Mumias faces stiff rivalry as regulator lists 3 more millers
Harvesting sugarcane in Kanduyi, Bungoma. Licensing of three more millers will increase competition for the raw material in western Kenya. Photo/File
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Kenya’s largest miller’s officials declined to be named commenting on possible impact of the new factories that fall under the Mumias sugar belt.
Kenya Sugar Board (KSB), the industry regulator, confirmed registering the controversial Cherry Company from Mauritius, a subsidiary of West Kenya Company and Polysac Africa to establish plants in the zone.
Mumias Sugar contracts most farmers in Busia but delay in harvesting mature cane has seen growers divert crop to neighbouring factories causing friction between the miller and its rivals.
Three more sugar factories have been registered in Busia County in a move set to pile pressure on listed miller Mumias Sugar Company (MSC).
Kenya’s largest miller’s officials declined to be named commenting on possible impact of the new factories that fall under the Mumias sugar belt. Mumias Sugar is in a closed period ahead of the release of full-year financial results.
However, the officials confirmed that 20 per cent of its cane comes from Busia zone.
“We financed the cane development. For an integrated miller the 20 per cent is important,” said an official.
Kenya Sugar Board (KSB), the industry regulator, confirmed registering the controversial Cherry Company from Mauritius, a subsidiary of West Kenya Company and Polysac Africa to establish plants in the zone.
Mumias Sugar contracts most farmers in Busia but delay in harvesting mature cane has seen growers divert crop to neighbouring factories causing friction between the miller and its rivals.
Mumias Sugar accuses the factories of cane poaching in the zone where Busia Sugar was initially set to be established. It made a Sh1.1 billion half-year loss and has issued a full-year profit alert, meaning the profits will fall by at least one-fourth owing to irregular sugar imports and cane poaching.
But in an interview with the Business Daily, industry regulator Kenya Sugar Board (KSB) said that the move to register new millers could bring in competition and ensure efficiency by companies seeking to retain contracted farmers.
“Farmers will be the ultimate winners as factories will have to improve their services in order to attract new farmers while retaining the old ones,” said chief executive Rosemary M’kok.
She added that to avoid rivalry over sugarcane, only factories that meet all the requirements would be allowed to operate.
“We will not issue a licence to a factory that has no evidence of sufficient raw material,” said Ms M’kok on phone.
There are three stages involved before the factory is given a licence for milling. The first stage involves expression of interest, followed by registration and eventually a licence.
The process takes up to two years and Ms M’kok said this gives the board enough time to ascertain the suitability of the factories.
However, the due diligence by KSB has never stopped cane poaching and most of the established factories continue to operate in excess capacity even as the Common Market for Eastern and Southern Africa sugar floodgates near opening next March.
The sugar boss said KSB has come up with a system dubbed “cane synchrony model” to help the industry synchronise their cane development against the factory capacity and enable the millers to have enough cane to mill throughout the year.
Inefficiencies on the side of some milling factories, she says, is to blame for the poaching, noting that some factories take a longer time than required before harvesting cane.
“If the crop is ready for harvest and the factories take long to carry out the exercise, what will stop farmers from selling the cane to a rival company?” asked Ms M’kok.
She said that farmers have many obligations to meet, hence they cannot keep the crop on the farms for long if it is due for harvest and the contracting factory delays the process.
This comes at a time when the government has issued a stern warning to factories that are in the habit of poaching from contracted farmers.
Speaking to industry players last week in Nairobi, Agriculture Cabinet Secretary Felix Koskei urged millers to ensure they have enough cane and to desist from buying the produce from rival’s farms.
“It is a criminal act for millers to buy sugarcane that they have not invested in; this is a criminal act that the government will no longer condone,” said Mr Koskei.
