STRATEGIC PLAN,2010â€“2014 - Kenya Sugar Board

KENYA SUGAR INDUSTRY 

STRATEGIC PLAN, 2010–2014 

Implementation 

Strategy 

Resource 

Mobilisation & 

Utilisation 

Reporting 

Monitoring 

Evaluation 

Enhancing Industry Competitiveness 

Strategic Plan, 2010-2014 i

ii 

Kenya Sugar Industry

Table of Contents 

Acronyms ......................................................................................................................ii 

Foreword ......................................................................................................................iv 

Acknowledgements ....................................................................................................v 

Executive Summary ...................................................................................................vi 

Chapter 1: Introduction 

1.1 Historical Background .............................................................................................................1 

1.2 Importance of the Sugarcane Sector to the Economy................................................................2 

1.3 Sugar industry Stakeholders .....................................................................................................3 

1.4 Scope of Services......................................................................................................................4 

1.5 Methodology............................................................................................................................4 

Chapter 2: Kenya’s Development Agenda and Challenges .................................6 

2.1 Attaining Vision 2030 .............................................................................................................6 

2.2 Trade Environment for Kenyan Sugar ......................................................................................8 

Chapter 3: Review of the Strategic Plan 2004-2009 ........................................... 12 

3.1 Strategic Objectives (2004-2009) ...........................................................................................12 

3.2 Achievements.........................................................................................................................12 

3.3 Lessons from Plan Implementation ........................................................................................21 

3.4 Situational Analysis ................................................................................................................22 

Chapter 4: Strategic Plan 2010-2014 .................................................................... 24 

4.1 Rationale for the 2010-2014 Strategic Plan............................................................................24 

4.2 Vision, Mission and Core Values of the Sugar industry ..........................................................24 

4.3 Analysis of Challenges along the Sugar industry Value Chain.................................................25 

4.4 Strategic Goals (2010-2014) ..................................................................................................26 

4.5 Strategic Objectives (2010-2014) ...........................................................................................27 

Chapter 5: Implementation Strategy and Resource Requirements ................ 40 

5.1 Implementation Strategy........................................................................................................40 

5.2 Resource Mobilisation and Utilisation....................................................................................42 

5.3 Accountability .......................................................................................................................44 

5.4 Implementation Risks ............................................................................................................44 

Chapter 6: Monitoring, Evaluation and Reporting ............................................. 46 

6.1 Monitoring ...........................................................................................................................46 

6.2 Evaluation .............................................................................................................................46 

6.3 Reporting ..............................................................................................................................47 

6.4 Information Sharing ..............................................................................................................47 

6.5 Conclusion ............................................................................................................................47 

Annexes ...................................................................................................................... 48 

Strategic Plan, 2010-2014 iii

iv 

ACP African, Caribbean and Pacific Countries 

AgGDP Agricultural Gross Domestic Product 

AIDS Acquired Immune Deficiency Syndrome 

AMS Agricultural Management System 

BPO Business Process Outsourcing 

CDF Constituency Development Fund 

CET Common External Tariff 

CFC Common Fund for Commodities 

CIF Cost, Insurance and Freight 

COMESA Common Market for Eastern and Southern Africa 

CSR Corporate Social Responsibility 

CSS Customer Satisfaction Surveys 

CU Customs Union 

EAC East African Community 

ERSWEC Economic Recovery Strategy for Wealth and Employment Creation 

EU European Union 

GDP Gross Domestic Product 

GOK Government of Kenya 

HIV Human Immunodeficiency Virus 

ICT Information and Communication Technology 

ISO International Organisation for Standardization 

KARI Kenya Agricultural Research Institute 

KECATRA Kenya Cane Transporters Association 

KenGen Kenya Electricity Generating Company 

KESGA Kenya Sugar Growers Associations 

KESMA Kenya Sugar Manufacturers Association 

KESREF Kenya Sugar Research Foundation 

KIRDI Kenya Industrial Research and Development Institute 

KPLC Kenya Power and Lighting Company 

KRB Kenya Roads Board 

KSB Kenya Sugar Board 

KSSCT Kenya Society of Sugarcane Technologist 

LATF Local Authority Transfer Fund 

M&E Monitoring and Evaluation 

MCI Millennium Cities Initiative 

MDG Millennium Development Goals 

MoA Ministry of Agriculture 

MoASP Ministry of Agriculture Strategic Plan 

MoE Ministry of Energy 

MoF Ministry of Finance 

MoI Ministry of Industrialization 

MoLG Ministry of Local Government 

MoR Ministry of Roads 

MoRDA Ministry of Regional Development Authority 

Kenya Sugar Industry 

Acronyms

MoT Ministry of Trade 

MoWI Ministry of Water and Irrigation 

MT Metric Tonne 

MTER Mid Term Evaluation and Review 

MTP Medium Term Plan 

NTB Non-Tariff Barriers 

OGC Outgrowers companies 

OTE Overall Time Efficiency 

PESTLE Political, Economic, Social, Technological, Legal and Environment 

PRSP Poverty Reduction Strategy Paper 

PS Permanent Secretary 

RRA Rural Roads Authority 

SACCO Savings and Credit Cooperatives 

SDF Sugar Development Fund 

SDL Sugar Development Levy 

SMART Specific, Measurable, Attainable, Realistic, Timed 

SMARTEST Specific, Measurable, Attainable, Realistic, Timed, Engaging, Siring, Team 

STI Science, Technology and Innovation 

SUCAM Sugar Campaign for Change 

SWOT Strengths, Weaknesses, Opportunities and Threats 

TARDA Tana and Athi Regional Development Authority 

TCD Tonnes Crushed per Day 

TCH Tonnes Crushed per Hour 

TNA Training Needs Assessment 

USA United States of America 

VCC Vale Columbia Center 

WTO World Trade Organisation 

Strategic Plan, 2010-2014 v

The sugar industry is a major contributor to the agricultural sector which is the mainstay of the 

economy and supports livelihoods of at least 25% of the Kenyan population. The subsector 

accounts for about 15% of the agricultural GDP, is the dominant employer and source of 

livelihoods for most households in Western Kenya comprising Nyanza, Rift Valley and Western 

Provinces. 

In 2008/2009, the industry produced close to 520,000 tonnes of sugar operating at 56 percent of the 

installed capacity. The industry has the potential of producing over 1 million tonnes of sugar if operated 

at 89 percent of the installed capacity. This would meet the domestic needs, currently standing at about 

700,000 tonnes, and provide a sustained surplus for export. 

By February 2012, the industry will begin operating under a liberalized trade regime after the COMESA 

safeguard measures lapse. In such environment, the industry will have to enhance its competitiveness 

along the entire value chain and reduce production costs by at least 39% to be in line with EAC partner 

states and COMESA sugar producing countries. 

At the moment, the industry is facing several challenges including capacity underutilization, lack of 

regular factory maintenance, poor transport infrastructure and weak corporate governance. Consequently, 

most factories have accumulated large debts amounting KSh. 58 billion. In the new Plan, the industry 

will require KSh 51.1 billion. KSh. 15.3 billion will be used to initiate power co-generation projects in 

various factories. KSh. 12.8 billion will be used to initiate ethanol production projects. The remaining 

KSh. 23 billion will be used to carry out other activities outlined in this Plan. 

As a matter of urgency, the Government through the Privatization Commission has appointedTransaction 

Advisors to work out the final details for the privatization of all publicly owned factories. Alongside the 

privatization, the Government will initiate a programme for financial restructuring of indebted public 

factories. This will be in addition to the continued Government support in the development of essential 

infrastructure such as roads, irrigation as well as basic research and extension. 

The 2010-2014 Kenya Sugar Industry Strategic Plan is intended to be the basis of facilitating the 

transformation required in the sugar subsector. It sets out the framework that will enable the industry 

achieve its vision of being ‘a world class multi-product sugarcane industry’ in the next five years. Despite 

the challenges the industry faces, this Plan underlines the industry’s commitment of being efficient, 

diversified and globally competitive. 

It is my hope that the objectives, strategies and activities recommended in this Plan will be implemented 

fully to revamp and resuscitate the sugar industry. I am therefore pleased to launch the Kenya Sugar 

Industry Strategic Plan 2010-2014. 

Hon. William S. Ruto, M.P, 

Minister for Agriculture 

vi 


Foreword

Acknowledgements 

The formulation of the Kenya Sugar Industry Strategic Plan 2010-2014 comes at a time when 

the industry needs to rethink its direction as it approaches the liberalization of the sugar trade 

regime in 2012. The industry needs to find ways of repositioning itself competitively. This 

would require that the industry goes beyond sugar, think more about sugarcane as a whole and exploit 

market opportunities that the broader sugarcane industry provides. 

The sugar industry stakeholders have been at the forefront in championing for a better, efficient and 

diversified sugarcane industry. It was through their efforts that considerable achievements were realised 

in the outgoing plan. It was also due to their participation and concurrence that the formulation and 

preparation of the incoming Plan became possible. 

First, I wish to thank His Excellency the President of the Republic of Kenya, Hon. Mwai Kibaki, 

EGH, MP and the Right Honourable Prime Minister of the Republic of Kenya, Hon. Raila Amollo 

Odinga, MP for their unwavering support for the sugar sub-sector. I am also grateful for the Minister for 

Agriculture, Hon. William S. Ruto for his robust support and vision for the development of the sugar 

industry. 

Secondly, I would like to thank the Board members and management team of Kenya Sugar Board for 

their invaluable contributions in setting the agenda for the new Plan. Special thanks to Ms. Rosemary 

Mkok, Chief Executive Officer, Kenya Sugar Board and her management team for the leadership they 

provided in the preparation of this Strategic Plan. 

Thirdly, I wish to express my deepest gratitude and appreciation to all industry stakeholders for their 

active participation in the preparation of this Strategic Plan. 

Lastly, I thank Log Associates consultants for facilitating the review and preparation of this Plan. I am 

confident that this Strategic Plan will serve as the industry’s framework for decision making, planning, 

resource mobilisation and performance monitoring in the next five years. 

Thank you. 

Z. Okoth Obado 

Board Chairman, Kenya Sugar Board 

Strategic Plan, 2010-2014 vii

viii 

Executive Summary 

I. Background 

The Kenyan sugarcane industry is a major employer and contributor to the national economy. Sugarcane 

is one of the most important crops in the economy alongside tea, coffee, horticulture and maize. By far, 

the largest contribution of the sugarcane industry is its silent contribution to the fabric of communities 

and rural economies in the sugar belts. Farm households and rural businesses depend on the injection 

of cash derived from the industry. The survival of small towns and market places is also dependent on 

the incomes from the same. The industry is intricately weaved into the rural economies of most areas in 

western Kenya. 

Besides the socio-economic contributions, the industry also provides raw materials for other industries 

such as bagasse for power co-generation and molasses for a wide range of industrial products including 

ethanol. Molasses is also a key ingredient in the manufacturing of various industrial products such as 

beverages, confectionery and pharmaceuticals. 

II. Methodology 

In preparing this Strategic Plan, the consultant adopted a participatory and collaborative approach and 

methodology comprising Literature Review, Key Informants Interviews (KII), Focused Group Discussions 

(FDGs) and Stakeholder Consultative Workshops. Consultations were held with industry stakeholders in 

structured discussions as well as personal interviews with key informants. The consultant also held a validation 

workshop and discussed the recommendations of the Draft Strategic Plan 2010-2014. The validation workshop 

was attended by board members and management team of the Kenya Sugar Board. 

