How Kenya’s big sugar experiment turned sour, trapping farmers in poverty

For Martin Wakhu, growing sugarcane is like a life sentence— he has not been able to wean himself off this “thankless” and cashless cash-crop.

Mr Wakhu’s one roomed grass-thatched house is all he can show today after growing sugar cane for over eight years – having inherited the misery from his ageing parents.

Images of girls fetching cane as firewood, dilapidated road networks, abandoned cane fields and uneven production are the hallmarks of the penury in the sugar belt.

Like thousands of his age-mates, Mr Wakhu’s poverty shows the kind of economic havoc and helplessness that a new generation of sugarcane growers is inheriting by growing a cash crop that has zero returns – but which has surprisingly created multi-millionaires within the chain.

That smallholder sugarcane farming is an experiment that went wrong is the untold story of Western Kenya and Nyanza and which few technocrats and politicians want to admit.

As a result, the government has continued to pour billions of shillings into the sector – trapping more farmers in a poverty cycle while still hoping that a solution will soon be found.

“We completely got it wrong with our model of cane production,” says Prof Peter Anyang’ Nyong’o, an academic and politician who has studied the problems of smallholder agriculture.

The Business Daily returned to the sugar belt for a comprehensive look at the state of the sugar industry in the region— some 50 years after the late President Jomo Kenyatta’s government, with aid from bilateral donors, got hundreds of thousands of farmers in Western Kenya and Nyanza to grow cane under contract.

The government hoped the small scale schemes would give local peasant farmers a cash crop that could uplift them from incessant poverty.

But forty-something-year-old Wakhu is among thousands of second-generation small sugarcane farmers in the region who are still chasing the elusive benefits.

He is stuck with the crop which has been driving farmers here through an endless cycle of poverty – but which has turned sugar managers and merchants into instant millionaires.

When sugar settlement schemes were mooted in the 1960s and 70s, they were supposed to alleviate poverty in the region by turning the peasant farmers into stakeholders of the multi-billion sugar industry.

Instead, victims of this unending deprivation – brought about by years of waste and political ineptitude – pass the poverty baton to their children.

Farmers like Mr Wakhu are a sad reminder of a collapsed dream – a smallholder experiment that went wrong. With large-scale production all but gone, the voiceless small-scale producers have been left at the mercy of unorthodox policies and whistle-start-whistle-stop formulas.

“Honestly speaking, sugarcane is not a crop that I enjoy growing, but I have to because there is no alternative,” said Mr Wakhu during the interview at his farm.

Although experts warned of the dangers of starting a sugar industry based on out-grower farmers’ cane, technocrats at the ministry of Agriculture decided to go ahead because the experiment made political sense, according to secret documents.

READ: Sugar farmers to earn interest on delayed harvest

While other sugarcane growing countries retained the colonial era sugar plantations, Kenya went for the more politically-correct, more expensive, smallholder schemes as bureaucrats struggled to settle the landless and allow the peasant farmers to grow new cash crops.

It has now emerged from these secret letters from the ministry of Agriculture that consultants warned early enough that this model of cane production would not work.

“... It is not sufficient to merely produce the total quantity of cane required annually. It has to be grown, harvested and delivered with almost split second timing so that exactly the right amount of cane goes on arriving at the mill round the clock, day after day and week after week,” warned Commonwealth Development Corporation sugar farming consultant, Mr B.C.J. Warnes in a declassified letter dated August 5, 1971.

Mr Warnes was one of the tens of consultants who had arrived in Nairobi to advise the government on the future of the experiment with smallholder cane farming — which had not succeeded anywhere in a sugar scheme.

His worry was that it would be impossible to maintain the military-styled discipline that was required in sugarcane farming and that the government would have little say on how an outgrower tended his crop.

“The outgrower is an individual. He can’t be hired and fired even if it were politically acceptable to do so, which it is not. And yet the collective fortunes of the entire body of outgrowers, and the milling company itself, depend absolutely on the willingness and ability of each and every grower,” he wrote in a letter to senior officials at the ministry.

“High throughputs call for some very exact timing and co-ordination on the cane growing side.”

Whether this letter – or view - reached the Kenyatta cabinet is not clear, but 45 years later, farmers like Mr Wakhu remain trapped in this conundrum as factories are left with little or no cane.

Mumias, so far the largest miller in Kenya with about 66,000 registered outgrowers, is only doing 20 per cent of its total capacity as it struggles with a biting cane shortage.

Although the company produces approximately 50 per cent of the domestic sugar output in the country, it continues to run up losses booking a net loss of Sh1.58 billion in the six months to December 2015, up from Sh1.4 billion during a similar period in 2014. It also survives on government bailouts.

At that time when these sugar schemes were designed, secret documents indicate that government bureaucrats were privately feuding on how to organise farmers, whose smallholder plots were supposed to be modelled on large plantations in South Africa, Malawi, Uganda and Zambia.

Today, Kenya imports sugar from these nations – thanks to its heavy reliance on small-holder production and ageing factories.

According to the Sugar Directorate, Kenya currently produces sugar at Sh95, 000 per tonne on average, meaning the product is more expensive than its equivalent from Sudan, Egypt, Swaziland, Zambia, Malawi, Tanzania and Uganda. Malawi’s average production cost is Sh35, 000 per tonne.

During our visit, we saw how lack of timing, ageing factories and irregular plots had left the entire industry in the Western region in limbo. Neither the millers, nor the government officials seem to have ready answers to the chaos in the sector.

