The sweet profits and bitter politics of Kenya's sugar industry

However, folklore also has it that way before the commercialisation of sugar in Kenya, there were indigenous varieties of sugar cane that were chewed and even used in brewing alcohol.

Yet, in colonial times, sugarcane cultivation and production was proscribed for Africans until after independence when it became a cash crop of choice where it was already in use.

More than a hundred years since its introduction in Kenya, investors of Indian origin retain great influence and interest in the sugar industry locally.

The nostalgic era of sweet sugar earnings

Starting from the 60’s onwards, the sugar cane growing areas in Nyanza and Western Kenya, came to be descriptively referred to as the “sugarbelts”.

As native Kenyans took to cultivating sugarcane, the era of the 70s and the 80s would be described as the honeymoon period where sugar cultivation and production was at its sweetest.

The sugar business made sense. Families from the sugar-belts in Nyanza and Western regions and as far as Ramisi in Kwale region planned their livelihoods around their profitable farming or employment.

The earnings were meaningful and sufficient to run the home. Life was predictable and planning was easy as paychecks came through on time.

In the sweet era of sugarcane farming, small-scale farmers made a decent living from the production of the cane, as millers employed local populations in their thousands.

Sugar commercialisation in Kenya

History has it that the first sugarcane factory in Kenya was set up at Miwani (Kano plains) in present Kisumu County in 1922 and later at Ramisi in Kwale County in 1927.

Thereafter, the Government set up more sugarcane growing areas and milling plants in Muhoroni (1966), Chemelil (1968), Mumias (1971), Nzoia (1978) and South Nyanza Sugar Company ‘SONY’ - (1979).

As the nineties crept in with globalization as the new mantra, so did trouble for the local sugar industry. Bad politics did not spare the industry, not to mention that the business was run on concepts that were decades old. 

There arose serious competition from the Eastern Africa region as faster-growing, higher-yielding strains of sugar cane were introduced in Madagascar and Sudan.

Mechanization of the industry was a demand not to mention that business trends showed efficacy was higher for larger sugarcane farms which in turn yielded greatly based on the economies of scale.

The once dominant and vibrant state-owned sugar factories in Kenya including Miwani, Ramisi, Chemelil, SONY, Muhoroni, Nzoia and Mumias suffered greatly. Many farmers ceased cane farming altogether and the remaining endured many months without pay or a very low pay.

Politics took centre stage during subsequent general election cycles where politicians promised farmers all sorts of solutions while political operatives imported tax-free sugar ostensibly to fill in flagging production gaps to the detriment of local farmers. The profits from tax-free sugar sales oiled the campaigns during the general elections. 

The oldest sugar milling firm in Kenya, Miwani Sugar, gave up the ghost after a tedious struggle. Later it was sold to private investors when almost all its sugar plantation nucleus land had dissipated. Ramisi Sugar was a victim of closure too.

Later on, it was sold to a private investor minus most of its initial nucleus plantation land. That sugar cane farming was becoming bitter for most farmers was not in question; what was bewildering both millers and farmers was the unending woes in the sector which has generated six reports over the past 11 years with no tangible turnaround move in sight.

As the old firms plummeted, several private new ones checked in. There was no vacuum in production despite the dwindling fortunes of the public sugar firms because private millers who had slowly moved into the sector, gradually took the lion’s market share of the local sugar industry.

Among these new private firms were West Kenya Sugar Company, Sukari Industries, Kibos Sugar and Allied Industries, Naitiri Mills and Butali Sugar Industries among others. 

At the dawn of 2023, several more firms were preparing to launch into the industry with new sugar milling factories, from Angata Sugar Mills, Soit Sugar, Tiryo Sugar Mills, West Kenya Valley, and Seal Sugar among others all angling for new nucleus plantations far removed from the traditional sugar belts of old.

Even though these private investors came in and even ‘poached’ sugarcane from former suppliers to the public sugar millers, their production volumes could not meet local demand.

A constant feature of this scenario is the annual sugar deficit of about 200,000 tons of sugar which continues to widen every year.

Economic Importance

The sugar industry contributes an average of 15% to Kenya’s agriculture GDP. The sector consists of more than 250,000 smallholder farmers, supplying over 92% of the sugarcane processed by sugar companies, while the remainder is produced by sugar firm-owned nucleus plantations.