III. Structure of the Report 

This Plan is set out in six chapters. After an introduction in chapter one, Kenya’s Development Agenda 

and Challenges is outlined in chapter two followed by a review of the 2004-2009 Strategic Plan in chapter 

three. The proposed Strategic Plan 2010-2014 is discussed in chapter four. Implementation Strategy 

and Resource Requirements is presented in chapter five. The document concludes with a discussion on 

Monitoring, Evaluation and Reporting in chapter six. 

IV. 2004-2009 Strategic Plan Review Findings 

A review of the 2004-2009 Strategic Plan showed that: 

1. The Plan goals of creating a world class sugar industry were ambitious and had not been 

realized, having been set at a time when the industry was still a high cost producer 

2. The consumption-production gap still persists and growing, delaying the industry’s goal of 

being a net exporter 

3. Yield levels declined from a modest yield level of 73 tonnes per hectare to about 70 tonnes 

per hectare over the last five years. 

4. Farmer support services provided by outgrower institutions and contractors were inadequate 

in quality and timeliness including seed cane, fertilizer supplies, and cane harvesting and 

transportation. 


5. Most the factories, that are the backbone of the industry were struggling in debt and were 

unable to maintain effective crushing capacity, carry out routine maintenance and essential 

rehabilitation and pay farmers on time. 

6. Funding to the industry was inadequate to meet infrastructural development needs such as 

irrigation, roads, research and factories modernization 

7. The safeguards that were put in place to protect the industry including COMESA region 

quotas and taxes had many loopholes 

8. Governance in many of the industry institutions including outgrower institutions and 

publicly owned factories continued to be a big challenge 

Overall, even though the goals of the 2004-2009 Strategic Plan were ambitious, the Plan instrument 

assisted in getting the industry stakeholders to seek a common ground for the good of the industry. 

V. The 2010-2014 Strategic Plan 

Rationale for the Plan 

The Kenya Sugar Industry Strategic Plan for 2010-2014 provides a road map of how the industry intends 

to be a “world class multi-product sugarcane industry.” To enable the Government achieve its strategic 

objectives of being a middle-income country by the year 2030, this revised strategic plan aims at making 

the industry more efficient, diversified and globally competitive to contribute to the overall objective 

outlined in the Agricultural Sector Development Strategy (2009-2020) and the Kenya Vision 2030. 

The Plan provides a framework for setting goals, defining key actions, and mobilizing resources for 

funding programmes in the industry. It is a unifying instrument at the strategic level for industry 

stakeholders, who otherwise are autonomous operators. It lays the ground for enhanced performance of 

the sugar industry premised on a rational utilization of all resources in the sector. 

Vision 

The new vision for the industry is to be ‘a world-class multi-product sugarcane industry’. 

Mission 

The new mission of the industry is to ‘facilitate a multi-product sugarcane industry that is efficient, 

diversified and globally competitive’ through: enhanced industry’s competitiveness through cost reduction 

strategies and efficiency improvements, expanded product base, improved infrastructure and strengthened 

regulatory framework. 

Strategic Goals 

The formulation of this Plan came at a time when the industry needs to rethink its direction as it 

approaches the liberalization of the sugar trade regime in 2012. The industry needs to find ways of 

repositioning itself competitively. This would require that the industry goes beyond sugar, think more 

about sugarcane as a whole, and exploit market opportunities presented by multiple sugarcane products. 

This Plan will therefore put new pressure on the industry to find and invest resources in the new direction 

where the industry needs to go. In the light of the above, the 2010-2014 Strategic Plan is intended to 

seek a more limited but achievable set of goals. The stakeholders have identified and endorsed four 

strategic goals. 

1. Enhancing Competitiveness in the industry in order to transform it to a leaner, lower cost industry 

that can take on its competitors through: 

Strategic Plan, 2010-2014 ix

x 

n Reduction in farm level risks 

n Efficient, reliable harvesting and transport operations 

n Effective, efficient, milling operations 

n Enhanced human resource capacity 

n Streamlined corporate governance 

2. Expanding the product base to take advantage of opportunities created in the production process 

and increase factory profitability through value addition and product diversification by: 

n Initiating power co-generation projects 

n Initiating ethanol production projects 

n Producing industrial sugar and alcohol 

n Encouraging intensification to increase food security 

3. Investing more in infrastructure by: 

n Improving road transport 

n Investing in irrigation 

n Investing in and promoting the use of ICT 

n Increasing funding in Research and Development 

n Modernisation of mills 

4. Strengthening the policy, institutional and legal environment by: 

n Improving the management of the sugar import policy 

n Strengthening Corporate Governance 

n Finalising and implementing the Sugar Regulations 

n Finalising the implementation of the privatisation programme 

n Establishing a coordination mechanism for roads maintenance in the sugar zones 

n Supporting measures to develop a comprehensive policy on co-generations and exploitation 

of bio-fuels and other sugarcane products 

VI. Implementation Strategy and Resource Requirements 

Reporting the progress of implementation will be critical in adjusting strategic directions and measuring 

performance. Progress reports will be made on quarterly basis. The reports will outline in summary 

form projected targets, achievements, facilitating factors and challenges. The reports will be prepared 

and submitted by UCs to the SRF where a summary report will be prepared and submitted to the MC 

for review. Issues that will require policy interventions will be forwarded to the NICC through the KSB 

Board. 


1.1 Historical Background 

Chapter 

Introduction 

Industrial sugarcane farming was introduced in Kenya in 1902. The first sugarcane factory was set-up 

at Miwani 10km north of Kisumu in 1922 and later at Ramisi in the Coast Province in 1927. After 

independence, the Government explicitly expanded its vision of the role and importance of the sugar 

industry as set out in Sessional Paper No 10 of 1965 which sought, inter alia, to: 

n Accelerate socio-economic development 

n Redress regional economic imbalances 

n Promote indigenous entrepreneurship 

n Promote foreign investment through joint ventures 

In pursuit of the above goals, the Government established five additional factories in the 1960s and 

1970s: Muhoroni (1966), Chemelil (1968), Mumias (1973), Nzoia (1978), and South Nyanza (1979). 

Later, several more were to come on stream: West Kenya (1981), Soin Sugar Factory (2006) and Kibos 

Sugar & Allied Industries (2007), bringing the total number of milling companies to ten (10). The two 

older factories ceased operations: Ramisi sugar factory collapsed in 1988 and Miwani sugar factory was 

put under receivership. 

The establishment of the publicly owned factories was predicated on the need to: 

n Achieve self sufficiency in sugar with a surplus for export in a globally competitive market 

n Generate gainful employment and create wealth 

n Supply raw material for sugar related industries 

n Promote economic development in the rural economy and beyond through activities linked 

to the sugar industry 

In support of the above goals, the Government invested heavily in sugar factories, holding about 83% of 

the equity, later reduced to 70% after it divested 36% of its interest in Mumias Sugar Company. These 

resource injections into the subsector were in addition to the resources from the Sugar Development 

Fund (SDF), set up in 1992, that has contributed about KSh. 11 billion into the industry for cane 

development, factory rehabilitation, research and infrastructure development. 

These investments did not, however, help achieve the self-sufficiency in sugar as consumption continued 

to outstrip production. Total sugar production grew from 368,970 tonnes in 1984 to 520,000 tonnes 

in 2008 leaving Kenya a net importer of sugar with imports rising from 4,000 to 220,000 tonnes over 

the same period. The deficit is being met through imports from the COMESA region and other sugar 

producing countries including Brazil, United Kingdom and Mexico. Figure 1.1 shows production and 

consumption status since 2001. 

In 2003, the Government set up a Task Force on the Sugar Industry Crisis 1 whose objective was to 

examine the problems facing the sugar subsector and make recommendations for revitalizing the industry. 

1 Otherwise known as the Amayo Task Force Report dated 1st July 2003 

1 

Strategic Plan, 2010-2014 1

Following the Task Force’s recommendations, the Government made the following decisions: 

(a) Made changes in the management of all publicly owned milling companies with a view to 

improving corporate governance 

(b) Reduced lending rates on SDF loans from 10% to 5% 

(c) Wrote off KSh. 4.7 billion on accrued interest and penalties on SDF loans 

(d) Disbursed KSh. 800 million towards settling arrears owed by milling companies to farmers 

(e) Increased research funding from the Sugar Development Levy by (SDL) doubling the 

allocation from 0.5% to 1% 

(f) Successfully negotiated for a four-year COMESA safeguard to give the industry time to 

restructure and become globally competitive 

2 

Tonnes (x10000) 

80 

60 

40 

20 

0 

2001 

Fig. 1.1: Sugar Production, Consumption, Imports and Exports Trends 

Concurrent with the structural reforms the Government was implementing, the industry continued to 

expand its processing capacity: Kenya Sugar Board (KSB) registered three new mill white sugar factories, 

namely: Butali, Kwale International Sugar Co. Ltd and Trans Mara Sugar Companies with a combined 

potential capacity of 5,000 TCD. It is also expected that an additional mill would be established in the 

Tana River basin, with a potential capacity of 9,000 TCD. With the operationalisation of these new 

factories and the upgrading of the existing mills, the industry’s capacity would be close to 38,000 TCD, 

which would result in a production of about 1 million tonnes of sugar per annum. 

Apart from the regular sugar mills, there are four licensed and operational jaggery millers, namely: 

Lubao, Shajanand, Farm Industries and Homa Lime Jaggeries, who have a combined capacity of about 

300 TCD. There are also in excess of three hundred informal and mostly mobile jaggeries, each of which 

crushes between 3-35 tonnes of sugarcane per day. 

1.2 Importance of the Sugarcane Sector to the Economy 

The Kenyan sugarcane industry is a major employer and contributor to the national economy. It is 

one of the most important crops alongside tea, coffee, horticulture and maize. Currently, the industry 

directly supports approximately 250,000 small-scale farmers who supply over 92 percent of the cane 

milled by the sugar companies. An estimated six million Kenyans derive their livelihoods directly or 


2002 2003 2004 2005 

Year 

2006 2007 2008 

Production Consumption Imports Exports

indirectly from the industry. In 2008, the industry employed about 500,000 people directly or indirectly 

in the sugarcane business chain from production to consumption. In addition, the industry saves Kenya 

in excess of USD 250 million (about KSh. 19.3 billion) in foreign exchange annually and contributes 

tax revenues to the exchequer (VAT, Corporate Tax, personal income taxes, cess). In the sugarbelt 

zones, the sugar industry contributes to infrastructure development through road construction and 

maintenance; construction of bridges; and to social amenities such as education, health, sports and 

recreation facilities 2,3 . 

The sugarcane industry provides raw materials for other industries such as bagasse for power cogeneration 

and molasses for a wide range of industrial products including ethanol. Molasses is also a 

key ingredient in the manufacturing of various industrial products such as beverages, confectionery and 

pharmaceuticals. 

By far, the largest contribution of the industry is its silent contributions to the fabric of communities and 

rural economies in the sugarcane belt. Farm households and rural businesses depend on the injection 

of cash derived from sugarcane. The survival of small towns and market places is also dependent on the 

incomes from the same. The industry is intricately weaved into the rural economies of most areas in 

Western Kenya. 

1.3 Sugar industry Stakeholders 

The Kenya Sugar industry has a wide range of stakeholders, each with a role to play. 

(i) The Government of Kenya (GoK) 

The Government of Kenya (GoK) through the Ministry of Agriculture (MoA) has the overall 

responsibility for the industry’s development. The GoK has a role of supporting the industry through 

regulation, enhancement of competition and fairplay, and provision of an enabling environment for all 

stakeholders. Currently, the GoK is the largest shareholder in the industry. 

