Cane shortage exposes Kenya to Comesa rivals

Cane shortage is hampering the operations of the sugar industry as millers struggle to keep machines roaring at full capacity without the raw material.

Key players like Mumias and Butali in the Western sugar zone, Sukari, Trans Mara, Kibos and Muhoroni in Nyanza Sugar Zone are all struggling with difficulties linked to raw material shortage.

Miwani collapsed in 2002 and Chemelil Sugar is closed for maintenance after being loaned Sh450 million by the Kenya Sugar Board last year.

Privatised millers in the upper Western region covering Busia include West Kenya, Polysak and Cherry Sugar.

Nyando, South Nyanza and Western are the main cane growing area, complemented by Coast province around Kwale, but companies within the zones are bearing the brunt of cane shortage.

Kenya Union of Sugar Plantation and Allied Workers secretary-general Francis Wangara says cane shortage needs urgent attention before liberalisation planned for next year or the mills will become relics of inefficiency.

“Kenya might just be unfit for the liberalised market because today as Mumias Sugar fights cane poaching, Kibos has now stopped supplying its sugar to supermarkets,” Mr Wangara said.
Players blame their woes on shortage of cane that drives transporters and middlemen to buy cane from farmers contracted by rivals.

READ: Why sugar sector must be revamped

Mr Wangara said Kenyan sugar companies should stop relying only on rain fed cane, a trend that affects sucrose levels and puts millers at a disadvantage against their Comesa peers.

Investors who have prospects in setting up industries should supplement by setting a reliable base of sugar supply for a period of two years, he told Business Daily.

Only Miwani has a nucleus surrounded by farmers with large tracts of land which can be developed to supply six times more than what the firm needs for crushing.

Mumias Sugar is trying its hand in diversification through co-generation of power and selling of ethernal and bottled water.

READ: Mumias seeks new products to shield it from sugar imports

Those initiatives, however, may not take the company far in the face of fierce poaching and outright theft of cane especially in the Busia zone.

Mumias Sugar managing director Peter Kebati said the company suspended buying cane in the Busia Sugar Zone because middlemen were harvesting the company’s contracted crop and selling it back to them at a premium.

Besides competition for cane, the output is dwindling following erratic weather patterns and poor crop husbandry.

With annual sugar consumption exceeding production levels by more than 200,000 tonnes, low-cost producers such as Egypt within the Comesa market and Saudi Arabia are likely to overrun domestic producers in a free market.

Sugarcane production in Kenya is estimated to cost $570 (Sh48,450) per tonne annually compared to $240 (Sh20,400) per tonne in Egypt. Yet the two are expected to compete for shelf-space in the Comesa market once the safeguards are lifted in March 2014.

Despite companies starting to streamline systems, inadequate cane is hurting optimal production leading to frequent sugar shortages and steady increase in retail prices. These two factors alone could see consumers turn to imports in droves once the market is fully deregulated.

Statistics from the Kenya National Bureau of Statistics (KNBS) indicate that cane production in 2011 was 475,061 tonnes, a drop from the previous year’s 523, 470 tonnes.

Mumias Sugar has reported that its cane production fell from 235,812 tonnes in 2011 to 172,614 tonnes in 2012.

KNBS statistics also reflect a major increase in demand for sugar from households and manufacturers who bring in white refined sugar for making confectionaries and beverages. Refined sugar accounted for 63 per cent of commodity imports last year.

The sugar board data shows a rise in the imports from Uganda and Tanzania in what the board considers as dumping, another threat to domestic producers.

The board’s statistics show that in 2012, Uganda exported 30,299 tonnes of sugar to Kenya in the 11 months to November while a year before, only 73 tonnes were exported in a similar period.

In the same year, the board says Tanzania exported 504 tonnes of sugar to Kenya.

KSB chief executive officer Rosemary Mkok suspects that Tanzania and Uganda are declaring costs of production that are lower than the industry figures in those countries to bring in sugar to Kenya at lower prices.

“If that is the case, Kenya is losing a lot in revenue buying substandard products which might not have been manufactured from the dealer countries (Tanzania and Uganda),” Ms Mkok said.

KSB is investigating cane dumping but players say only efficient cane farming is key to sustainability.

The board plans to spend Sh2.3 billion funding farmers to expand cane production while the Kenya Sugar Research Foundation is releasing faster maturing cane varieties.

“We will be ready to aggressively compete come liberalisation of the market in 2014,” Mrs Mkok.