Analysis: Collapsed Sugar Industry. Can It Be Fixed? 

19 mins read

The titanic collapse of the sugar industry in Kenya dates back to 2010 when everything went downhill and now in, 2023 there is no sugar industry in Kenya anymore. From media reports the sugar industry was one of the biggest sources of income for Kenyan farmers and revenue for the country.

The collapse of the sugar industry started in 2010 by owned sugar millers where salaries were delayed, allowances to employees stopped and debts owed to suppliers and farmers piled up.

Before the collapse, the sugar industry controlled 15% of the GDP in the Kenyan agricultural sector. That means you add revenue from tea, coffee, livestock, and all agricultural activities in Kenya and the sugar industry held 15% of that income for the country. That is colossal by any measure and the question now is how our governments between 2010 and 2023 let the industry completely fall apart when it was such a big part of the national GDP.

If you consider that agriculture as a whole contributes up to 33% of total Kenya GDP you can see the weight the sugar industry had in our economy and the livelihoods of Kenyans.

The other aspect of the sugar industry that makes its death so painful for the country is that the industry directly contributed to the lives of so many Kenyans in the rural areas and it had been the economic backbone of the economy for many regions in Kenya from western Kenya to Nyanza and Kwale at the coast. How does a government let something like that go to the dogs?

The biggest problem in the sugar industry is that it went into the hands of the sugar cartels which got involved in every sugar factory and production and sadly the biggest cartel in the sugar industry has been the Kenya government in every aspect.

At the moment there are all sorts of desperate and inconsequential moves by President Ruto and his government to look like they are reviving the sugar industry but with zero plans to do anything substantive it is going to amount to nothing and soon, politicians will find something else to jump on for their endless campaigns for 2027, which is four years away, while sugarcane farmers and workers in sugar mills have nothing to live on right now are owed hundreds of millions which they will never get.

At the Mumias Sugar Company, a furious William Ruto issued a death threat (Go To Heaven) order to a sugar miller Jaswant Rai to quit hassling the company. Shortly after that Rai withdrew all the cases he had filed against Mumias sugar company. The real problem is that the whole drama changes nothing at the dead Mumias company. Nobody is investing in that place and the war with Jaswant Rai makes no difference at the factory or to the sugarcane producers.

Our politicians right from the president have not accepted the fact that sugar companies and production in Kenya cannot be revived by rhetoric and political posturing but only through concrete actions and material investments in the whole sugar sector starting with the sugarcane farmers.

Mumias Sugar Company was the largest in Kenya, producing over 250,000 tons of sugar annually at its peak. How do you fix that?

Other than the war with Jaswant Rai who still owns more than three sugar factories in Kenya including Western Sugar Company and Kabras, the Kenya government has no plans on to revive Mumias Sugar which has loans and debts in billions. What is the plan with Mumias Sugar Company and for the sugarcane producers? Absolutely nothing.

Strangely enough, when politicians in the sugar-producing region recently held a big meeting at Masinde Muliro University with 2,000 sugarcane producers and factory workers, the main discussion was reduced to whether sugarcane producers would be forced to sell their products only to the company in their area or they should sell to whichever company they choose. Farmers wanted the freedom to sell anywhere and the politicians wanted them to be restricted to sell only to the local millers.

Nobody wanted to address the real issue which is that the milling companies are all dead or dying. Farmers have nowhere to sell their sugarcane other locally or elsewhere. That is the issue no politician wants to talk about.

The whole meeting turned into a mess with politicians demanding what they call zoning and the sugarcane farmers demanding their rights to free business.

“We want the venture to be regulated. We do not want a scenario where a certain miller poaches and harvests cane developed by another miller and yet that certain factory has invested a lot in ensuring farmers plant enough sugarcane,” said Wetang’ula.

Charles Atyang, chairman of the Kenya Association of Sugarcane and Allied Products (KASAP) opposed zoning urging the government to ensure millers empower farmers to grow more cane for the viability of the cane industry.

“We want a free and fair competitive market where farmers are given the right to sell their raw materials to the factory of choice and based on how millers have helped farmers in growing their product,” said Atyang.

“What we want is our millers to help farmers achieve low costs of production by availing fertilizer, researching, conducting soil testing, and investing in training to increase production of the cane and make a profit.”

“We were happy when our LREB Governors led by Fernandes Barasa organized this event to deliberate on issues affecting our sector but it has been hijacked by politicians and we are appealing that farmers be allowed to give out real issues affecting the sector during the second day of this event,” said Olenarupa.

Kibos Sugar to move out of Kenya over volatile working conditions

The collapse of Kibos Sugar Company highlights a lot of things and Governor Nyong’o intervened to save the company but the situation was very complicated.

In the media, it was reported that Kibos Sugar and Allied Industries Limited in Kisumu wanted to relocate to a neighboring country because of what the company boss Raghbir Singh called a volatile working environment.

“We are going to seek space in a country which is friendly to investors,” he said.

The real issues at Kibos Sugar were numerous starting from the nightmare of the local communities living around Kibos River who raised the issue that the company dumped all its toxic garbage in the river and was killing it. When government officials demanded that the company stop dumping garbage into the river they took that as harassment.

The river pollution issue was very serious because other than the sugar business the same company also owned Kibos Distillers Limited, Kibos Paper Packaging Limited, and Kibos Fertilizers Limited, and the garbage from all those companies were being dumped into Kibos River. When NEMA visited the company and obtained the Environmental Assessment License they found out that the license was illegally acquired and the matter was going to court when the owners decided they were leaving the country.