(ii) The Kenya Sugar Board (KSB) 

The Kenya Sugar Board (KSB) is a public body set up by the Sugar Act, 2001, under the Ministry of 

Agriculture. The Board is mandated to: 

i. Regulate, develop and promote the sugar industry 

ii. Co-ordinate the activities of individuals and organisations in the industry 

iii. Facilitate equitable access to the benefits and resources of the industry by all interested 

parties 

(iii) Kenya Sugar Research Foundation (KESREF) 

The Kenya Sugar Research Foundation (KESREF) established in 2001, is the scientific wing of the 

industry mandated to develop and transfer appropriate technology in the sugar sub-sector. It also 

carries out socio-economic studies to enhance the development of sugar as a commercial business. 

The Foundation is funded mainly through grants from the Sugar Development Fund (SDF). It has its 

headquarters in Kibos, Kisumu with sub-stations in Mumias, Mtwapa and Opapo. 

2 Bracing for COMESA: Kenyan Sugar industry, Mumias Sugar Company Bulletin 2008 

3 Kenya Sugar Board Strategic Plan (2008-2012) and Year Book of Statistics (2008) 


(iv) Cane Growers/Outgrower Institutions 

Sugarcane farmers (outgrowers) supply 92% of the cane milled. A large number of institutions including 

Outgrower Institutions, Societies, Unions and SACCOs represent these farmers. The role of these 

institutions is to promote, represent and protect the interest of the farmers. The institutions operate 

under the Kenya Sugarcane Growers Association (KESGA). 

(v) Cane Transporters 

Cane transporters are responsible for provision of cane transportation services in the industry.Transporters 

operate under the Kenya Cane Transporters Association (KECATRA). 

(vi) Millers/Jaggeries 

The role of the millers is to make fair return on investment through efficient operation of the sugar mills 

or jaggeries for the production of sugar and other products for sale and making timely payments to cane 

growers. The millers operate under an apex institution known as the Kenya Sugar Manufacturers Association 

(KESMA). Millers are a critical node in the sugarcane industry because of the role they play in value addition. 

The profitability and hence strength of the industry depends on how efficiently they operate. 

(vii) Other Industry Stakeholders 

Other industry stakeholders include: 

n Importers 

n Financial institutions 

n Consumers 

n Special interest groups 

• Kenya Society of Sugarcane Technologist (KSSCT) 

• Sugar Campaign for Change (SUCAM) 

1.4 Scope of Services 

The scope of services outlined in the Terms of Reference for the preparation of the 2010-2014 Strategic 

Plan, were as follows: 

i. Review the current strategic plan and other relevant documentation which shall include, but 

not limited to the National Vision 2030; the Ministry of Agriculture Strategic Plan 2006- 

2010; the Sugar Act 2001; Guidelines for the preparation of strategic plans 2008-2010 from 

the office of the Prime Minister, Ministry of State for Planning, National Development and 

Vision 2030; and prepare a critique of issues for consideration 

ii. Conduct a stakeholders’ workshop to collect views on possible amendment to the current 

document 

iii. Arising from (1) and (2) above, prepare a draft industry strategic plan 2010-2014 

iv. Conduct a workshop for the Board and Management Team to take them through the draft 

industry strategic plan 2010-2014 

v. Prepare a final draft to be presented to the Board, Management Team and sugar 

stakeholders 

vi. Prepare and present the final document 

1.5 Methodology 

In reviewing the strategic plan, the consultant adopted a participatory and collaborative approach 

comprising Literature Review, Key Informant Interviews (KII), Focused Group Discussions (FDGs) and 

Stakeholder Consultative Workshops. 

4 


1.5.1 Literature Review 

The consultant reviewed a wide range of published materials and documents in the course of 

the assignment, including: 

i. Kenya Sugar Industry Strategic Plan (2004-2009) 

ii. Kenya Sugar Board Strategic Plan (2008-2012) 

iii. Kenya Vision 2030, A Globally Competitive and Prosperous Kenya 

iv. Sessional Paper of 2008 on Revitalisation of Sugar industry (March 2008) 

v. Agriculture Sector Development Strategy (2009-2020) 

vi. Economic Recovery Strategy for Wealth and Employment Creation 

vii. Report of the Task Force on Sugar industry Crisis, 1 st July 2003 

viii. Guidelines for Preparation of Vision 2030 based Strategic Plans 

ix. Report on Cost of Cane and Sugar Production (KSB, 2006, 2007) 

x. Year Book of Sugar Statistics (KSB, 2008) 

xi. Kenya Sugar industry Report (EPZA, 2005) 

xii. Working Papers (Millennium Cities Initiative & Vale Columbia Center, 2008) 

xiii. National Policy on Sugar industry (GoK, April 2001) 

xiv. National Sugar Conference Report (October, 2004) 

xv. Economic Governance Reform in the Sugar Subsector (February, 2005) 

xvi. Energy Act, 2006 

xvii. Various internet sources 

1.5.2 Stakeholder Consultative Workshops 

The consultant held two stakeholder consultative workshops in Kisumu. The first workshop 

was held on 21 and 22 May 2009. The second workshop was held on 17 June 2009. The 

workshops’ participants comprised representatives of Outgrower Institutions (OGIs), Millers, 

Transporters, Cane Researchers, Universities, Ministry of Agriculture, KESREF and Kenya 

Sugar Board. These workshops were used as discussion forums to gather information on key 

issues affecting the industry and the way forward. 

1.5.3 Debriefing Workshops 

The consultant conducted three debriefing workshops. The first workshop was held on 10 July 

2009 with the management team of the Kenya Sugar Board. The second and third workshops 

were held on 27 July 2009 and 14 August 2009 respectively with the Board and Management 

Team of KSB. The comments and suggestions from the three debriefing workshops have been 

incorporated in this report. 


6 


Chapter 

2 

Kenya’s Development Agenda 

and Challenges 

2.1 Attaining Vision 2030 

Kenya’s medium and long-term development agenda is set out in the Kenya Vision 2030. The Vision is 

built on the foundation of the Economic Recovery Strategy for Wealth and Employment Creation (ERWEC) 

2003-2007. It is the country’s new development blueprint covering the period 2008-2030. The vision 

aims to transform Kenya into a newly industrialising, middle-income country providing a high quality life 

to all its citizens in a clean and secure environment by the year 2030. The Vision is also expected to be 

a major vehicle for the realisation of the Millennium Development Goals (MDGs). The vision is based 

on three pillars: the economic, the social and the political. These pillars are anchored on macroeconomic 

stability; continuity in governance reforms; enhanced equity and wealth creation opportunities for the 

poor; infrastructure; energy; science, technology and innovation (STI); land reform; human resources 

development; security as well as public sector reforms. The sugar industry will contribute to the 

attainment of three pillars through various interventions discussed below: 

2.1.1 Economic Pillar 

The economic pillar aims to attain an average Gross Domestic Product (GDP) growth rate of 

ten per cent (10 %) per annum and sustain it to 2030. The programs envisaged to move the 

economy up the value chain are tourism, agriculture, wholesale and retail trade, manufacturing, 

business process outsourcing and financial services. The sugarcane industry will play a key role 

in the attainment of the goals set for the programmes in agriculture and manufacturing; and 

to benefit substantially from programmes envisaged in the wholesale and retail, and financial 

services programmes. 

Agricultural Sector: The sugarcane industry already accounts for about 15% of agricultural GDP. In 

the Vision 2030, Kenya aims to build an agricultural sector that is innovative, business oriented and 

modern through: 

n Transforming key institutions to promote agricultural growth 

n Increasing productivity in the sector 

n Land policy and land use reforms 

n Expanding irrigation in arid and semi-arid lands 

n Improving market access for smallholders through better supply chain management 

Torealisetheaboveobjectives,theVisionhasidentifiedsevenflagshipprojectsforimplementation 

by the year 2012. Three of the projects that are relevant to the sugar subsector include irrigation 

development along the Tana River Basin; development and implementation of a 3-tiered fertilizer 

cost reduction programme; and development of an Agriculture land use Master Plan.

Wholesale and Retail Trade: The 2030 vision for wholesale and retail trade is to move 

towards greater efficiency in the country’s marketing system by lowering transaction costs 

through institutional reforms. This involves strengthening informal trade (through investment 

in infrastructure, training and linking it to wider local and global markets). This is expected 

to raise the market share of products (including sugar and co-products) sold through normal 

channels such as supermarkets from 5% to 30% by 2012. The envisaged flagship projects 

such as creation of wholesale hubs, building of retail markets and a free trade port are market 

opportunities that will be exploited by the sugar industry in the incoming planning period. 

Manufacturing Sector: Kenya aims to have a robust, diversified and competitive manufacturing 

sector through: 

n Restructuring local industries that use local materials but are currently uncompetitive e.g 

sugar and paper manufacturing 

n Exploiting opportunities in value addition to local agricultural produce 

n Adding value to intermediate imports 

With fuller exploitation of forward linkages in the value chain, the industry has an opportunity 

to increase significantly its contribution to the manufacturing sector. 

Financial Sector: The 2030 vision for financial services is to create a vibrant and globally 

competitive financial sector in Kenya. The sector is expected to create jobs and promote high 

levels of savings to finance investment needs. One of the most urgent steps towards creating a 

competitive financial environment in Kenya is introducing legal and institutional reforms that 

will enhance transparency in all transactions, build trust and make enforcement of justice more 

efficient. This will be achieved by: 

n Undertaking legal and institutional reforms to make Kenya more competitive as a financial 

centre 

n Consolidation of banks to make them larger and stronger 

n Introduction of credit referencing 

n Strengthening informal and micro-finance institutions and SACCOs 

n Deepening financial markets by raising institutional capital through pension funds, 

expanding bond and equity markets as well as tapping external sources of capital 

The reforms are also expected to strengthen the regulatory and oversight authority which 

in turn will help increase investor confidence in the economy and thus increase investment 

opportunities in the sugarcane sector as well. Increased investment in the sector will lead to 

higher production of sugar and co-products, which will then contribute to the realisation of 

the envisaged 10% GDP growth rate. 

To fully utilize the potential in the sugarcane industry, some essential reforms have been 

identified in the Agricultural Sector Development Strategy 2009-2020 to complement the 

broad reforms envisaged under Vision 2030, these include: 

n Land reforms to reduce inequality and increase intensification 

n Improving efficiencies in the supply chain e.g. enhancing access to input markets, raising 

cane yields, reducing post-harvest losses and upgrading factory capacity 

n Increasing access to credit facilities particularly for farmers 

n Increasing value addition by more processing and product diversification 

n Strengthening corporate governance in the sugarcane industry 


8 

2.1.2 Social Pillar 

The social component addresses issues of equity and social justice; national cohesion, security 

and environmental concerns. It lays great emphasis on the development of education and 

training, better healthcare, improved water and sanitation, sustainable and better environmental 

management as well as vital national attention to gender equity, youth, vulnerable groups, 

housing, and poverty reduction. 

Developments envisaged in the social pillar will be important in providing opportunities for 

social safety nets and greater mobility in the social space. The sugar industry will contribute 

significantly to the social development through provision of employment opportunities and 

wealth creation in the rural areas of Kenya. As a social tool, a vibrant sugar industry will act 

as a catalyst for raising the standards of living in various rural households through direct and 

indirect incomes. The sugar industry will also contribute to the realisation of the goals of 

the social pillar through its corporate responsibility activities in health, education, water and 

sanitation, and recreation activities. 

