President William Ruto's five-day tour of western Kenya and about-turn on radical policy interventions have exposed the age-old politics that have has mired the sugar industry.
For decades, the sugar sub-sector has been used as a campaign tool every electioneering period, with key players making pledges after pledges to solve the sugar sector woes.
Like his predecessors, Mwai Kibaki and Uhuru Kenyatta, President Ruto is promising to revive the sugar sector amid fears that his ambitious plans could run into headwinds.
In the past, the sugar sector was once the country's top employer, contributing to nearly 10 per cent of the country’s gross domestic product.
This week, the President camped in the four counties of Western reportedly for a development tour of the region but his trip largely highlighted by the politics of the sugar industry.
Ahead of the 2022 presidential elections, Ruto was ambitious about his far-reaching interventions to sort out the mess in the sugar sector and breathe life to Western region's economic mainstay.
However, nearly a year after taking over office, the unending sugar woes have forced him to rescind on some of his initial plans to address the sugar mess in the country.
The President had rolled out a mega programme that would have seen at least five-state owned millers put up for sale. In March, his Cabinet approved a key legislative proposal to that effect.
Privatisation storm
The Cabinet then approved the Privatisation Bill, 2023 which would have seen non-performing public entities sold to private actors without the bureaucratic approval process by Parliament.
The approval of the Bill came just five months after Ruto said that the government was seeking to privatise 10 state firms within a year through the National Securities Exchange.
However, the plan to dispose of the loss-making firms has faced opposition from various stakeholders, especially after the Cabinet approved the Privatisation Bill.
Kakamega Senator Bonny Khalwale said privatisation of sugar millers would render residents jobless as new investors would recruit other people.
"This is not out of disrespect for the President and the government. That is the little we have in the economy of the sugar industry," Khalwale said.
"Our forefathers donated 12,500 acres for Mumias Sugar and 24,500 acres for establishment of Nzoia Sugar. If you privatise, someone will go away with our ancestral land."
Vihiga Senator Godfrey Osotsi had argued that the government wanted to sell the sugar millers through the back door.
“You have heard that they want to sell Nzoia and Mumias but they don’t want to involve Parliament. We are opposed to anything of that sort as the huge chunks of land, where the two factories are domiciled do not belong to the government, it’s our land,” the senator said.
“Selling of the two companies will not happen under our watch.”
Analysts say that the reality of the deep-rooted sugar sector woes has dawned on the President, heralding radical policy reversals that could delay his ambitious plan to restore order in the sector.
''The initial plan to privatise state-owned millers will not happen, we will not let our companies continue sinking into more debts. It's now up to our MPs to approve the waiver on the debts owed by sugar companies," Ruto said on Tuesday.
The head of state said the government was committed to reviving the struggling sugar industry, even as he urged MPs to hasten the amendment to the law allowing the writing off of Sh117 billion debts accrued by the millers.
"Don’t expect to hear that some Asians are buying your companies. You will not hear of Rai,” he said in reference to sugar mogul Jaswant Sigh Rai who was allegedly abducted by unknown people last week.
Rai owns the Kabras Sugar factory, Kanyara Sugar in Uganda and has a stake in West Kenya Sugar Millers.
“I want you to know that it will not be privatised, land will remain property to Kenyans but we will plan to ensure it benefits Kenyans," the President said while on his tour of western Kenya.
The exchequer has already written to Parliament seeking the approval to write off loans owed to the government and the Kenya Sugar Board amounting to Sh65.8 billion and tax penalties amounting to Sh50.14 billion.
The ailing state millers that had been earmarked for privatisation include Chemelil Sugar, South Nyanza (Sony), Nzoia, Miwani and Muhoroni.
Plans to privatise the crippled sugar firms have been in the pipeline since 2015 when the Privatisation Commission approved the sale of the government’s stakes in five sugar companies.
A task force established by Uhuru had recommended their privatisation to rescue them from what was termed as imminent collapse.
Last month the government locked out private and government-owned millers from being part of the importation deal of 100,000 metric tonnes of sugar.
Agriculture and Livestock Cabinet Secretary Mithika Linturi revealed that only private individuals will be allowed to import the 100, 200 metric tonnes of sugar during a four-month importation window.
The importation is meant to stabilise the country’s sugar industry, which has seen prices hit historic high as local millers fail to meet local needs.
Kenya has a capacity to produce 600,000 tonnes of sugar every year, with a deficit of 200,000 tonnes, which are usually sourced outside.
