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Ideas & Debate

Why the State sugar mills leasing plan is raw deal for farmers

A tractor transporting sugarcane
A tractor transporting sugarcane. FILE PHOTO | NMG 

Farmers, their representatives as well as local politicians are being intimidated to support plans to lease out State-owned sugar companies. As a stakeholder, I am opposed to this plan for various reasons.

Most the shortlisted bidders are local private millers who are at the heart of the current problems bedevilling the sugar industry and killing the public millers.

Some of these bidding companies have been long-term contractors supplying second-hand and outdated equipment to the public millers at exaggerated prices.

This is the common tactic they employ to prompt frequent breakdowns and poor quality in production. Additionally, some of these firms eyeing takeover of the State-owned millers have been behind destructive poaching of cane from nucleus estates owned by the public sugar companies.

The planned leases are part of a willy scheme aimed at denying the public millers much-needed raw materials from their own contracted farmers.

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The private millers bidding to take control of public millers under the leasing programme are also part and parcel of the alliances that engage in routine annual importation of cheap substandard sugar in large amounts.

The intention is to render the publicly owned millers without any local market for their products and to ruin their cash flows and make it impossible for them to pay farmers on time.

Indeed, the local private millers now itching to take control of the publicly owned entities have over the years perfected the art of regulatory capture.

At every turn, and through the influences of friends in high places — they make sure that any regulation that is introduced must support their nefarious activities against public millers.

For example, when an investor sets up a sugar mill without a nucleus estate, how would the mill access raw materials for its production other than by poaching from public millers?

Why were all the private-owned mills positioned next door to public ones — breaking the old tradition of spacing out sugar mills to avoid unfair competition and cane poaching? Was this deliberate to lay the foundation for some selfish agenda?

Looking at the current list of firms which have been shortlisted to take over the State-owned millers it is clear that some of them will become overnight monopolies or duopolies because of cross-ownership and control of multiple milling companies in sugar growing zones.

I strongly believe that this is a plot to deny farmers the benefits of an efficiently functioning market for cane. Once established, the monopoly/duopoly within a specific geographical area will determine the price on a take or leave it basis to the farmers. It is already happening.

CAK INTERVENTION

The Competition Authority of Kenya (CAK) should do its work and order an immediate stop to the leasing scheme.

When you look at it closely, the real objective of the leasing scheme is to transfer control of the nucleus estates of the public millers to the shortlisted bidders who will overnight have free cane to deliver to their private mills for crushing. They will keep the factories closed for months while pretending that the factories are under repair.

As the so-called upgrades are going the mature cane currently sitting on the nucleus of publicly owned companies will be crushed next door — allowing the merchants to earn huge margins for their own factories.

I see a scheme whereby the contrived upgrade and factory rehabilitation will be extended for as long as there will still be mature cane in the nucleus estates to transfer to the private mills for crushing.

It does not surprise that despite the fact that the procurement process is still ongoing one politically connected player who appears to be confident that he will take control of one of the publicly owned mills is already repairing a feeder road linking his private mill to the nucleus of the neighbouring publicly owned mill.

The scheme would then progress as follows: politically connected individuals will be given long-term sub-leases of the nucleus estate free of charge to grow cane.

The fake modernisation will drag on and on without completion in sight. Eventually, the nucleus estate will be transferred absolutely sub-lessees to “compensate for the incomplete modernisation’. Robbery is being planned 25 years in advance!

Mr Omondi is a former chief of staff in the defunct Office of the Prime Minister

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