2.1.3 Political Pillar 

The political component aims to realise a democratic political system predicated on greater 

economic and political devolution, respect for the rule of law, and protection of rights and 

freedoms for all citizens. Under this component, Kenya’s development agenda is to improve 

accountability, reduce impunity and begin the real fight against corruption, and thus promote 

efficiency in the governance and management of public affairs. Good corporate governance 

in the sugar industry is essential in order to create a climate of fairness, transparency and 

accountability especially now when major decisions are needed to make the industry leaner, 

efficient and more competitive. 

2.2 Trade Environment for Kenyan Sugar 

2.2.1 Global Trade Environment and Obligations 

In the last two decades, the world has witnessed rapid economic growth and expansion of trade, 

driven primarily by emerging Asian Tiger economies. The rapid and continued strong growth 

in China and India will further put upward pressure on prices of crude oil. This will continue 

to cause major challenges to Kenya’s sugar industry that is significantly dependent on fossil 

fuel for cane transportation. In addition, there is evidence to suggest that financial market 

challenges in the United States of America (USA) and Europe, are affecting global markets 

thus impacting negatively on Kenya’s trade performance in goods and services. The overall 

effect of the credit crunch will be felt in terms of reduced purchasing power of foreign buyers 

of Kenyan goods, and lower domestic access to credit, grants, and donor support. Capital 

markets will also be more concerned at the likely impact of reducing global trade flows on the 

creditworthiness of countries like Kenya. 

The European Commission (EU) trading block, despite cutting prices by 36%, will still be an 

attractive sugar export destination. At an average price of 22 cents per pound, the EU price is 

still 4 cents above the open trade price. 

International competition from low cost sugar producers is a big challenge to the local sugar 

industry. The average cost of sugar production in 2006/07 in Kenya was KSh. 42,192 (USD 

680) per tonne. The world average cost of production for the same is USD 263 per tonne. As 

a result, importers view Kenya as an attractive market. Kenya needs to bring its cost structure, 


productivity and quality control to levels comparable to those of its competitors in order to 

exploit the opportunities availed by the global market. 

Kenya’s is a signatory to World Trade Organization (WTO), the Cotonou Partnership 

Agreements (ACP-EU), COMESA Free Trade Agreement and the East African Community 

Customs Union. Sugar imports and exports are affected by what happens in these trade 

regimes. 

2.2.2 COMESA and East African Community Customs Union Obligations 

The Kenyan sugar industry is protected by COMESA safeguard measures. The safeguards were 

first granted in 2004 and were to expire in February 2008. Despite the remarkable progress 

made during the safeguard period, the industry was not ready for an open trade regime in 

sugar. Kenya therefore sought and was granted an additional four years of protection from 

March 2008 to February 2012, with a declining tariff and an increasing quota (Table 2.1). 

Table 2.1: COMESA Import Quota 

Year Quota (tonnes) Tariff Rate (%) 

2008/09 220,000 100 

2009/10 260,000 70 

2010-2014/11 300,000 40 

2011/12 340,000 10 

1 March 2012 Open market 0 

The extension was granted subject to certain conditions, including: 

i. Rising sugar import quota in tandem with a declining tariff as shown in Table 2.1 

ii. The Government adopts a privatization plan within the first 12 months and takes 

verifiable steps to privatize the remaining publicly owned factories by 2011 

iii. The industry to implement cane payment system based on sucrose content instead of 

weight 

iv. The Government adopts an energy policy aimed at promoting co-generation and 

other forms of bio-fuel production that will contribute to making the industry more 

competitive 

v. Kenya Sugar Board (KSB) to increase funding for research on high yielding and early 

maturing varieties and spearhead its dissemination by farmers 

vi. The Government to increase funding for road infrastructure 

vii. The Government to submit twice yearly performance reports to the COMESA Council 

on all measures, activities and improvements on the sugar sector’s competitiveness 

Sugar prices in Kenya need to drop by at least 39% to be in line with COMESA levels. Such 

a price drop in less than 3 years is drastic and requires major cost reduction strategies for the 

industry. Although there are eight sugar mills in production, industry sources indicate that 

only West Kenya, Mumias and Kibos & Allied Industries would survive if the safeguards were 

to be lifted now because they can produce sugar at costs similar to other COMESA countries. 

These factories are equipped with modern facilities that can process sugarcane efficiently 4 . 

4 KSB (2008), Cost of Cane and Sugar Production and Personal Interviews 


10 

Table 2.2: Cost of Sugar Production in COMESA and Selected EAC countries 


Country Cost USD/ tonne 

Kenya 415-500 

Sudan 250-340 

Egypt 250-300 

Swaziland 250-300 

Zambia 230-260 

Malawi 200-230 

Uganda 140-180 

Tanzania 180-190 

While Tanzania is not a member of COMESA, Uganda is not a signatory to the COMESA 

Free Trade Agreement. Consequently, the two countries can and do import sugar from outside 

COMESA. These sugars find their way into Kenya through Informal Cross Border Trade 

(ICBT), which poses an unfair competition to the local sugar producers. Similar problems also 

occur through transhipment of sugar via other COMESA countries (such as Egypt) from non- 

COMESA countries (such as Brazil). 

The East African Community (EAC) commenced implementation of a common customs 

union in 2005. The Customs Union encompasses the removal of internal tariffs, application 

of a Common External Tariff (CET) and elimination of Non-tariff barriers (NTB). The CET 

applies zero tariff rates for raw materials, 10% for intermediate goods and 25% for finished 

products. Whilst this is a welcome move, it is worth noting that within the EAC, the cost 

of sugar production is lowest in Uganda followed by Tanzania then Kenya. The practical 

consequence is that even within the EAC; a duty free movement of sugar would imply that 

Uganda and Tanzania producers would pose a challenge to their Kenyan counterparts. The 

EAC Customs Union also include Burundi and Rwanda who are also members of the EAC. 

Ultimately, the custom union might include Southern Sudan and the Democratic Republic of 

the Congo in future. Therefore, it is necessary that domestic production be more efficient and 

competitive and internal prices be realigned with regional levels for the industry is to survive 

the anticipated regional sugar trade liberalization. 

2.2.3 National Challenges 

The country is facing a monumental task of overcoming poverty: 56% of the population lives 

below the poverty line; an unemployment rate in excess of 40%, compounded by an increasing 

number of youths leaving school who are looking for white-collar jobs. These problems are 

exacerbated by high inequality in income and asset distribution and a deteriorating gender 

inequality. The pressure to create jobs in the economy is therefore very high and the sugar 

industry is expected to play a significant role. 

These adverse trends have led to considerable disparities in development among the 

different regions of the country, which is posing a serious challenge to national cohesion and 

development. In addition, insecurity in neighbouring Somalia coupled with homegrown 

criminality, including the emergence of organized gangs and militia and availability of illegal 

firearms have combined to create an adverse investment climate and have put considerable 

pressure on state resources.

The state of infrastructure is unsatisfactory in terms of adequacy and quality because of years 

of deferred maintenance. Roads in particular, require a major effort for rehabilitation and 

maintenance; irrigation infrastructure has stagnated at very low levels since the 1970s – the 

share of irrigated agricultural output is less than 10% of AgGDP. The limited use of irrigation 

has increased farm level risks and hindered a sustainable increase in yields. The infrastructure 

problems are likely to persist unless there is a clear plan and programme of implementation 

over the medium and long-term. For the sugar industry, the process of seeking to build a 

competitive industry will be impeded by an inadequate and poor quality infrastructure. 

Corporate governance has been a challenge for the industry for a long time. The sugar industry 

needstotransformitselftoprofitabilityandefficiencypaththroughsoundmanagementpractices. 

There is need to develop and implement policies that would ensure that the principles of good 

governance are instituted and maintained. This would ensure competitiveness, transparency, 

accountability and sustainability of the industry. 

Land is an important factor of production as it provides the foundation for all other activities 

such as agriculture, water, settlement, tourism, wildlife and forestry, and infrastructural activities. 

However, over the years, administration and management of land has been a challenge due to 

lack of a comprehensive land tenure policy. This has led to fragmentation of land into small and 

uneconomic land units. Small land sizes has led to strong competition for land between food 

crops and sugarcane, which has increased food insecurity. The agricultural sector is developing 

a National Land Use Policy and Master Plan, which will provide guidelines regarding the use 

of land. 

Development projects recommended under Vision 2030 will increase demand on Kenya’s energy 

supply. Currently, Kenya’s energy costs are higher than those of her competitors. Kenya must, 

therefore, generate more energy at a lower cost and increase efficiency in energy consumption. 

To help meet the energy needs, the industry will invest in co-generation with the aim of selling 

surplus power to the national grid. 


12 


Chapter 

3 

Review of the Strategic Plan 

2004-2009 

3.1 Strategic Objectives (2004-2009) 

To turn around the sugar industry, the outgoing Plan identified nine (9) Strategic objectives for 

implementation during the period 2004-2009. These objectives and actions are presented in Annex I. 

3.2 Achievements 

A review of the outgoing Plan revealed that the level of implementation of activities was only about 30% 

of what was intended, many of the activities are work-in progress. The poor implementation of the plan 

was attributed to the fact that the objectives were way too ambitious, not SMART 5 hence extremely 

difficult to implement and monitor. Implementation of some activities was delayed by lack of funds. 

3.2.1 Attainment of the Mission 

The Kenya Sugar Industry Strategic Plan (2004-2009) set out the mission of the industry as to: 

“consistently achieve self-sufficiency and capacity for export of sugar and related products through 

implementation of competitive global industry best practices.” However, this mission was not 

achieved during the Plan period. The industry is still a net exporter. The goal of being globally 

competitive is still a dream because the industry did not implement the structural measures 

that would have brought down costs and increased its competitiveness. But of great concern, 

is the focus on sugar and self-sufficiency without regard to profitability and efficiency. It 

became clear that the sugar industry could not simultaneously seek self-sufficiency and global 

competitiveness. As illustrated by the COMESA conditionality for granting an extension of its 

safeguards, the industry needs to become competitive through major structural changes. This 

calls for a review of the mission. 

3.2.2 Analysis of the Sugar Industry Performance (2004-2009) 

I. Increased Sugarcane Production and Productivity 

Area under Cane 

Area under cane grew from 131,507 hectares in 2004 to 169,421 hectares in 2008 (Fig 3.1), 

representing an increase of 28.8%. The increase in cane area was attributed to the addition of 

Kibos and Soin Sugar Zones as new cane areas. Additionally, apart from SONY Sugar Company 

and Miwani, all the other companies increased areas under cane. Most of the increase was from 

the West Kenya zone, which rose by 198.2% (Table 3.1) 

5 Specific, Measurable, Attainable, Realistic, Timed

Area under cane (Ha) 

169,421 

158,568 

147,730 

144,765 

131,507 

122,580 

126,826 

117,131 

Fig. 3.1: Area under Cane (2001-2008) 6 

Source: Year Book of Sugar Statistics, KSB, 2008 

Table 3.1: Area under Cane 

Company 

2001 

Year 

2004 2008 Increase/ 

Decrease 

Increase/ 

(Decrease) 

Ha Ha Ha % 

Chemelil 10,219 13,341 3,122 30.6 

Muhoroni 11,146 14,259 3,113 27.9 

Mumias (+Busia Zone) 56,792 64,637 7,845 13.8 

Nzoia 19,449 23,899 4,450 22.9 

SONY 20,941 19,322 -1,619 (7.7) 

Miwani 5,560 4,633 -927 (16.7) 

Kibos - 2,622 2,622 New zone 

West Kenya 7,400 22,070 14,670 198.2 

Soin - 4,638 4,638 New zone 

Total 131,507 169,421 37,914 28.8 

Source: Year Book of Sugar Statistics, KSB, 2008 

Cane Varieties 

2002 2003 2004 2005 

In 2008, cane variety CO 945 occupied 35.72% of the total area under cane. Varieties CO 421, 

CO 617 and N14 occupied 28.4%, 13.29%, 10.95% of the total area respectively. KESREF 

developed four new cane varieties (KEN 82-062, KEN 82-472, EAK 73-335 and D8484) 

in 2007. However, the area under cane for Kenyan bred varieties remained just under 5% of 

the gross area. The slow adoption rate to Kenyan varieties is attributed to inefficient factory 

utilisation capacity that translates into delayed harvesting which raises the risks to the farmers, 

and to some extent weak research-extension-farmer linkages. Most farmers do not want to 

adopt early maturing cane varieties because they deteriorate faster and the factories do not have 

the capacity to harvest in good time. 

