Poor policies to blame for sugar sector woes

Given the crisis rocking Kenya’s sugar industry, one that threatens many livelihoods, the government must work with industry players to put in place the right policies for the sector.

 Sugarcane farming was once a vibrant economic activity that accounted for 15 per cent of the country’s agricultural Gross Domestic Product. However, many of the factories, especially those that are publicly owned, are on their knees.

 To get the industry back on its feet, the government would have to ensure that there is an effective regulatory framework and a good master plan.

 The current regulations are not implementable and have hindered the growth of the sector.

 A better sugar masterplan should protect jobs, rural livelihoods and trade and at the same time create diversified revenue streams for sugar producers.

 Kenya can learn from Ethiopia, where reforms in the sugar sector have helped increase the annual production capacity of sugar factories.

Raise capital

Ethiopia has been privatising sugar firms to reduce reliance on the exchequer and raise additional capital to support expansion and modernisation.  

 Other examples include Morocco and Egypt, who may be net importers but are also among the best-performing.

 To make the industry more efficient and competitive, the government should write off debts and tax liabilities of state mills and growers.  

The government should consider privatising the firms and ensure that farmers get the best seed varieties, fertilisers and farm implements. However, privatisation must be approached with caution.

 The problems that cane farmers are facing are deeply entrenched in the policy-making process of the sugar industry in Kenya.

Key policies include one that was formulated in 2001 that created the Kenya Sugar Board, and another in 2013 established the Agriculture Food Authority after dismantling the Kenya Sugar Board.

The two policies have really shaped the negative sugarcane farming outcomes.  

 Privatisation of government-owned mills was expected to make a difference, but even after giving permits to more private companies, the woes in the sector persist.

The sector has been neglected for long, putting thousands of farmers in economic jeopardy. No wonder most of Nyanza and western regions have high poverty rates despite having favourable climatic conditions and resources.

A task-force report released in 2020 details a raft of policy recommendations for reforming the sugarcane industry in Kenya. However, these recommendations that have the potential to jumpstart the sector has never been implemented.

The recommendations include reinstatement of the sugar development levy, prompt payment of farmers, zoning and reduction of taxes and imports. 

Mr Obonyo is a Public Policy Analyst. [email protected]