model used by the Kilombero Sugar Company Limited (KSCL) in Kilombero District, Tanzania, provides an example of some elements of inclusive business models and their challenges,’ noted The Land Portal.
“KSCL has been partnering with sugarcane smallholder farmers to produce sugarcane that is processed, marketed and distributed by the miller (KSCL). The partnership is based on a Cane Supply Agreement (CSA) which is signed between the company and the farmers’ associations every three years and may be amended every harvesting season if the need arises. Individual out-growers cannot sign contracts with the company.”
The CSA spells out the division of proceeds, requiring that the company pays the out-grower for the sugarcane delivered to the company on the 15th day of the following month.
For the year 2013/14, out-growers earned $35.6 per tonne, before adjustments for sucrose levels and actual sales. Based on these adjustments, out-growers are paid less if the sucrose level of their cane is too low; and all growers are paid based on final sales. Payment is done on the ratio of 57 per cent to 43 per cent of the profits for out-growers and the company, respectively.
“The out-growers can participate in the sugarcane production business with as little as one acre of land. Since each farmer has full control of his or her land, he or she is still free to lease out such land or turn it to the production of other crops such as rice or maize – all suitable in the area, although their production is now affected by birds nesting in sugarcane fields,” notes The Land Portal.
KSCL was the largest miller in Tanzania in 2014 when The Land Portal did this report; it ran two irrigated estates with a total 8,022 hectares and two factories.
It bought sugarcane from over 8,000 registered out growers who owned individual sugarcane farms amounting to 11,900 hectares.
“Currently, out-growers supply 43 per cent of the total sugarcane processed by the company annually. In 2013/14 the company produced 116,495 tonnes of sugar, about 40 per cent of the total sugar produced in the country. The company, throughout growers’ associations, has managed to mobilise a large number of out-growers to put their farmland into sugarcane growing fields, and attracted some donor support to finance the maintenance of both the estate and out growers’ infrastructure,” wrote The Land Portal, curators and disseminators of land governance information.