6 Source: Kenya Sugar Board Strategic Plan (2008-2012), Year Book of Sugar Statistics 

Year 

2006 2007 2008 


14 

Area Harvested, Cane Deliveries and Cane Yields 

Area Harvested: Total area harvested in the nucleus estates and the outgrower farms was 

54,465 hectares in 2008 compared to 54,191 hectares in 2004, indicating an increase of 0.51%. 

This does not however include the area harvested by non-contracted farmers. The mean area 

harvested over the entire planning period was 38.9% of the total area with a standard deviation 

of ±3.4. The largest area harvested was recorded in 2007 (Fig. 3.2). However, the best industry 

average was achieved in 2002, when 42.6% of the area under cane was harvested. 

Average yield (Tonnes/Ha) 

75 

73 

71 

69 

67 

65 

63 

2001 

Fig. 3.2: Area Harvested (2001-2008) 7 

Cane Deliveries: Total cane deliveries for the year 2008 were 5,125,821 tonnes against 

4,660,995 tonnes in 2004, representing a cane supply increase of approximately 10% over 

the planning period. The best supply was recorded in 2007 at 5,204,214. The decrease in cane 

supply in 2008 was attributed to poor rains, post election related violence including a spike in 

cane burning cases which affected operations at the farm, transportation and factory levels. 

Cane Yields: The average cane yield for the year 2008 was 72.9 TC/Ha against 73.8 TC/Ha 

in 2004 representing a decrease of 1.2% (Fig. 3.3). The mean yield for the entire planning 

period was 70.4 TC/Ha with a standard deviation of ±3.1. Highest cane yields were recorded in 

SONY sugar belt (five-year average, 86.0TC/Ha) followed by Nzoia Sugar company (five-year 

average, 83.6TC/Ha) then Mumias Sugar Company (five year average, 70.9TC/Ha). Lowest 

yields were recorded in Chemelil (five-year average, 60.3TC/Ha). The challenge remains in 

respect of raising cane yields. 

7 Source: Kenya Sugar Board Strategic Plan (2008-2012), Year Book of Sugar Statistics 


2002 2003 2004 2005 

Year 

2006 2007 2008

Harvested area (Ha) 

Thousands 

61 

59 

57 

55 

53 

51 

49 

47 

2001 

Fig. 3.3: Average Yield, Tonnes/Ha 8 

II. Increased Sugar Production 

Cane Crushed, Sugar Made and Recoveries 

In 2008, a total of 5,165,786 tonnes of cane was crushed at a sugar recovery rate of 10.03% to 

make 518,026 tonnes of sugar. In 2004, a total of 4,805,887 tonnes of cane was milled to make 

512,835 tonnes of sugar, giving a recovery rate of 10.67. Some sugar factories such as Chemelil 

and Muhoroni are still recording sugar recoveries below the industry standard of 10.1%. The 

industry’s long-term target is to achieve recovery levels of 11.5%. 

Quality of sugarcane crushed deteriorated during the outgoing planning period. In 2008, the 

weighted average pole % cane as a measure of cane quality reduced to 12.7% from 13.2% in 

2004 (Fig.3.4). This was still lower than the industry’s long-term target of 13.50%. The average 

fibre % cane rose to 17.72% from 17.46% in 2004 (Fig.3.4). The long-term industry’s target 

for fibre is 15.50%. 

8 Source: Year Book of Sugar Statistics, KSB, 2008 

2002 2003 2004 2005 

Year 

2006 2007 2008 

Future Outlook for the Sugar industry: 

According to the mini-survey conducted in January 

2009, it was revealed that all zones except West 

Kenya and Kibos have “excess” cane. The industry is 

projected to produce 8,146,913 tonnes against a 

consumption of 6,377,453 tonnes leaving an 

“excess” of 1,769,560 tonnes (28%) 


16 

Cane quality (%) 

Fig. 3.4: Cane Quality (2001-2008) 9 

Time Account 

During the outgoing planning period, the total gross time available for grinding was 70,112 

hours. The actual hours used for grinding over the same period was 40,188 hours representing 

57.3% of the gross grinding time. The industry grinding time standard deviation was computed 

as±417.5 hours (±4.8%). Figure 3.5 shows account of the factory time within the planning 

period under review. 

Time (Hours) 

19.0 

18.0 

17.0 

16.0 

15.0 

14.0 

13.0 

12.0 

Hundreds 

95 

85 

75 

65 

55 

45 

35 

2001 

Fig. 3.5: Factory Time Account 10 




2001 

2002 2003 2004 

Year 

2005 

Pol % cane Fibre % cane 

2002 2003 2004 

Gross grinding time 

Year 

2005 

2006 2007 2008 

2006 2007 2008 

Actual grinding time

Causes of time losses: 

i. Lack of cane resulting mostly from delays in harvesting and transportation 

ii. Frequent factories’ breakdowns due to lack of maintenance 

Based on the above, none of the sugar factories met the standard for Factory Time Efficiency 

(FTE) of 92%. Additionally, all the sugar factories with the exception of Mumias Sugar 

Company, failed to meet the industry’s standard of Overall Time Efficiency (OTE) of 82%. 

Capacity Utilisation 

The combined installed capacity of sugar factories in the country is 24,040 TCD. This could 

produce about 883,691 tonnes of sugar per year. However, during the planning period, the 

average capacity utilised was 13,522.50TCD (56.25%), and even though this was a modest 

increase over the previous period, it is still far below optimal (Fig. 3.6). The decline in capacity 

utilisation needs to be addressed first before expensive options such as capacity expansion are 

sought. 

Capacity utilisation (%) 

70 

65 

60 

55 

50 

45 

2001 

Fig. 3.6: Average Factories’ Capacity Utilization (2001-2008) 11 


2002 2003 2004 2005 

Year 

Future Outlook for the Sugar industry: The 

excess cane in the sugar industry has been occasioned 

mainly by inefficiency in the utilization of the milling 

capacity which currently stands at 56.25%. 

Stakeholders’ Concern: ‘Why can’t KSB address the issue 

of the factories’ inability to crush existing cane? 

2006 2007 2008 


18 

III. Expanded Product Base 

Very little was achieved under this strategic direction. Plans for expanding the product base 

were largely tentative. Partly because the industry was beset with debts and pressing demand 

for factory rehabilitation. The industry also lacked a comprehensive legislation to undertake 

the same. 

During the outgoing planning period, Mumias Sugar Company was the exception, having 

launched a co-generation plant to generate electricity to supply the national grid. Some sugar 

factories such as Muhoroni, despite their indebtedness, were giving out bagasse freely to small 

business entrepreneurs for the production of briquettes and soft boards. Currently, no feasibility 

study has been carried out on the production of ethanol and other cane products. 

Industry records indicate that production of power alcohol was undertaken for sometime at 

the Agro-Chemical and Food Company for blending with petrol. This programme could not 

be sustained because there was no policy and legal framework to regulate its use. In addition, 

there was resistance from the multi-national petroleum companies who feared a reduction in 

their market share. 

This strategic direction needs to be pursued in the next planning period. 

Challenges to Product Diversification: 

i. Co-generation: Uncompetitive pricing mechanism 

ii. Limited technology and factory capacities 

iii. Weak legal and regulatory framework 

IV. Policy and Legal Framework 

The major achievements under this strategic direction were: 

i. The Cabinet approved the Privatisation Plan 

ii. Commenced implementation of the Privatisation Programme 

iii. Drafting of the Sugar Act, 2001 Amendment Bill 

iv. Drafting of the Sugar (General) Regulations 

v. Classification of sugar as a special commodity under the East African Community 

Customs Union hence a CET of 100% or USD 200 per tonne whichever is higher 

vi. ISO certification is on going in some sugar factories. Already five factories (Mumias, 

Muhoroni, Chemelil, Nzoia and West Kenya) are ISO certified. It should be noted that 

ISO certification focuses mainly on the process audits that may not be an indicator of 

satisfactory performance in terms of service delivery. 


Stakeholders’ Concerns: 

1. There are no concrete steps towards 

diversification 

2. Needs to accelerate its intensification programme 

e.g. introducing sweet sorghum in the farming 

community as a way of complementing 

cane farming

Finalization and implementation of all pending policy and legal instruments will be a major 

milestone in the incoming Plan. Pending actions include: 

i. Passing of the Sugar Amendment Bill 

ii. Gazetting of the Sugar General Rules 

iii. Reclassification of sugar as a food 

iv. Finalisation of regulations to restructure outgrower institutions 

V. Privatisation of the Sugar Industry 

During the period under review, the Privatisation Bill was passed by parliament and recently 

the Privatization Commission has commenced preparatory work towards offering the candidate 

factories for privatization. Speed will be of essence because of the urgency to restructure in 

good time to realign factories with the new trade regime expected after the expiry of COMESA 

safeguard measures in 2012. 

Work in progress: 

Stakeholders’ Concerns: Delay in the 

implementation of policy and legal actions 

i. The basic framework for OGIs has been prepared. It envisages OGIs that will become 

effective service providers. 

Stakeholders’ Concerns: Mushrooming of 

many outgrower institution with minimal service 

delivery 

VI. Funding for the Industry 

The funding of the industry was a challenge. This was exacerbated by poor managerial and 

business practices. During the period under review, the industry was not able to attract strategic 

investors to inject the much needed capital in the sub-sector. As a result, most millers and 

outgrower institutions have severe cash flow and liquidity problems. As a coping mechanism, 

some of the millers were not remitting Sugar Development Levy (SDL), which led to greater 

default penalties. The low funding has compounded the financial problems of factories that 

were already highly leveraged. Despite this, there were some notable achievements, including: 

i. Farmer education on the availability of credit facilities 

ii. Development of proposals for funding (KESREF/EU) 

iii. Development Partnerships (EU awarded 6 million Euros to the industry for structural 

adjustments) 

iv. Development of proposals for SDF funding that led to increased funding for the 

industry 


20 

VII. Efficient Supply Chain Management 

Supply chain management is still a challenge in the sub-sector. For the industry to remain 

competitive, improved management actions such as cost cutting and productivity improvements 

along the supply chain should continue and intensified in the next planning period. Notable 

achievements under this strategy included: 

i. Establishment of quarterly consultative forums 

ii. Frequent stakeholder workshops 

iii. Adoption of e-commerce in procurement 

iv. Development of some cost reduction policies 

v. Simplified Cane Payment Formulae 

The industry was not able to establish an accountable and specialized procurement body to 

help stakeholders reduce costs through economies of scale. Each industry institution insisted 

on its own procedures to maintain control of the process. In addition, Parastatals mills are 

bound by the public procurement procedures, which are cumbersome and costly. 