The government’s target to import the commodity from the Common Market for Eastern and Southern Africa has proved futile amid scarcity, with other countries with surplus refusing to sell their own.
Even as the government dropped its initial plans to sell the troubled sugar millers, it emerged that the government was working on a new model that would enhance their sustainability.
In June, Deputy President Rigathi Gachagua said Kenyans and sugarcane farmers were not keen on the privatisation of any of the state-owned sugar firms, hinting the government was now leaning towards a leasing model.
“The ministry considered full public participation by the people of Kenya and farmers in the sugar belt. The result was that they are not keen on privatisation but prefer a leasing model,” the DP said.
Gachagua spoke after chairing an Intergovernmental Budget and Economic Council meeting at his Karen residence.
He said that the Ministry of Agriculture had agreed to the demands of the people and was working with Attorney General Justin Muturi on how to actualise the leasing model.
“We have agreed that the leasing model will be worked out with the opinion given by the AG on how those sugar factories and nuclear farms can be leased for the benefit of those counties and the people who reside there,” he said.
Sugar politics usually come to the fore in the electioneering period.
During the run up general elections, politicians from all sides promise sugar farmers prosperity, but it turned out to be empty rhetoric.
For instance, on June 24, 2014, Uhuru visited Mumias Sugar and gave a bailout of Sh1 billion. In July 2017, he gave another Sh500 million, just days before elections.
Mumias puzzle
Exposing the deep-seated politics roiling the sugar sector, the President this week hit the roof over the confusion, politics and interests surrounding the sugar company.
He demanded that two related investors fighting over control of Mumias Sugar Company must cease, pack up and move out.
These are 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 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.
He is also the chairman of Kabras Sugar Company, Sukari Industries and Olepito.
The company produces roughly half of Kenya's sugar consumption.
In 2022, they opened Naitiri Sugar Company, their fourth sugar mill, in Bungoma.
According to Sugar Directorate Data from 2020, Rai Group held 45 per cent of the nation's total sugar sales. Sukari Industries came in at 11 per cent, West Kenya at 29 per cent and Olepito at two per cent.
Mumias Sugar Company had for many years been the poster child of the public sugar millers in Kenya until it was privatised in 2001 with the government only retaining a paltry 20 per cent shares.
Its fortunes took a dramatic downturn in the 2012-13 financial year 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.
However, stakeholder went to court and successfully managed to have one of the receiver managers removed.
Mumias Sugar Company was then handed over to the Sarrai Group from Uganda in 2022.
A June 4, 2021, report by Rao, the receiver manager, showed that Mumias Sugar had assets of Sh15.7 billion and liabilities of Sh30.1 billion.
"I have ordered those sugar cartels to get out of Mumias and withdraw all the cases they have filed against Mumias as we shall entertain no court case again," Ruto said while on a tour of western Kenya.
"You have three choices: Leave Kenya, face jail or go to heaven."
Mumias, Muhoroni and Miwani are under receivership while Nzoia, Chemelil and Sony are on the verge of being closed down.
"The sugar industry has a productivity problem. This is the reason, despite reprieves Comesa gave the sugar millers, there is nothing to smile home about. Even policy makers have stuck to the protectionist thinking that the industry was built on," argues Byron Ochieng' of the University of Nairobi in his article published in the Standard.
Ochieng says that the problems bedevilling the sector range from low productivity, poverty, poor management, corruption and embezzlement of funds,and lack of resources to invest in irrigation and the latest technologies.
“All the state-owned sugar factories are insolvent and the government as well as stakeholders in the sugar sector have turned a blind eye on the issue for reasons best known by themselves,” he said.
“Cane farming has the potential of creating employing in rural areas, but it does not generate the capacity needed for absorbing jobless people as an alternative economic activity.”
Economic Importance
The sugar industry contributes an average of 15 per cent to Kenya’s agriculture GDP.
The sector consists of more than 250,000 smallholder farmers, supplying over 92 per cent of the sugarcane processed by sugar companies.
The remainder is produced by sugar firm-owned nucleus plantations.
Around 25 per cent of Kenya’s population depends directly or indirectly on the sugar industry for their livelihood.
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.
Ugenya MP David Ochieng' said the head of state should walk the talk on his sugar reforms promise.
"President Ruto should actually deal with the cartels as he says and not just talk for the show," he said on Thursday.
"On this issue of sugar, we are talking about 20-30 million Kenyans whose livelihoods have been messed up for the past 25-30 years."
Ochieng said that it would be unfortunate to revive the coffee and tea sectors and not revive sugar companies.