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VAS

What cane farmers need are incentives

OPINION
By Kizito Namulanda | May 18th 2016

The story of sweet bitter sugar cane farming has been a long and winding one for the farmers in Western Kenya and Nyanza. Lack of efficiency has piled misery on farmers leaving many poverty stricken.

In order to make things sweeter, the Government last year approved the sale of 75 per cent stakes in five sugar firms. These are Nzoia, South Nyanza (Sony), Chemelil, Muhoroni and Miwani.

The Commission of Privatisation which is leading this process announced that the plan was to sell 51 per cent to a strategic investor, with 24 per cent being set aside for farmers and employees of these firms.

The proceeds from the process are to be used to rehabilitate and modernise the firms in order for them to compete favourably with products from the Common Market for Eastern and Southern Africa (Comesa), once the import limits are lifted in the near future.

The Government while retaining 25 per cent shares, announced plans to offload it at a later stage through Initial Public Offering (IPO).

Whereas from the face value these plans look impressive, further scrutiny raises pertinent issues that need urgent attention. Unfortunately, no one from the Government seems interested, and so are the political leaders from the sugar belt.

So what are these issues? One, whereas it’s well appreciated that a certain shareholding percentage has been set aside for farmers, there are serious concerns as to whether this stake will end up in farmers hands as intended.

The definition of a farmer who qualifies for the stake has been left open, such that anybody who is registered as a farmer will qualify.

It is common knowledge the suffering that many farmers have undergone over years resulted in despair. While some farmers decided to venture into private farming so as to have freedom to sell their cane to whoever will offer better and quick pay, others decided to lease out their farms to outsiders.

The question then is; does this category fit the definition of farmers for whom 24 percent shareholding has been set aside? As I understand, the answer is no.

The only recognised farmer in this case is one who is registered with the sugar milling firms. The farmers have a right to expect that the Government must put in place mechanisms to ensure their stake is not grabbed by imposters. Do we know how many ghost farmers could be lining up to grab the farmers’ stake?

Two, it appears like the structure that has been laid down to allow farmers acquire their stake is meant to frustrate rather than aid farmers.

It is planned that farmers must take up the 24 per cent stake set aside for them within three years after which they will be forced to buy at market price. Should they still fail to do so, then the stake will be open for grabs by any other investors.

This might make a lot of sense in business terms, but put in the farmers contest, it raises one big question. How does the Government expect poor farmers who have been unable to take their stake in three years be able to do so at a higher price (market price)? Won’t the Government be technically putting this stake beyond the farmers?

It would make a lot of sense for the Government to give more incentives to farmers to pick up this stake. Giving a six year window for instance would make a lot of sense because farmers who will have planted cane will be allowed to harvest all the three ratoons before fresh plant.

This would then give farmers money to take up their stake in the firms. There could even be an arrangement where a certain percentage of their cane proceeds and what is owed to them by the firms is retained for this purpose.

Finally, the criteria for choosing the strategic investor who takes up the 51 per cent controlling stake needs to be water tight.

In the Expression of Interest (EOI) advert that was put up in the local dailies in March this year, greater emphasis seemed to have been placed on years of experience as opposed to benchmarking on best practice.

The Government has to bring in investors with proven experience in efficiency rather than plain years of experience. If this is not addressed, there are loopholes that could easily see people without capacity take over these firms and continue impoverishing the people of Western and Nyanza. 

Such people would only have to buy the firms and sit as Government uses the same funds to modernise and rehabilitate the very firms they have bought as is planned.

Or could this be a silent plan by some people in some quarters?

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