IX. Socio-Economic Development 

The following were achieved during the outgoing planning period: 

i. Policy on social corporate responsibility developed but not yet adopted 

ii. Community empowerment through awareness creation on HIV/AIDS and Malaria 

iii. Environmental health and safety standards developed 

iv. Supported sports development 

The following were not achieved: 

i. Infrastructural development was considered far too modest 

ii. Sugar industry business plan was not realised 

iii. Brand Kenya initiative was still in the initial stages of conceptualization 


Stakeholders’ Concerns: Since its inception 

in 1992, SDF has grown to be the largest source of 

industry funding. Is the SDF funding sustainable? 

Stakeholders’ Concerns: Some companies 

were ISO certified yet the services to farmers were 

still wanting

Stakeholders’ Concerns: Dilapidated 

infrastructure leading to high cost of cane and 

sugar production 

3.3 Lessons from Plan Implementation 

Several interviews and discussions were held to determine the salient lessons learnt since the industry’s 

Strategic Plan (2004-2009) was formulated and the experiences during its implementation. Overall, all 

stakeholders interviewed concurred that the Strategic Plan instrument was good. They also all agreed 

that the outgoing Plan could have achieved more. 

The useful lessons drawn from the implementation of the same were: 

i. Due to lack of a well-institutionalised monitoring, evaluation and reporting system, many 

stakeholders did not report diligently on their operations both current and planned. As a result 

there was no reliable empirical information for accurate forecasting beyond a quarter or two. This 

meant that the data that informed internal decision-making was not the same as was shared during 

the Plan’s quarterly implementation review meetings. This denied the planners the opportunity 

to gather information that would have been essential in facilitating the design and redesign of a 

longer-term strategy for the transformation of the industry. 

ii. Lack of a proper implementation framework was a major shortcoming in the outgoing Plan. 

This made it difficult to implement the strategic actions. Additionally, the objectives were not 

SMARTEST 12 , which made it difficult to measure performances against targets. 

iii. There was no linkage between Plan’s strategic objectives and the national agenda. Thus the 

implementation of the Plan was done in isolation. 

iv. Lack of funds and/or delayed funding led to delays in the implementation of some of the strategic 

objectives. 

v. There was no harmony between the Strategic Plan, work plans, performance contracts and 

budgetary provisions. This reduced efficiency and effectiveness of strategy implementation. 

vi. The role of KSB in carrying out monitoring and evaluation of the Plan’s implementation was full 

of challenges. The Board was not able to enforce and supervise its implementation. 

vii. Lack of a risk mitigation mechanism in the outgoing Plan was a major set- back in the realisation of 

the strategic objectives. Some of the declining outputs were as a result of risk that could have been 

anticipated and mitigated. 

viii. There were extremely high expectations at the onset of the Plan’s implementation. Some of the 

stakeholders had expected the Plan to be an instrument through which the Government would 

12 Specific, Measurable, Attainable, Realistic, Timed, Engaging, Siring, Team effort 


22 

identify funding needs and release funds towards the same. Essentially, this group of stakeholders 

turned to Government as a lender of first resort and seemed disappointed when they learnt 

otherwise. 

ix. High indebtedness by most of the factories led to lack of implementation of some of the strategic 

objectives as some of the funds for implementation were to be from internal sources. This increased 

pressure on the Sugar Development Fund (SDF), which was already inadequate. 

Based on the foregoing, the incoming Strategic Plan (2010-2014) has been formulated taking cognisance 

of the above lessons. 

3.4 Situational Analysis 

At the end of the 2004-2009 planning period, the sugar industry is still struggling to transform itself into 

a vibrant, efficient, diversified and competitive industry. A SWOT and PESTLE analysis demonstrated 

the state of affairs. 

3.4.1 Strength, Weaknesses, Opportunities and Threats (SWOT) Analysis 

The Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of the Kenya’s sugar 

industry involved the assessment of both the internal and external environment in which the 

industry operates. The results are outlined below: 

I. Strengths: The following were identified as the industry main strengths: 

a. Vast potential for expansion of area under cane 

b. Unutilized processing capacity 

c. Strong agronomic research capacity 

d. Resilient, hardworking farmers 

e. Stakeholder participation and concurrence 

f. Protected local markets 

II. Weaknesses: The major weaknesses of the industry are: 

a. Over-reliance on a single product (sugar ) for revenue 

b. Limited irrigation 

c. Weak corporate governance 

d. High level of industry indebtedness 

e. Substantial Government ownership 

f. High post harvest losses (estimated to be at least 5%) 

g. Poor transport infrastructure 

h. Capacity underutilisation (56.25% of TCD) 

i. Low capacity mills (only 12.5% of operating factories above 3,500 TCD) 

j. High costs of production 

k. Inadequate and uncoordinated funding 

l. Lack of performance monitoring and evaluation system 

IV. Opportunities: Possible opportunities for exploitation in the Industry include: 

a. Ready local and regional markets 

b. Agronomic potential 

c. Government goodwill 

d. Proven opportunities for product diversification (co-generation, ethanol) 

e. Sucrose based pricing and cane payment system 

f. Sugarcane production through irrigation 


V. Threats: The threats to the realisation of the vision and mission include: 

a. Continued reduction of the SDL 

b. Informal cross-border trade 

c. Strong import competition 

d. Uneconomic land sub-division 

e. High energy costs 

f. High tax burden 

g. Risk of insolvency of some producers 

h. Food insecurity 

i. Risk of slow adoption of new technologies 

j. Political interference in affairs of the industry 

k. Climate change due to environmental degradation 

l. Malaria and HIV/AIDS 

3.4.2 PESTLE Analysis 

In addition to the SWOT analysis, an analysis of Political, Economic, Social, Technological, 

Legal and Environmental (PESTLE) challenges that the Kenya sugar industry faces was done. 

The analysis helped in understanding the challenges that might hinder the competitiveness 

of the industry. Annex II is a summary of the outcome of the analysis. Overall, the analysis 

showed that poor corporate governance creates uncertainties in the investment climate and may 

hinder the privatization process. It also pointed to the high production costs and the singular 

focus on sugar that had resulted in a non-competitive industry. The analysis also revealed the 

ecological risks of environmental degradation and climate change and the consequent negative 

impact on water and farming systems. 

3.4.3 Stakeholders Comparative Advantage Analysis 

The sugar industry has strong linkages with stakeholders identified in section 1.3 of this 

report. All these stakeholders play important roles in the industry. The industry recognises that 

stakeholders will facilitate the implementation of the incoming plan based on their comparative 

advantages. Annex III is a summary of the stakeholders’ comparative advantage analysis. 


24 

Strategic Plan 2010-2014 

4.1 Rationale for the 2010-2014 Strategic Plan 

The Agricultural Sector Development Strategy (2009-2020), and the Vision 2030 emphasize the need 

for increasing productivity, commercialisation and competitiveness of the agricultural sector as well as 

the need for efficiency and better management in the utilisation of public resources. This is to enable 

the Government achieve its strategic objectives of being a middle-income country by the year 2030. 

The Kenya Sugar Industry Strategic Plan 2010-2014, will be one of the key building blocks for both the 

Agricultural Strategy and Vision 2030 goals. 

The 2010-2014 Strategic Plan will be used to maintain and build on the successes achieved in the 2004- 

2009 Strategic Plan. The revised Plan will aim at consolidating the gains made, identify new options to 

improve efficiency and increase the industry’s competitiveness. It will also take cognisance of the lessons 

learnt in the last five years. 

The Plan will provide a framework for setting goals, defining key actions and mobilizing resources to fund 

programmes that will achieve agreed goals. It will also provide an opportunity for the exchange of ideas 

by a wide array of stakeholders in the industry. It will increase awareness of industry-wide limitations 

and opportunities leading to a greater appreciation of actions to be undertaken. Consequently, there will 

be greater willingness to share information, gather new ideas and more correctly situate local area issues 

in an industry context. 

The periodic consultation forums to review status of the Plan’s implementation will provide opportunities 

for all industry stakeholders to learn from the leaders and innovators in the industry. The Plan will be 

an empowerment tool for internal lobby groups to press their demands for resources and better quality 

services. In addition, it will lay ground for enhanced performance of the sugarcane industry premised on 

proper utilisation of resources, arising from clearly identified goals, targets and verifiable indicators. The 

Plan will set strategic objectives that will help achieve the vision and mission of the industry. 

Above all, the formulation of the sugar industry Strategic Plan 2010-2014 comes at a time when the 

industry needs to rethink its direction as it approaches the liberalization of the sugar trade regime. The 

industry needs to find ways of repositioning itself competitively. This requires that the industry goes 

beyond sugar, think more about sugarcane as a whole and exploit market opportunities that the broader 

sugarcane industry can provide. It also puts new pressures on the industry to find and invest resources 

in the new direction where the industry needs to go. 

4.2 Vision, Mission and Core Values of the Sugar industry 

Following extensive consultations and discussions by the industry stakeholders, KSB management and 

the Board, it was agreed as follows: 


Chapter 

4

4.2.1 Vision 

The new vision for the industry is to be ‘a world-class multi-product sugarcane industry’. 

4.2.2 Mission 

The new mission of the industry is to ‘facilitate a multi-product sugarcane industry that is 

efficient, diversified and globally competitive’. This will be realised by enhancing industry’s 

competitiveness through cost reduction strategies and efficiency improvements, expanding 

product base, improving infrastructure and strengthening the regulatory framework. 

4.2.3 Core Values 

To achieve the Vision and Mission of the industry, stakeholders have pledged to uphold the 

following six core values: 

1. Product and Service Excellence: through excellent product and service delivery it will 

strive to exceed customer expectations 

2. Stakeholder Partnership: to optimise synergies in order to meet set goals by consciously 

and deliberately nurturing team spirit, collaboration and consultation 

3. Integrity: to uphold virtues of integrity through honesty and fairness in all operations 

4. Accountability: to strive to be responsible custodians of all resources entrusted to the 

industry in a professional and transparent manner 

5. Social Responsibility: endeavour to be socially responsible to society and pursue industry 

goals though socially acceptable practices that preserve the environment; promote 

socio-economic development, support vulnerable groups and HIV/AIDS and Malaria 

programmes 

6. Gender Mainstreaming: embrace principles of gender equity, fairness and balance across 

gender 

4.3 Analysis of Challenges along the Sugar industry Value 

Chain 

After five years of implementing the Strategic Plan 2004-2009, the original strategic issues and objectives 

of the sugar industry broadly remain the same in spite of the marked improvement in addressing them. In 

the incoming planning period, the key strategic issues have been derived after a comprehensive analysis 

of the challenges and/or gaps along the industry’s value chain (Fig 4.1). 


CHALLENGES 

• High cost of 

inputs 

• Weak researchextension-farmer 

linkages 

• Low adoption of 

high yielding cane 

varieties 

• Excessive land 

subdivision 

• Delayed payments 

to farmers 

• Limited irrigation 

• Inefficient OGIs 

• Drought, Cane 

fires, diseases 

• Long maturity 

periods 

• Inadequate 

funding (SDF) 

• Lack of collateral 

• Food insecurity 

• Limited irrigation 

26 

Farm level 

operations 

NUCLEUS 

ESTATES 

SMALLHOLDERS 


Pre-Factory 

Operations 

HARVESTING 

TRANSPORTATION 

• Delayed and 

uncoordinated 

harvesting 

• Labour intensive 

• Dilapidated 

infrastructure 

• High post 

harvest losses 

(cane spillage, 

poaching etc.) 

