President exempts Kwale Sugar from land division order
Workers plant cane at a Kwale Sugar International plantation. The President has allowed Omnicare, a partner to Kwale Sugar, to subdivide part of its land. Photo/FILE
What you need to know:
The exemptions now pave way for the company to divide the land and stagger sugar production as the company readies its plant to start production by mid-next year.
The miller will use the 20,000-acre land to feed its plant with sugar cane as opposed to relying on small scale outgrower farmers, a situation that has worked against the efficiency of local sugar manufacturers.
The Kwale project is expected to boost competition in the sugar industry where processors have been bogged down by high production costs due to poor technology and old machinery.
President Kibaki has allowed Mauritian sugar manufacturer Omnicane to subdivide a 20,000-acre piece of land the miller acquired in Kwale, where land laws prohibit the division of parcels above 20 acres.
Only 80 of the 20,000 acres is on holdings of less than the 20-acre limit, which made it difficult for the miller to subdivide the land and stagger sugar cane production to ensure constant supply throughout the year.
This prompted Omnicane to seek presidential exemption weeks after Finance Minister Njeru Githae exempted it from paying stamp duty following the transfer of about 17,000 acres to Kwale Sugar, the promoters of the new plant.
The miller will use the 20,000-acre land to feed its plant with sugar cane as opposed to relying on small scale outgrower farmers, a situation that has worked against the efficiency of local sugar manufacturers.
The President is the only person empowered to offer exemption on provisions of the Land Control Act that bans sale, transfer and subdivision of agricultural land in controlled areas.
“I, Mwai Kibaki ... exempt the controlled transactions and such exemptions to take effect on the date indicated in the schedule below,” read part of the legal notice issued last week.
The exemptions now pave way for the company to divide the land and stagger sugar production as the company readies its plant to start production by mid-next year. This is expected to heighten competition in the market and help stabilise sugar prices.
Omnicane, which is listed in the Stock Exchange of Mauritius, said it would inject $200 million (Sh17.1 billion), making it one of the largest foreign direct investments in the industry in what could shake sector dominance by Mumias Sugar.
The planned factory, with a capacity of 3,600 tonnes of cane per day, will include a 30,000-ethanol production plant. The factory will also host an 18 Megawatt power plant to run on bagasse, a by-product of cane.
Kenya has an installed factory crushing capacity of 30,109 tonnes of cane per day.
The project is being funded 50 per cent by debt while equity from both foreign and local investors will make up the rest.
Kwale Sugar is a joint venture between Kwale International Sugar Company and Omnicane. The Mauritian firm owns a 20 per cent stake in the project and it has been brought on board as managing partners.
The company seeks to avoid dependence on outgrowers for sugar cane supplies, a situation that has worked against efficiency of local sugar manufacturers.
Small-scale farmers will, however, account for 25 per cent of its sugarcane needs with the remaining share coming from the 17,000 acres of land.
The government, which owned 85 per cent of the land, has exempted Kwale Sugar from paying stamp duty, normally two per cent of the transfer value.
The Kwale project is expected to boost competition in the sugar industry where processors have been bogged down by high production costs due to poor technology and old machinery.
Omnicane’s entry is expected to hand the project a major boost because of the firm’s immense experience in Mauritius, where the sugar industry is quite competitive due to high technology use in cane production and processing.
The country’s largest miller, Mumias Sugar, also plans a Sh24 billion integrated sugar project in Tana River District to cut its reliance on small scale farmers.
