How to revamp local sugar industry

The setting up of the earlier sugar factories such as Nzioa, Muhoroni, Sony and Mumias in the 1960s was driven by two main objectives: To help make the country more self-sufficient in sugar, and to create job opportunities in large swathes of Nyanza and Western provinces, where unemployment was high.

Today, more than 50 years later, neither objective has been achieved. Kenya still imports around a third of its needs, while vast areas, especially around the factories, are seas of poverty. It is estimated that over 5 million people are dependent, in one way or another, on the sugar industry, and many of them live in deprivation.

The main reason for the failure was that they were government-driven and controlled. In turn, they literally became victims of assorted political machinations, including patronage, nepotism and corruption.

Like many parastatals, they were pillaged and sucked dry of their productive qualities, and were kept alive with government bailouts.

Nevertheless, these entities remain decrepit and function way below capacity.

Even outdated productivity yardsticks were used. For example, cane was paid for by weight rather than by sucrose content. This meant that the same amount was paid for old cane as the younger, much sweeter cane.

Bad habits like zoning crept in, meaning, certain areas planted with cane became the preserve of certain factories, equating to modern-day serfdom.

Over the years, there have been various stabs at reviving the mixed fortunes of these operations, to little avail. The time has come for the government to seriously address this shameful blot on our economic and social landscape that consigns so many people to poverty and deprivation.

A coherent plan of action needs to be implemented, and must involve several key guidelines.

First, the privatisation of these sugar factories should focus on getting the best for them and those working for, or with them. That means successful bidders, both international and local, should satisfy the fundamental criteria of adequate financial means, commercial capability, the ability to develop nuclear estates, and of course, sustain and support farmers. The latter should be focused on buying the cane at the optimum time and paying farmers on time.

If the last two are fully adhered to, cane shortages and zoning would be things of the past.

To put it more bluntly, the exercise must be based on meritocracy rather than on quick-fix solutions and machinations often agreed upon in opaque circumstances.

This means harmonising the activities of the Privatisation Commission with the Sugar Task Force Report so they speak and act in unison. At the moment, the sad irony is that they are almost in competition.

County governments must also live up to their responsibilities in maintaining the relevant sugar-belt roads. Financial support for this could come from the reinstatement of the Sugar Development Levy.

It goes without saying that this operation must adhere to strict accountability rules to ensure that money collected goes directly to road maintenance and is not diverted to other areas.

But a line in the sand must be drawn between this and the actual running of the factories. Under no circumstance should the county governments be involved in the day-to-day operations.

Ditto goes for national government. The role of the central government is to provide the right policy framework and an enabling environment for these revamped operations to function and grow, not to be involved in their commercial operations.

Conversely, the running of these milling operations should not involve other non-core activities such as importing sugar or being allocated sugar importation quotas. Imports should be handled by such bodies as the Kenya National Trading Corporation and must be separate from manufacturing.

Particular emphasis should be placed on both price and comparative standards. When subsidies and bailouts are factored, the cost of production for some Kenyan sugar is among the highest in the world.

The above proposals should, and must, massively bring down production costs to become comparable to those in, say Mauritius and Kenana in Sudan.

In conclusion, it is clear that a competitive and transparent privatisation process must be conducted to transfer these limping operations from the clutches of government to commercially competent owners and managers. Last, but as important, national and county governments must be completely delinked from involvement in their operations.

If the above is carried out, there is a very good chance these moribund operations can be restored and in turn make a significant contribution to filling the gap between demand and supply.