Why sugar sector must be revamped

In Summary
* A review of all new cases of development and licensing involving sugar milling companies in Western Kenya and the lake region are typical of investments devoid of proper studies and control by licensing authorities thus contributing to current cases of anarchy and arson besides theft of cane.

Your article on 28th December 2012 titled “This Decade-old sugar story should end” was a prescriptive dismissal of the stand taken by a parliamentary team on the proposed privatization of public sugar mills and is based on a misunderstanding of the impact and implications of current privatization efforts in the Kenyan sugar sector.

The Kenyan sugar industry in its current state is not viable and sustainable even with 100 per cent private equity ownership structure. Available evidence to support this contention is that all private millers are struggling and under performing due to structural and policy deficiencies within the Kenyan sugar sector.

The anarchy in the sector has largely been caused by uninformed licensing of new milling plants. The planned development of Kwale Sugar Company (Kiscol) in the Coast, is the appropriate model of how a new sugar cane milling plant should be developed.

In the case of Kiscol, one sees clearly that the road map and cycle time for developing a sustainable sugar milling operation takes close to four years from ground breaking in both sugarcane farms and factory.

A review of all new cases of development and licensing involving sugar milling companies in Western Kenya and the lake region are typical of investments devoid of proper studies and control by licensing authorities thus contributing to current cases of anarchy and arson besides theft of cane.

This situation has led to dwindling sugar cane supply, local sugar shortages and price hikes. All the new mills also engage in unfair labour practices. A report by Ernst & Young for the Kenyan government on the subject of privatisation of public owned mills indicated that without industry structural reforms, the Kenyan mills will not compete regionally and hence their recommendation that policy reforms precede any privatisation. This explains the position of the parliamentary committee.

In conclusion, I wish to state that for the industry to thrive in a private sector driven mode, it must give adequate support to sub industries supplying parts and components since in its current state, it is largely import oriented- importing all inputs, machinery and parts. The industry must develop local technical training institutions for its top personnel.

To achieve low-cost production status, the industry must embrace intensive research and development targeting effective farm production technologies, improved early maturity adaptable varieties, sugarcane yield and quality improvements, efficient manufacturing technologies, investment in technical training locally and exhaustive product diversification.

The writer is a retired civil servant.

source: businessdailyafrica