Around 25% of Kenya’s population depends directly or indirectly on the sugar industry for their livelihood. 

Down to almost a hundred years of local sugar production, Kenya is not yet self-sufficient in this sector. The country remains a net importer of sugar as local sugar production is unable to sustain domestic sugar consumption needs. 

It has not always been a mirage as Kenya was once sugar production self-sufficient in 1980 and 1981 by producing 401,239 MT against a demand of 299,514 MT in 1980 and 368,970 MT against a demand of 324,054 MT in 1981.

The failed State vision for the sugar industry

After independence, the government explicitly expanded its vision on the role and importance of the sugar industry as set out in Sessional Paper No. 10 of 1965 which sought, inter alia, to accelerate socio-economic development; redress regional economic imbalances; promote indigenous entrepreneurship; and promote foreign investment through joint ventures.

From the inception of the sugar mills in the early days, the government pursued the establishment of the factories aimed at among others; achieving self-sufficiency in sugar with a surplus for export in a globally competitive market generating gainful employment and creating wealth, supplying raw material for sugar-related industries and promoting economic development in the rural economy and beyond through activities linked to the sugar industry. Looking back, little if anything from the cited policy papers has been achieved.

President Ruto wades into the murky waters of Mumias Sugar Company

Last week, President William Ruto seemed to hit the roof over the confusion, politics and interests surrounding Mumias Sugar Company. He demanded that two related investors fighting over control of Mumias Sugar Company must cease, pack up and move out.

These are Jaswant Rai, the owner of West Kenya Sugar Company and his brother Sarbjit Singh Rai, the main shareholder of the Uganda-based Sarrai Group which took over the management of Mumias Sugar Company in 2022.

A reclusive Kenyan billionaire businessman and chairman of the Rai Group- a conglomerate with interests in the sugar, real estate, and hospitality industries - Rai is thought to control at least 43 per cent of Kenya's sugar business.

Rai is also the chairman of Kabras Sugar Company, Sukari Industries, and Olepito.

According to Business Daily, the company produces roughly half of Kenya's sugar consumption. In 2022, they opened Naitiri Sugar Company, their fourth sugar mill, in Bungoma.

The Ksh.6.3 billion ($44 million) facility, which has a daily production capacity of 6,000 tonnes of sugar, began operations in May.

According to Sugar Directorate Data from 2020, Rai Group held 45% of the nation's total sugar sales. Sukari Industries came in at 11%, West Kenya at 29%, and Olepito at 2%.

As President Ruto took a hard stance on the on-goings at Mumias Sugar Company, things got pretty heated with many critics within the legal fraternity and the opposition questioning his respect for the rule of law and his bare-knuckle tackle on investors which might not auger well for the country at large.

The debate is still raging but he’s thrown down the gauntlet to the litany of litigants involved in the public sugar firms, the line is drawn.

Mumias Sugar Company remains the poster child of the public sugar millers in Kenya. Privatized in 2001, the government only retained a paltry 20% share and hence did not have control over the firm’s affairs.

The rain began beating it in the FY 2012/13 when it recorded losses which were running into billions by the time it was declared insolvent in 2018.

Its creditors allowed it to be placed under receiver managers in 2019. To add salt to injury, a stakeholder went to court to accuse one of the receiver managers of incompetence and corruption and the receiver manager was subsequently removed.

Mumias Sugar Company was then handed over to the Sarrai Group from Uganda in 2022; who now stand accused by other primary stakeholders of selfish interests in running down the company not reviving it, stripping the company’s assets and having intent to take over the sugar firm’s 15,000 hectares which serves as its nucleus plantation.

Is it all lost or is there hope?

The sugar industry is documented as one where demand outstrips supply from year to year. The deficit is met through importation mainly from the COMESA states. Those affected by the unfolding events at public sugar millers have been stripped of dignity and the space to do meaningful work for just pay. 

Who will hear the pleas from the farmers and workers whose lives have been turned upside down since the downfall of the public sugar millers began? Will the tough stance taken by President Ruto restore sanity, purpose and profitability back to the public sugar mills? Or does it call for more tact, soft skills and negotiations to outmuscle the so-called cartels that are holding the public millers at ransom?