• The starting point for Kenya’s excessive cost is seeds.
• Farmers are still using low yield seeds, meaning that Kenya produces far less sugar per hectare than its competitors.
Kenya’s sugar industry has many natural advantages, all of which have been undermined by policy and public mismanagement leading to a slump in productivity.
As a result, when Comesa’s import protection ends next year, the industry will be immediately undercut by far cheaper imported sugar. The costs to Kenya will be huge.
Up to 250,000 farmers grow sugarcane. Almost six million Kenyans draw a livelihood from Kenyan sugar. The nation saves Sh40-Sh55 billion a year in import costs by using locally produced sugar. This is crucial as our trade deficit continues to grow and put pressure on the shilling value.
Yet to remedy the industry decline the government has drawn up new regulations that appear unjustified.
Comesa has warned there will be no further extensions in protecting domestic sugar production from imports, yet Kenyan sugar currently costs $870 (Sh90,530) a tonne to produce, compared with $350 (Sh36,420) in Malawi and $400 (Sh41,623) in Egypt.
There is, thus, no possibility of Kenyan sugar competing against imports without the cost of production falling dramatically. Production cost should be the regulations' priority.
Setting up a new department in the Sugar Directorate with the technical capacity, expertise and infrastructure to test seeds and approve seed growers will be costly and time consuming, and only replace what Kephis already does.
The starting point for Kenya’s excessive cost is seeds. Farmers are still using low yield seeds, meaning that Kenya produces far less sugar per hectare than its competitors.
The regulations should have encouraged entrepreneurs to produce any of the 14 new high yield seeds developed by the Sugar Research Institute and already released for commercial production. Likewise, delivering on the Crops Act’s commitment to extension services to get farmers to switch to better seeds would have lifted yields by up to 100 per cent.
Instead, the regulations put sugarcane seed production under the control of the Sugar Directorate, taking it away from the Kenya Plant Health Inspectorate Service, which handles the rest of the country’s seed licensing.
Setting up a new department in the Sugar Directorate with the technical capacity, expertise and infrastructure to test seeds and approve seed growers will be costly and time consuming, and only replace what Kephis already does.
Moreover, instead of fast-tracking additional licensing, the proposed rules promise a period of delayed seed licensing. Neither do they explain how this unorthodox new department will help in solving the sugarcane seed problem.
The next ‘dead hand’ is the mismanagement and inefficiency of mills. Kenya produces around 5.3 million tonnes of sugarcane a year, and has 16 sugar mills, while Egypt produces only 2.8 million tonnes, and has 14 mills.
Yet Egypt produces nearly five times the sugar that we do – 2.3 million tonnes, compared with our 0.5 million tonnes.
Yet, Kenya is now moving to zoning and introducing extraordinary new rules around mill investments. These include requiring investors to set up high-powered management teams up to two years before getting licences or going into operation. Also, investors must build sugar mills first, before finding out if they can be licensed.
That’s because its mills are newer, and crush better-quality sugarcane more efficiently.
The regulations introduce zoning, which means every farmer growing sugarcane is assigned just one mill they can sell to.
In Australia, the introduction of zoning damaged a once-thriving industry, delivering a constant average fall in sugarcane production of 2.6 per cent a year. When the country abandoned zoning, raw sugar production doubled in five years.
Other sugar-growing countries like Pakistan, India, and South Africa have all experienced the same.
Yet, Kenya is now moving to zoning and introducing extraordinary new rules around mill investments. These include requiring investors to set up high-powered management teams up to two years before getting licences or going into operation. Also, investors must build sugar mills first, before finding out if they can be licensed.
No investor will take such a risk, investing millions in the hope of a possible subsequent licence to operate.
The new regulations are also not legal. In addition to breaching the Constitution and multiple other laws, they never underwent an impact assessment, which is required as a matter of law in creating new regulations that affect large populations.
The Parliamentary Committee on Delegated Legislation is due to review this decision to ‘forget’ to carry out a cost-benefit analysis, or any comparative assessment of other policies.
And maybe there may be a new attempt yet by the government to introduce regulations to encourage the use of better seeds and greater mill investment, and make Kenyan sugar as good as the rest of Africa’s sugar.
Coordinator of the Sugar Campaign for Kenyan cane growers