Why our farmers should abandon sugarcane growing

Kenya’s troubled sugarcane farmer and his dwindling fortunes have become regular news items in the media these days.

I speak as an insider of this ailing industry, having tried my hand in the once-upon a time luxury of sugacane’s millions.

Contrary to the golden years gone by, growing sugarcane has more recently become an investment tragedy for thousands of farmers in the mainly Western Kenya producer belt.

Those who have been keenly following this industry in the past couple of decades will testify to the fact that the solution to its many problems does not lie in firing Mumias or Muhoroni managers.

Neither can the industry’s malaise be fixed by the government doing the political thing of doling out a few hundred millions whenever there is volatile pressure.

It would be wise for the minister to try out an independent scholarly research to establish why Kenyan millers carry such exaggerated production costs.

There are signs that a large fraction of this cost is ballooned and based on some dangerous guess work.

Aside from the speculation, the more sobering reality is that sugarcane growing should now be a no go zone for any one whose goal is to engage in a profitable economic undertaking.

In 2004, I was part of the Kenyan team charged with the organisation of a crucial African Caribbean and Pacific (ACP) Ministerial Conference devoted to sugarcane growing.

That conference ran in Kisumu for about one week and it does remind me that a similar ministerial volley in Nairobi, 2014 was not the first time such consultations have been held within our borders.

For those of us who were privileged to participate in the Kisumu consultation, the clear message by the European Union (EU) was that the future for sugar lay, only in diversification.

To the best of my recollection, other than Mumias Sugar, none of the captains of industry (all who had been invited) were even willing to second guess those future alternatives.

Then as now, we were simply obsessed with the rather tired call for a longer “grace period” from our Comesa partners.

Ten years down the line, same old rut. We may have chosen to be completely oblivious of how the World Trade Organisation (WTO) has re-engineered the international trading regime and how in particular, the rich countries must now dictate how they conduct agricultural trade and even others.

The situation in Kenya is clearly aggravated by factors that most of the people investing in the bottomless pit that sugar industry has become should have accepted and moved on. 

The reality is that we are surrounded by countries whose per-capita-cost of producing sugar is much lower.

In a country that has every often set unenviable record on corrupt ways of doing business, there is no rocket science in knowing that cheap sugar from Sudan or Malawi (let alone Tanzania or Uganda) would always find its way to local markets.

Cartels

When you take into account the untouchable cartels, it sure is a miracle to expect the more expensive Kenyan millers to survive.

In international trade terms, this practice by cartels is more accurately called, “dumping”. And whereas the WTO does not expressly prohibit dumping, it is expected that governments should deal with it by imposing appropriate Counter-Veiling Duty (CVD).

It is the only legitimate way to “protect” a local market and the impoverished farmer.

The reality however is that Kenya’s sugar cartels are untouchable and any minister who tried lowering production costs for millers has almost always failed.

In so far as sugarcane growing is concerned, the EU Commissioner’s message to the ACP collective was simply that EU would no longer extend preferential treatment. 

But just like their East African Community counterparts, most delegates and ministers from the Caribbean and the Pacific did not like this message of doom. 

To their credit, countries like Fiji moved on, to use this convoluted Kenyan parlance, and have since diversified into garments and tourism—amongst others —just to escape the monopolistic sway of sugar.

For the avoidance of doubt, that 2004 message is what has metamorphosed into the Economic Partnerships Agreement (the EPAs) pitting the East African block against the EU. 

The obvious problem is that although we may have on paper an East African Common Market Protocol, the reality is that not every country is playing with all its cards on the table. 

The WTO sense, however, tells us that Africa may only have a chance if it grows larger trading blocs; but this is another story altogether. 

What is inescapable is the fact that the General System of Preferences cannot last forever, because, to put it simplistically, it contradicts the very first tenet of world trade — the Most Favoured Nation status whose basis is to equalise trading across the board.

For Kenya specifically, sugarcane was simply not going to wash for the reason that our sugar is somewhat the most expensive to produce in the region; and even beyond.

This leaves us with only two sensible options; to forget cane growing completely (after all, it is not a particularly healthy product!) and import everything we need for consumption.

The money (such as the Sh500 million) thrown earlier this year at Mumias; or Sh400 million for Muhoroni...etc, must in turn, be used to support other growth sectors in those regions.

It bears repeating, that there is no sense in flogging dead horses and my case is that farmers in Muhoroni, Nzoia, Awendo, Mumias, Bungoma and others must realise that sugarcane is not everything. 

The fertile grasslands of our sugar belt can readily support other economic endeavours; perhaps more beneficial to the country and to the farmers alike.

Dr Outa is a former Information and Communications Advisor in the then Ministry of Trade.