Apart from the pollution issue, Kibos Sugar company was also accused by the workers of importing illegal immigrants to work in the factory and they were given special treatment.

Some workers who spoke to the media on condition of anonymity for fear of being fired said that foreigners working at the firm number about 450, and enjoy special treatment and pay.

“Some of them are paid to do domestic work and cultivate sugarcane plantations but are paid three times what locals earn. They are also served food like school children by lining up and having a shop in the compound. They rarely mix with locals,” disclosed a worker.

The illegal immigrant workers’ situation at the factory got so bad that immigration officials went to the factory and on that day the foreign workers there had work permits but officials were told by the workers that the illegal workers were sent out because the boss knew that inspectors were coming.

The Kibos sugar owners can be defined as the classic cartel but they had very powerful friends who visited them as part of the family.

Next in line for dead sugar milling companies is Chemelil Sugar Company.

In 2016 the Auditor General told Kenyans that Chemilil Sugar Company was too broke to run the business.

“Evidently the company is technically insolvent and its continued operations as a going concern are, therefore, dependent on financial support from the government, trade payables, and its bankers,” the audit report indicated.

Chemelil sugar was involved in many shady activities including mixing up sugar they said was for export to Sudan and then selling the same sugar in Kenya and nobody could figure out what they were doing.

Another very troublesome case of total ruin in the sugar industry is the Miwani Sugar Company.

Miwani Sugar company once owned by Ketan Somaia is completely dead and the only issue as of last year was who owns the 10,000 acre land once used by the company.

“The land hosting Miwani Sugar Company belongs to the government. Therefore nobody should claim ownership of the land,” said Mr Munya.

‘The residents of Miwani are legitimate owners of the land. The land has neither been sold nor purchased.’

Miwani Sugar Company dates back to 1928, when it was the pioneer sugar milling company in Kenya by 1946, the company was milling 20,000 tonnes of sugar and employed 4,200 workers and at that time it was run by other people, not Somaia.

The owner before it became bankrupt was sent to jail in Britain for fraud related to his business activities in England.

Then we go to Muhoroni Sugar Company

It was shut down because of insolvency in a very messy situation.

By the time Muhoroni was shut down by the Kenya Revenue Authority, the company owed KRA Sh. 200 million in taxes, Sh. 390 million in Collection Tax and 200 million in Sugar Development Levy.

As a result of all the taxes and other monies owed to KRA, Muhoroni shut down the factory because it was impossible to do business.

One aspect of the whole collapse of the sugar industry is the amount of money the Kenyan government rakes in from these companies. What the heck is the Sugar Development Levy for? In this case, Muhoroni was supposed to pay Sh. 200 million in that fund for what? Where does that money go?

Incidentally, Muhoroni was owned 82% by the Kenya government and 17% by the Mehta Group. So the Kenya government was not paying taxes to itself and also owed the workers Sh. 70 million so they decided why not just shut down the whole thing. How smart is that? Now you see how the Kenyan government is one of the biggest cartels killing the sugar industry.

The Sony Sugar Company Situation

The situation at Sony Sugar Company another case of the Kenya government working as cartels and just robbing farmers and stealing the money is just pathetic. Sony Sugar Company is fully owned by the Kenya government and when it was shut down it owed Sh. 400 million to sugarcane farmers.

There was no maintenance of the machines at the factory for five years and all the machines were rotting and in complete disrepair. On many occasions, the millers would shut down the factory for up to three months claiming they were doing repairs.

The biggest scandal at Sony Sugar was in 2018 when the company that was supposed to produce sugar imported Sh. 2.4 billion of brown sugar from Brazil and lied to the National Treasury that they only imported Sh. 50 million of white sugar.

So here the Kenya government is lying to the same government while ripping off sugarcane farmers. They are also importing which cannot be taxed because their real import is Sh. 2.4 billion but their declared value for tax is Sh. 50 million. That kind of stuff can only be done from the head offices of the top political leaders running the country at the time.

It is clear that the Kenya government’s main interest in the sugar industry was to find ways for big individuals within the government to scoop money from the factories and they would care less if those companies collapsed which is exactly what has happened and most of that has happened in last ten years under the Jubilee government and now under Kenya Kwanza.

You have to wonder who should go to heaven because of the destruction in the sugar industry in Kenya. Can the whole Kenyan government go to heaven because of what they have done in the sugar industry?

So those are just a sample of the complete disaster in the sugar industry and the Kenya government is responsible for 90% of the death of the sugar industry.

Like in the case of Sony Sugar, the government knew there was trouble there including importing billions worth of sugar. Wouldn’t government officials from the Agriculture Ministry to the Trade Ministry go there, find out what is going on, and fix it? They don’t go there as long as state officials are getting their cut. That is how cartels work.

Where do you think Sony Sugar Company got Sh. 2.4 billion to import brown sugar when they were so broke. That is money from the top guys at that time in the Jubilee government to find a way to import sugar into the country to make tons of money.

The big guys in this case the Jubilee government could not just import sugar so they had to use the government owned sugar companies to do the trick for them so it looks like the company produced the imported sugar.

So they were importing sugar while killing state-owned sugar companies and now they pretend they didn’t know what was happening and want to deport people. It is total rubbish.

Our sugar industry is dead causing real damage to the Kenya economy because the Kenya government has killed the industry. Every sugar company owned by the Kenya government has collapsed leaving behind hundreds of billions of debt and money owed to sugarcane farmers and workers. It is a tragedy for the country.

Adongo Ogony is a Human Rights Activist and a Writer who lives in Toronto, Canada

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