Private firms: Cane poachers or envy of failed millers?

Norman Brooks’ family has, for about six decades, been growing sugarcane in Koru, Muhoroni Constituency in Kisumu County.

The British family has maintained its 700-acre cane empire and is a case study on how to run a cane estate. When smallholder farms were mooted in the 1960s, they were supposed to mimic these large plantations — where planting and harvesting would be synchronised. The public millers were supposed to help the smallholders get a foothold in the multi-billion-shilling business.

But decades later — the public millers are a pale shadow of the dream and have become the laughing stock of the sugar sector weighed down by debts amounting to more than Sh100 billion; mainly attributed to mismanagement and plundering.

DOUBLE-EDGED SWORD

In their place, private millers have found commercial success.

The Brooks family has contracted Raju Patel’s Kibos Sugar Millers to harvest their cane — having had a past dalliance with public millers.

Like all other cane farmers, James Brooks, son of the founder Norman Brooks, worries about the failure by cane companies to pay farmers in good time.

“When the millers mistreat the farmer who is the source of their raw materials then there is something wrong. Sometimes the private millers delay payments too but not compared to what the public millers do,” he said.

That public sugar mills have become the industry’s double-edged swords, helping and hurting in equal measure, is now clear. They not only have bloated wage bills but have defeated all strategic intervention by the government by gobbling up any injected capital. As a result, the government has been toying with the idea of privatising these mills and returning the management of the sugar sector to commercial entities.

With new mills, new technology and ready liquidity to buy and mill cane, the private mills, which have since outnumbered the government owned millers, have become the envy of the industry: They receive praise and blame in equal measure.

MACHINE EFFICIENCY

Their operations are also distinct from how the public millers are run and the rift is even wider when efficiency is compared.

Private firms: Cane poachers or envy    of failed millers?

Utilising all the products from sugarcane has given these factories an edge over public ones

Kisumu-based Kibos Sugar and Allied Industries, for example, use trucks to source for cane in areas as far flung as Fort Ternan — 75 kilometres away — with six cane collection centres spread around its catchment areas.

Kibos’ Corporate Affairs Manager Joyce Opondo believes their diversification and machine efficiency has given the miller an edge over its competitors.

“We are not just focusing on producing sugar; for us sugar will soon be a bi-product as we ensure nothing goes to waste. It is this model of operation that has enabled us to make the strides since we started operations. There has to be a shift on how we treat sugar cane as a raw material and that is what Kibos is focused on,” says Ms Opondo.

AGGRESSIVE SOURCING

Kibos is largely automated and requires minimum labour, further saving on the cost of production.

But that is not how they are viewed by the industry.

“What they are doing is poaching which is simply stealing, because you give the farmer seed and support them, then someone comes and takes the cane. The farmers love it because they escape that loan,” claims Mr Francis Ooko, the Muhoroni Sugar company boss.

Mr Ooko says that the aggressive cane sourcing nature of these millers is to blame for the frequent cane shortages. He says cane poaching by private millers has proved disruptive and collapsed cane sourcing plans — leaving public millers with nowhere to source quantity and quality cane.

“We need to have some sanity in cane harvesting because we are used to long-term planning and order. When a private miller suddenly appears and picks cane form areas you had planned to harvest, it becomes a chaotic scenario,” he says.

With the liberalisation of cane sourcing, the private millers have set up weighbridges and off site cane collection centres and use faster trucks to transport cane, away from the traditional tractors — used by public millers.

DEFAULT LOANS

The reality on the ground, before the entry of private millers, was that public mills could not take up all the cane produced and farmers were left desperate for an alternative. It was after their aggressive entry into the scene — and instant payment — that they were accused of poaching cane from the zones traditionally preserved for the public millers

But are the private mills the damaging devils or the rescue angels for the sector?

Insiders say the private millers brought the critical alternatives for the farmers who had no choice but deal with the ageing state-owned mills which break down regularly and fail to pay them. An AFA study to establish the national sugar supply and demand between 2014 and 2018 isolated the private mills’ performance at more than twice in efficiency compared to their public counterparts.

On overall time efficiency, state owned millers made planned and unplanned stoppages averaging five months in 2014 compared to the 2.5 months’ stoppages the private mills have. The result is that private mills crush cane faster, pay farmers and keep themselves in business as the state-owned millers antagonise farmers through delayed payments.

The mills have clashed over sugar cane sourcing in what will be a key clause in the Sugar regulations 2018 which is set to be finalised and taken to Parliament.

Indeed, farmers love the coming of the private mills as much as they are blamed for having taken an advantage of their existence to default input loans advanced to them by the public mills.

Large-scale farmers, such as the Norman Brooks family, and who do not depend on any input subsidies from the public mills, have however found a softer landing in the private mills.

RESPONSIBILITIES

But the public millers — and their supporters — believe that the coming of the private mills is largely to blame for the reduction in cane supply since they are said to offer no support to the farmers while they have caused the public millers to shrink support for fear of funding what will eventually be poached from them.

Sony Sugar Corporate and Planning and Strategy Manager Eliud Owuor believes that the private mills also have lesser responsibilities to the communities they serve since most of the roads and schools were already supported by the public mills.

Mr Owuor says Sony, for example, takes care of some 754 kilometres of a road in the four zones it operates in in addition to supporting schools and hospitals which the public expects from them as compared to what the expectation from the private mills is.

“That success through diversification narrative is a fallacy by the private mills to sustain some of the wrongs they have done as much as it is an add-on but not the key determinant of the success of this industry. We support farmers through inputs and extension services and we have done this over the years without any worry for poaching until the private millers some as later as 2017 emerged. They just put up mills without developing sufficient raw materials so they simply resorted to stealing which has really distorted out planning, “Mr Owuor said.

But Ms Opondo of Kibos disputes the claims of having a joyride on the back of public millers. She said the Kibos Sugar, for instance, had spent some Sh400 million in repairing sections of the abandoned Miwani-Muhoroni road to enable its trucks to source for cane from the area.

The love-hate relationship with the private millers remain complex since some public milers borrow materials like bagasse and even trade with them when need arises. Muhoroni for example generated its first Sh500 million in September by selling cane to Kibos when it needed a restart capital.

In this mix, the smallholder cane farmers is caught in a complex commercial game.