Cartels have mushroomed in the chain, taking advantage of the general collapse of the industry as pilfering and cane poaching continues unabated.

As a result, farmers keep on grappling with low economic returns, high costs of inputs, poor road infrastructure and delayed payments.

Rules that were set to ensure discipline, smooth processes and regular output from the smallholder 10-acre farms are no longer followed and extension services have been abandoned. Nobody seems to care.

“Why should I hire extension officers for over 100,000 farmers who have been growing sugarcane for years and they do not need any advice to do so,” Mumias Sugar Company chief executive officer Johnston Eroll said when we asked about the absence of extension officers in his area.

With no sense of discipline in the farms, the out-grower run schemes have become a free- for- all, at times left at the mercy of extortionist gangs who torch cane fields in order to get cutting contracts.

In Kisumu County, bribe money for these contracts is called chuth ber in the local Dholuo language, loosely translating into “money before hand” since the cash is demanded before harvesting.

This bribe, paid by the farmer, is a mandatory requirement during harvesting in Muhoroni, Chemelil and Miwani zones. It is often given to factory managers, contracted harvesters, loaders and transporters and farmers with mature cane are forced to pay up before their cane is harvested.

Chemelil was the first experiment on smallholder sugar production in Kenya and started operations in 1965. Records show that after only six years, officials knew it was a failure.

The proposed sugar co-operatives had failed to work and this triggered a war of words between Cabinet ministers Jeremiah Nyagah and Masinde Muliro in 1971.

Also, the early failure of sugar co-operatives in Chemelil made agricultural officials in Nairobi more cautious on how to organise farmers in the sugar belt. The co-operatives that were to be used in the chain of production were abandoned, leading to chaos from the start.

With the disorganisation in the fields, farmers lose either by oversupplying factories or undersupplying. The entry of sugar barons has not helped either.

“It is a complete mess and farmers have constantly found themselves between the two odds of oversupply and under supply. They lose either way because when there is undersupply, the factories do not make much and can’t pay them and when there is an oversupply, harvesting is not done in time and they are delivered when the cane have no value, sometimes they are harvested and left to dry losing weight and earning less,” says Prof Nyong’o who has a sugar plantation.

Institutions which had been set up as the link between farmers and the millers have collapsed. The once giant Mumias Outgrowers Company (Moco) collapsed in 2008, leaving the farmers with no voice at the factory level.

Moco was a result of a bitter war between the ministry of Co-operatives and that of Agriculture on the kind of institution required for the sugar sector.

Officials at the Treasury under Phillip Ndegwa favoured the establishment of a limited company owned by the government, the farmers and the factory.

They had support from Agriculture which was opposed to formation of co-operatives similar to those in the coffee sector. The proposed sugar co-operatives in Chemelil had failed to work.

At about the same time, Mumias was being mooted. In July 1972, the government decided that Mumias Outgrowers Company would be formed and owned by the government, the outgrowers and Mumias Sugar Company Limited.

“When Moco was there, it was a great way of communicating with the farmers. For me it was easy to pick up the phone and call the chairman and say, come and have a meeting with me because we have this and that problem. Now, if there is a problem, who do I call?” posed Mr Eroll.

Its work, like the Kenya Tea Development Authority, was to offer farmers inputs at subsidised rates and organise the cane harvesting and planting.

“It would not be difficult to get things right for a few hours or a few days,” Mr Warnes wrote but warned that to it would require “high level of discipline” which he thought would not be achievable in an outgrower-run scheme. “While discipline could be achieved at the commercial farm owned by the factory, this would not be the case at the individual plots.”

Today, this lack of timing has left all the sugar factories grappling with the problem of either lack of cane, spoilt cane or overgrown cane.

For instance Muhoroni, now in receivership, receives 90 per cent of its cane from smallholder farms which are always grappling with transport problems, overgrown and poor quality cane. The same story is repeated in Mumias, Chemelil, Sony, Nzoia and Miwani, which is also under receivership.

In 2014, these five premier factories produced 321,000 tonnes compared with Malawi’s sole sugar producer Illovo Sugar (Malawi) Ltd, formerly owned by Lonhro, whose two factories at Nchalo and Dwangwa produced 289,000 tonnes despite breakdowns.

Zambia’s single factory from its sugarcane estate in Nakambala produced 450,000 tonnes compared with Kenya’s 11 factories which produced 592,668 tonnes last year.

The figures are a good indicator of the economics of sugar production and how they favour larger farms. While Kenyan factories do not process refined sugar, both Zambia and Malawi are net exporters.

It now appears that this chaotic situation was foreseen as far back as 1971, even before farmers were enticed to grow cane.

“Without collective discipline, the cane supply will be sporadic: Either too little, resulting in idle time at the mill and therefore high production costs, or too much (where) the mill will not be able to handle it (leading to) cane spoils, high costs and recurring losses,” Mr Warnes had warned.

To deal with this problem, the expert suggested that an organisation be formed that can have “dictatorial” powers to enforce discipline on the more than 3,000 outgrowers, which he warned would be a “highly sophisticated, technical and political operation.”

But five decades later, despite growing sugarcane, both Nyanza and Western Kenya sugar belts have high levels of poverty that are above the national average.

“Currently, it is very hard for a farmer to use what he earns in carrying out any major development using proceeds from cane,” says a farmer Mary Busolo, disillusioned after receiving her statement from Nzoia Sugar Company, said, reflecting the woes of many other growers.