• Inappropriate 

trailer designs 


funding (SDF) 

• Poor cane yard 

management 

• Small and 

uncoordinated 

planting and 

harvesting units 

• Irregular routine factory 

maintenance 

• Low crushing capacity 

• Low sugar extraction 

rates 

• Slow adoption of 

new and appropriate 

technology 

• Lack of industrial 

research 

• High cost of sugar 

production 

• High indebtedness 

• Narrow product base 

• Dilapidated processing 

equipment 

• Inefficient factory 

operations 

• Wastage in cane yard 

• Inadequate funding 

(SDF) 

Fig. 4.1: Challenges along the Sugar Industry Value Chain 

4.4 Strategic Goals (2010-2014) 

Processing Distribution 

CANEYARD 

OPERATIONS 

MILLING 

OPERATIONS 

BY PRODUCTS 

WHOLESALERS / 

RETAILERS 

• High taxation 

• Strong cartel 

of sugar 

importers 

• Limited value 

addition 

and product 

diversification 


funding SDF 

Consumption 

INDUSTRIAL 

CONSUMERS 

DOMESTIC 

CONSUMERS 

• Imports 

cheaper 

• Incapacity 

to process 

industrial 

sugar 

• Poor 

• product 

quality 

• Lack of 

consumer 

representation 

in SDF 

committees 

Arising from the stakeholders’ consultations, SWOT and PESTLE analysis, a number of strategic goals 

were identified along the sugar industry’s value chain. These issues and proposed actions are summarised 

in Fig. 4.2.

Farm level 

operations 

STRATEGIC ISSUES 

Enhance Competitiveness Enhance 

Competitiveness 

• Reduce cost of farm inputs 

• Increase supply of quality 

seed cane 

• Increase adoption rate of 

new technology 

• Intensify farm level 

research 

• Invest in irrigation 

• Increase research funding 

• Encourage good 

husbandry practices 

• Modernise and promote 

the use of ICT 

• Improve cane yard 

management 

• Reduces postharvest 

losses 

• Increase research 

funding 

• Modernise and 

promote the use of 

ICT 

Enhance 


• Intensify industrial and 

applied research 

• Increase processing 

efficiency 

• Reduce cost of sugar 

production 

• Factory rehabilitation 

and modernisation 

• Embrace condition 

maintenance 


promote the use of ICT 

Enhance 


• Harmonise marketing 

pattern 

• Increase market 

research 

• Branding 

• Maintain adequate 

stock levels 


promote the use of 

ICT 

Expand Product Base Expand Product Base Expand Product Base Expand Product Base 

• Encourage intensification 

to increase food security 

• Increase income 

streams from expanded 

product base 

• Implement legislation 

on blending 

• Feed in tariff 

• Implement legislation 

on blending 

Improve Infrastructure Improve Infrastructure Improve Infrastructure Improve Infrastructure 

Rehabilitate rural roads • Consider other 

modes of transport 

• Increase transport 

units 

• Invest in road 

improvement 

• Invest in ICT 

• Embrace e-commerce 

and e-procurement 

Regulatory Framework Regulatory Framework Regulatory Framework Regulatory Framework 

• Pass the Sugar 

Amendment Bill 

• Gazette Sugar General 

Rules 

• Harmonize all sugar laws 

• Finalise and implement 

regulations to restructure 

outgrower institutions 

Fig. 4.2: Strategic Issues 

Pre-Factory 

Operations 

• Establish a sugarbelt 

roads management 

committee 

4.5 Strategic Objectives (2010-2014) 

• Encourage good 

corporate governance 

• Enforce measures to 

eliminate tax evasion 

A synthesis of the 2004-2009 Plan review and discussions with industry stakeholders led to a recognition 

of four (4) key strategic objectives that will be the pillars of the 2010-2014 Strategic Plan. These strategic 

objectives are: 

1. Enhancing industry competitiveness 

2. Expanding product base 

3. Improving infrastructure 

4. Strengthening the regulatory framework 

Processing Distribution 


In order to ensure that the identified strategic objectives are comprehensively addressed, a number of 

strategies have been formulated for each objective. A set of activities have been identified for each strategy 

in order to work towards the achievement of the desired results. A results matrix has been developed 

and presented as Annex IV. The following section therefore presents the strategic objectives, proposed 

strategies and activities/actions to be undertaken under each strategy. 

28 

4.5.1 Strategic Objective 1: To Enhance Sugar Industry Competiveness 

Kenya remains a high cost sugarcane and sugar producer compared to regional competitors. 

The average cost per tonne to produce sugar in Kenya is higher than that of its COMESA 

competitors. In the 2008/09 season, the average industry sugar production cost per tonne was 

USD 428 vs. an estimated cost of USD 263 for its competitors 13 . These costs are too high to 

remain competitive, yet without cost reduction, the industry cannot compete. To bring its costs 

in line with its competitors, the industry needs to reduce its costs by a factor of about 39%. In the 

incoming planning period, 2010-2014, the sugar industry will reduce sugarcane production cost 

by 15% and 22% for plant crops and ratoon crops respectively as shown in Tables 4.1a. During 

the same period, sugar production cost will be reduced by 46% as shown on Table 4.1b. 

Table 4.1a: Actual and Required Cost Reduction in Cane Production per tonne 

Cost (KSh/Tonne 

Base year 2009/10 2010/2011 2011/2012 2012/2013 

Item 

PC R PC R PC R PC R PC R 

Land development 316 43 316 43 316 43 316 43 316 43 

Seed cane 269 0 269 0 269 0 269 0 269 0 

Cane maintenance 362 315 362 315 362 315 362 315 362 315 

Harvesting and 

loading 

206 206 189 189 172 172 150 150 150 150 

Cane transport (24km 

radius) 

600 600 530 530 450 450 400 400 400 400 

Total 1,753 1,164 1,666 1,077 1,569 980 1,497 908 1,497 908 

USD* 22.9 15.2 21.8 14.1 20.5 12.8 19.6 11.9 19.6 11.9 

*Exchange rate – USD 1 = KSh. 76.55; PC – plant cane; R - ratoon 

Source: Log Associates, 2009, Proposed Cost Reduction for Plant and Ratoon Crops 

Table 4.1b: Actual and Required Cost Reduction in Sugar Production per tonne 

Cost (KSh/Tonne) 

Item Base year 2009/2010 2010/2011 2011/2012 2012/2013 

Factory Cost 5,909 5,023 4,269 3,757 3,306 

Other business support 

costs 

26,873 22,841 19,415 17,085 15,034 

Total 32,782 27,864 23,684 20,842 18,340 

USD* 428.2 364.0 309.4 272.3 240.0 

*Exchange rate – USD 1 = KSh. 76.55 

Source: Log Associates, 2009, Proposed Cost Reduction in Sugar Production 

13 Calculations based on figures from Cost of Cane and Sugar Production 2008 by KSB 


The above tables are illustrations costs in two key stages of the production and value chain 

but are not the only areas that require cost reduction. The industry needs to gain production 

efficiencies at all stages of the value chain. One of the key elements of value chain enhancement 

is the expansion of the product base. In Mauritius for instance, the share of sugar revenue in 

the total revenue mix is only about 40%. The remaining 60% is derived from sugarcane coproducts 

including power generation, ethanol, industrial sugar and other products. The 2010- 

2014 Strategic Plan will redirect the Kenya sugar industry in the same direction. To enhance 

the competitiveness of the industry, the following strategies will be implemented: 

Strategy 1.1: Reduction in Farm Level Risks 

Farmers face many risks in the production cycle including unpredictable rainfall, cane fires, 

uncertainty in the timing of cane harvesting among many others. These risks ultimately result 

in increased sugarcane production costs and diminished returns to the farmer. In the incoming 

period, the industry will strive to reduce farm level risks by: 

i. Increasing sugarcane production and productivity through efficient farm operations: 

The search for an efficient and competitive sugarcane industry starts with the farmer. 

Farmers need to increase cane yields through consistent fertilizer application, use higher 

yielding and early maturing varieties and where feasible adopt supplemental irrigation and 

drainage. With good husbandry practises, farmers can profitably increase the number of 

ratoon crops and save replanting costs. The industry will increase the area under sugarcane 

by 32% and yield per hectare by 36% (Table 4.2). During the same period, the ERC% 

sucrose content in cane will be increased to 87.25%. It is also expected that 20,000Ha of 

sugarcane will be planted along the Tana River Basin 14 . 

Table 4.2: Farm Level Annual Targets 

Year Area under Cane (Ha) Yield (Tonnes/Ha) 

2008/2009(Base Year) 169,421 73 

2009/10 177,892 79 

2010/11 196,682 84 

2011/12 206,363 90 

2012/13 215,290 95 

2013/14 224,925 100 

Source: Log Associates, 2009, Projected Area under Cane and Yields 

ii. Developing the use of and financing irrigation for sugarcane production: There exist 

vast potential to increase irrigated sugarcane production in Kenya particularly in the Tana 

River Basin, Nyando Basin and Nzoia Basin. While estimates vary, the potential irrigable 

land in these three basins alone is in the range of 700,000 hectares. In the incoming 

period, the industry will expand cane area under irrigation by about 40,000 hectares 

annually to reach an estimated total of 2000,000 hectares by the end of the Plan period. 

Studies indicate that yields from irrigated fields range from 120-150 TCH compared to 

the 70-100TCH from rain-fed fields. Therefore, 200,000Ha irrigated cane field would 

produce 40,500,000 tonnes of sugarcane. In such controlled growing conditions, the 

sucrose content in the sugarcane can be boosted to an average of 15% compared to 

13.5% for rain-fed conditions. During the planning period 2010-2014, the industry will 

14 TARDA Strategic Plan 2008-2012 


30 

invest in irrigation in the Tana, Nyando and Nzoia river basins. Already, the Ministry 

of Water and Irrigation (MoWI) is working on the details of constructing multi-purpose 

dams in Nyando and Nzoia basins as a lasting solution to perennial flooding in these areas. 

The water from these dams will be used by the industry for irrigation projects. The GoK 

has also stepped up campaigns for developing irrigation infrastructure along the Tana River 

basin. The sugar industry will support these initiatives to fast track implementation. Table 

4.3 outlines the targeted area under cane to be irrigated over the next five-year period. 

Table 4.3: Annual Targets for Irrigated Area under Cane 

Year Irrigated Area (Ha) 

2008/2009(Base Year) 400 

2009/10 44,000 

2010/11 84,000 

2011/12 124,000 

2012/13 164,,000 

2013/14 204,000 

Source: Log Associates, 2009, Proposed Irrigated Area under Cane 

iii. Creating an insurance scheme to cushion the farmers from losses arising in the 

industry: Sugarcane farmers continue to suffer from unforeseen calamities occasioned 

by unpredictable weather patterns with erratic and prolonged periods of drought. Cane 

fires and theft have also become increasingly frequent. During the planning period, 

the industry will pilot and if successful, expand sugarcane crop insurance working in 

collaboration with private sector partners. 

iv. Enhancing results oriented research-extension-farmer linkages to accelerate adoption 

rates of high yielding varieties: Adoption rates of new technology at farm level have 

generally been in the 30% range. Despite the advantages of high yielding and early 

maturing varieties, farmers have shown little enthusiasm for the new technologies. The 

extension messages need to be disseminated more aggressively while keeping in mind 

that the principle of sugarcane farming as a business starts with the farmer who needs 

transparent pricing, and prompt payment to run the farm as a business. In the incoming 

period, sugar factories and outgrowers will phase out long maturing cane varieties like 

CO 421 while replacing them with varieties such as CO 945, EAK 73-335 varieties, 

which are early maturing, rich in sucrose content and resistant to diseases. Table 4.4 

outlines the targeted proportional area under high yielding Kenyan cane varieties over the 

next five-year period. 

