Monday, September 19, 2016

Madness of the Market

Fifty years ago, President Jomo Kenyatta’s administration, with aid from donors, lured hundreds of thousands of farmers in western Kenya and Nyanza to grow sugar cane under contract. That smallholder cane farming is an experiment that went wrong is the untold story of western Kenya and Nyanza. The failure is something few technocrats and politicians want to admit. The government has continued to pour billions of shillings into the sector — trapping more farmers in a poverty cycle while still hoping that a solution will be found. It was hoped that this would give the regions’ peasant farmers a cash crop that could lift them out of poverty. The pioneer crop of farmers have since passed their farms on to the next generation. Sadly, however, the second generation farmers have nothing to show for their inheritance. Yet, merchants have grown wealthy from the proceeds of the crop.

Martin Wakhu’s life is anything but sweet — and all because he is a sugarcane farmer who has over the years invested his time and effort in the thankless, cashless cash-crop. Mr Wakhu’s mud-walled and grass-thatched hut is all he can show after growing sugarcane for over eight years. Like many of his age-mates, Mr Wakhu’s poverty exhibits the kind of economic havoc and helplessness that a new generation of cane growers is inheriting by growing a crop that has zero-returns for farmers, but which has nevertheless created multi-millionaires within the distribution chain. Farmers like Mr Wakhu are a sad reminder of a dream deferred and an experiment that went wrong. Farmers keep on grappling with low economic returns, high costs of inputs, poor roads and delayed payments. Mr Wakhu remain trapped in the sugar conundrum as factories are left with little or no cane to crush.

Mumias, so far the largest miller in Kenya with about 66,000 registered outgrowers, is only doing 20 per cent of its total capacity as it struggles with a biting cane shortage. Although the company produces about 50 per cent of the domestic sugar output, it continues to run up losses. It survives largely on government bailouts.

Smallholder plots were supposed to mimic large plantations in South Africa, Malawi, Uganda and Zambia. Today, Kenya imports sugar from these four nations — thanks to its heavy reliance on smallholder production and ageing factories. Kenya produces sugar at Sh95,000 per tonne on average, meaning that sugar from its mills is more expensive than its equivalent from Sudan, Egypt, Swaziland, Zambia, Malawi, Tanzania and Uganda. Malawi’s average production cost is Sh35,000 per tonne.

With the disorganisation in the fields, farmers lose either by oversupplying or undersupplying factories. The entry of sugar barons has not helped either. They lose either way because when there is undersupply, the factories don’t make much and can’t pay them and when there is an oversupply, harvesting is not done on time and cane is delivered when it has no value.

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