Leading Mauritius miller, Omnicane, has an option to grow its stake in the Kwale integrated sugar project to 50 per cent, the company has said, signalling its chances of firming grip in the local sugar industry.
Omnicane currently holds a 25 per cent stake in Kwale International Sugar Company Limited (Kiscol) following a Sh1.7 billion ($20 million) acquisition deal that was sealed late last month as part of its international strategy to optimise value addition and expand production in Africa.
The management board said the company still has an opportunity to expand its holding in the Kiscol project that is planned for commissioning in early 2014.
“The company has an option to take a further 25 per cent one year after soft commissioning of the factory,” the board said in a statement.
“Shareholders of Omnicane Limited and the investing public will be kept informed of further developments.”
The factory under construction will have a capacity of 3,000 tonnes of cane- per- day will include a 30,000-ethanol production plant. The facility will also host an 18 megawatt power plant run on baggasse, a by-product of cane.
The Kwale project is expected to boost competition in the sugar industry where manufacturers continue to be bogged down by high production costs due to use of old technology.
Kenya currently has a total installed factory crushing capacity of 30,109 tonnes of cane- per- day.
Kiscol said that it would rely on its own nucleus estates as opposed to small-scale out-grower farmers for cane supplies, a situation that has worked against efficiency of local firms.
The entry of Kiscol in the market could help ease pressure for imports from traditional markets such as the Common Market for Eastern and Southern Africa (Comesa).
The company plans to sell 80 per cent of its products in the domestic market with rest being shipped out to outlets in Comesa and the international markets.
Kenyans consume about 750,000 tonnes of sugar a year, according to the Kenya Sugar Research Foundation, but the region’s biggest economy only produces about 500,000 tonnes a year.
Statistics by the Kenya Sugar Board showed that the country produced 495,000 tonnes of sugar last year, down from a revised output of 501,000 tonnes in 2011.
The regulator said the acreage under sugarcane grew 9.4 per cent to 190,315 hectares in 2012 compared with the previous year due to higher demand for cane resulting from increased competition by millers and high sugarcane prices.
“Sugarcane yields also increased from 63.4 tonnes of cane per hectare in 2011 to 65.85 tonnes of cane per hectare in 2012 due to better crop husbandry and the prevailing competitive market,” it said.
The regulator said Kenya was expected to produce 520,000 tonnes of sugar in 2013, buoyed by improved weather and harvests from crop that matured late last year.
“While 2012/13 is a cane deficit season 2013/14 is expected to be cane surplus with mill requirement of 6,898,500 tonnes against available cane of 7,870,309 tonnes. This is conditional upon young cane meant for the 2013/14 season not being harvested and crushed in 2012/13,” said the regulator.