Agriculture Fisheries and Food Authority (AFFA) director-general Alfred Busolo. PHOTO | FILE
Sugar millers will pay cane farmers monthly for delays in harvesting their crop in a shift that will put pressure on the loss-making factories.
The agriculture regulator said millers will be expected to pay a monthly interest penalty — equivalent to the prevailing bank lending rate of 18 per cent —on the value of the crop after 24 months.
The average maturity period of sugar cane in Kenya is 18 months and the penalty will put further strain on the millers struggling to pay farmers for crop delivered.
Agriculture Fisheries and Food Authority (AFFA) director-general Alfred Busolo said the new penalty will start next month and is aimed at pushing millers to make timely payments to farmers from the sugar sold to homes and businesses.
“From July 1, any miller who delays in paying farmers will pay a penalty that will be determined by the value of the crop. If the cane is to be harvested at the 24th month and he pays on the 25th month, then the interest will start accruing on that month,” said Mr Busolo.
The millers will also sign contracts with farmers indicating the minimum price per tonne of cane to cushion growers from price fluctuations, Mr Busolo said.
Cane prices have been ranging between Sh4,200 and Sh3,000 for each tonne over the past four years.
Farmers have been complaining over the falling prices as rival African producers like Mauritius, Egypt and Zambia produce sugar cheaply. Critics have blamed high cost of production for the woes facing Kenya’s sugar industry that has factories with aging machinery prone to breakdowns.
Much of the sugar cane is provided by small-holder farmers relying on rain-fed plots as opposed to larger irrigated plantations that allow nations like Mauritius to produce cheaply.
The government has sought to protect the industry since 2003 by limiting imports. Critics reckon the restriction has fostered mismanagement and smuggling.
It has also delayed reforms such as privatisation and modernisation of an industry on which six million Kenyans depend.
Mumias Sugar, which accounts for 30 per cent of Kenyan production, posted a loss of Sh2.26 billion in the six months to December from a loss of Sh2.08 billion in a similar period a year ago.
“The new move will ensure that farmers receive their payments within the required time. This is a move towards the right direction and as manufacturers we are in support of it,” said Jaswant Rai, the chairman of the Kenya Sugar Manufacturers Association (Kesma).
“When millers sell sugar, they are supposed to set aside money for paying farmers and this is what Kesma has agreed on,” added Mr Rai, also the chairman of the Rai Group that own West Kenya Sugar.
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