Table 4.4: Annual Targets for Proportion of High Yielding Cane Varieties 

Year Proportion (%) 

2008/09(Base Year) 5 

2009/10 10 

2010/11 25 

2011/12 40 

2012/13 45 

2013/14 50 

Source: Log Associates, 2009, Proposed Proportion of High Yielding Varieties 


v. Implementing a land tenure policy that encourages economies of scale: Land 

fragmentation through subdivision is a major threat to plantation crops such as sugarcane. 

A mix of population pressure and cultural practises has led to an escalation of land 

subdivisions. The sugarcane industry will continue to articulate the risks of uncontrolled 

subdivision. It will also design and implement innovative arrangements such as block 

farming 15 and satellite villages 16 that will help increase land sizes under cane cultivation. 

These approaches are consistent with the recommendations of the Agricultural Sector 

Development Strategy 2009-2020 and the Kenya Vision 2030. 

vi. Ratooning: Farmers need to make a fair return on investment. Studies have shown that the 

margins are small for plant crop. Subsequent ratoons, if well maintained, bring good profits 

to the farmer (Table 4.5). Currently, there are only two ratoons in the industry. Tanzania, 

whose production cost is the lowest in EAC region, has 5-8 ratoons. Brazil, which is the leastcost 

cane producer (USD20/t) in the world, has only 20% of the total area under cane on 

new plantings. The remaining 80% is under ratoon crops. Top sugar producing countries are 

known to produce over 10 ratoons, while marginal producers hardly go beyond two ratoons 

hence sustaining losses due to high production costs 17 .To increase earnings from cane farming, 

farmers will be encouraged to increase the number of ratoons to five or more. 

Table 4.5: Profit Margins Plant Crop vs. Ratoon Crop 

Sugarbelt 

Plant Crop 

Profit (KSh/Tonne) 

Ratoon Crop 

Nyando 310 1,107 

Western 

South Nyanza 

621 958 

Light soils 669 946 

Heavy Soils 572 970 

Mean 543 995 

Source: Kenya Sugar Board, 2007, Cost of Cane and Sugar Production Study 

Strategy 1.2: Efficient, Reliable Harvesting and Transport Operations 

On average, harvesting and transport operations account for 48% of the total cost of sugarcane 

production with a range of 37%-52% 18 . In 2008, harvesting, loading and transport costs 

amounted to KSh. 806 per tonne, which translated into KSh. 4.163 billion (assuming all cane 

transported within 24km radius19 ). This huge cost was borne by the farmers. The industry will 

seek to reduce this cost to levels in the range of 10%-15% in the next five years by: 

i. Improving cane yard management: Losses related to a poor transport system are 

translated into unavailability and inefficient movement of sugarcane in the cane yard. This 

leads to capacity underutilisation in the factory. The losses due to capacity underutilisation 

are huge. Good cane yard management is needed to reduce the uneconomically lengthy 

turnaround times by cane haulage units. Efficient cane yard operations will also lead to 

reduced staleness and mitigate losses to the farmer. To improve efficiency of operations, 

cane yards will be rehabilitated, automated and modernised. The monitoring benchmarks 

will be reduced staleness index (Table 4.6) and increased cane delivery trips. 

15 Discussions on Block Farming are presented in XI 

16 Satellite village farming involves consolidating small parcels of land and consolidating farmers into eco-friendly villages 

17 Kegode P, 2005, Economic Governance Reform in the Sugar Sub-Sector 

18 Outgrowers cane production costs, 2007/2008 

19 The true picture is that some cane is transported even at70km 


32 

Table 4.6: Annual Targets for Staleness Index 


Year Staleness Index (Days) 

2008/2009 (Base Year) 4 

2009/10 2 

2010/11 2 

2011/12 1 

2012/13 1 

2013/14 1 

Source: Log Associates, 2009, Proposed Reduction in Staleness Index 

ii. Reducing post-harvest losses: Sugarcane farmers lose huge amounts of revenue as a 

result of post-harvest losses. A 5% loss in 2008 was equivalent to 258,289.3 tonnes of 

sugarcane. The cost of sugarcane ranges between KSh. 2,500-3,100 per tonne. This 

implies that farmers lost approximately KSh. 646-800 million. The industry will reduce 

post-harvest losses to less than 2% through stronger oversight, improved trailer designs 

and infrastructure development (Table 4.7). 

Table 4.7: Annual Targets for Post-Harvest Losses 

Year Percentage post-harvest losses 

2008/2009 (Base Year) 5 

2009/10 4 

2010/11 3 

2011/12 2 

2012/13 2 

2013/14 2 

Source: Log Associates, 2009, Proposed Reduction in Post-Harvest Losses 

iii. Reducing time lapse between cane maturity and harvesting: The average cane maturity 

period is 18 months. Farmers wait for up to 6-12 months before cane is harvested. This has 

made cane farming unattractive to most of them. Some have opted out of cane farming. 

The delays in harvesting operations are attributed to uncoordinated and unpredictable 

harvesting and transport schedules; and inefficiencies in mill operations. All this is 

happening due to lack of proper planning. Information and Communication Technology 

can provide the tools needed to coordinate transport and harvesting operations. Through 

ICT scheduling, the waiting period for harvesting will be reduced to less than a month 

(Table 4.8). The industry will also institutionalise harvesting operations to make it more 

reliable and predictable. 

Table 4.8: Waiting Time between Cane Maturity and Harvesting 

Year Time (months) 

2008/2009 (Base Year) 6-12 

2009/10 4 

2010/11 3 

2011/12 2 

2012/13 1 

2013/14 1 

Source: Log Associates, 2009, Proposed Time Lapse between Cane Maturity and Harvesting

iv. Promoting the use of other modes of transport: Industry players need to experiment 

with different modes of cane transport including light rail and trucks. Animal drawn carts 

are suitable for small factory capacities such as those common in India. 

v. Increasing research funding for harvesting and transport: Research in harvesting 

and transport is lagging behind as most of KESREF research is agronomic. During 

the incoming Plan period, the industry will increase funding to KESREF to explore 

mechanised harvesting operations. While mechanical harvesting may save on labour, it 

increases post-harvest losses and leads to soil compaction. Soil compaction leads to poor 

infiltration, slow drainage and reduced aeration, limiting root growth, nutrient uptake 

and crop yields. KESREF while undertaking research towards mechanisation should seek 

ways of mitigating such setbacks. 

Strategy 1.3: Effective, Efficient and Reliable Milling Operations 

The role of the millers is to make a fair return on investment through efficient operation 

of mills and/or jaggeries for the production of sugar and other products for sale, and make 

timely payments to cane growers. In the next five years, the millers will enhance industry’s 

competiveness by: 

i. Increasing sugar production through efficient processing: All factories need to operate 

optimally through efficient modern style management and carry out regular condition 

maintenance. Valuable time is lost while extensive maintenance is being undertaken. 

In the incoming plan period, sugar production will be increased by 122% by the year 

2014, recovery levels and capacity utilisation increased to 11.5% and 89% respectively 

(Table 4.9). Other efficiency performance benchmarks such as FTE and sugar co-product 

production per tonne will also be monitored. Currently, all the efficiency benchmarks are 

lower than those of major competitors. The various efficiency benchmarks are presented 

in Annex V. 

Table 4.9: Factory Level Targets 

Year Capacity Utilisation Rendement (%) Made Sugar(Tonne) 

2008/9(Base Year) 50 10.0 518,128 

2009/10 61 10.5 565,236 

2010/11 70 11.5 670,830 

2011/12 75 11.5 813,286 

2012/13 80 11.5 982,257 

2013/14 89 11.5 1,151,557 

Source: Log Associates, 2009, Proposed Factory Level Targets over the next Five Years 

ii. Creating economies of scale: Apart from Mumias and the proposed TARDA sugar 

company, all the other sugar factories are below 4,000TCD (Annex VI). As the industry 

seeks to become more efficient and competitive, all options for achieving economies 

of scale will have to be considered. The envisaged privatization programme offers an 

opportunity to increase economies of scale through factory mergers in the Western and 

Nyando zones. Other opportunities for achieving economies of scale will be realised 

through the construction of a new, larger capacity factory in Tana River Basin. Investing 

simply in rehabilitation and upgrading of mills, while necessary, is not sufficient. 


34 

iii. Intensifying industrial and applied research: The Kenya sugarcane industry needs a 

centre of excellence in applied research. This will be achieved through strengthening of 

KESREF research capacity and other innovative approaches such as twinning arrangements 

between factories and local universities to bring together researchers and practitioners. 

iv. Benchmarking with international standards: For Kenya’s sugar products to be 

competitive nationally, regionally and globally, millers must benchmark their production 

processes with international best practices. The industry will achieve this by carrying 

out the following activities: (a) Providing information on production technologies and 

quality standards and facilitating their application, adaptation and uptake; (b) Providing 

information on international best practices for local millers to benchmark themselves; 

and (c) Participating in regional and international negotiations on issues affecting the 

sugar industry 

Strategy 1.4: Enhanced Human Resource Capacity 

The twin problems of bureaucratic interference and poor corporate governance have combined 

to obscure the efficacy of the human resource development programmes in the industry. 

Although Kenya has many educational institutions, both private and public, which provide 

quality education, the industry still lacks adequate skilled human resources. Arrangements are 

underway to create partnerships between the industry and training institutions to produce the 

kind of professionals that the industry needs. Already there are ongoing arrangements with 

Masinde Muliro University of Science and Technology (MMUST), Egerton University, Maseno 

University and Moi University towards the same end. More institutions need to come on 

board particularly middle level, diploma type training institutions to supplement these efforts. 

In addition to the external training programmes, factories and outgrower institutions will 

beef up their internal training capacities. To reinforce a strong skill development programme 

through training, staff recruitment policies will be strictly merit based. The management styles 

will be progressive and results oriented. It is only through a combination of these approaches 

that industry will eventually overcome the current human resource constraints. 

In order to deliver on the vision and mission setout in this Strategic Plan, the industry will 

recruit, train, promote and retain its staff, to effectively deliver quality services to all the 

stakeholders. In this regard, staff will sign performance contracts with respective institutions 

binding them to deliver on targets. To ensure availability of skills, talents, and knowledge 

required, the industry will carry out the following activities: 

i. Undertaking a sugar industry Training Needs Assessment (TNA) and implementing its 

findings 

ii. Preparation of a staff retention strategy though better remunerations, staff motivation 

and workforce compensation 

iii. Signing Performance Contracts; 

iv. Implementing a Performance Appraisal System (PAS) 

v. Strengthening industry’s collaborations with training institutions/universities 

Strategy 1.5: Streamlined Corporate Governance 

There are major challenges in corporate governance in some of the institutions in the industry. 

These challenges are pronounced particularly in institutional and supply chain management 

both in outgrower institutions and at the corporate levels of publicly owned factories. This was 

the result of poor recruitment policies and political patronage. The industry is moving towards 


ISO certification which may help highlight governance weaknesses and if addressed will help 

mitigate some of the challenges. Greater private sector participation in the industry within a 

strong regulatory environment will also complement the steps the Government is taking to 

improve the same. In order to streamline corporate governance in the industry, the following 

activities will be carried out: 

i. Conducting periodic Customer Satisfaction Surveys (CSS) 

ii. Ensuring the undertaking of International Organization of Standards (ISO) certification 

iii. Sensitization of industry on quality standards and certification requirements 

iv. Advocacy on governance, security, high cost of doing business, among others 

v. Improvement of communication amongst industry stakeholders and the rest 

vi. Training on prudent financial management 

4.5.2 Strategic Objective 2: To Expand Product Base 

Most countries are growing cane and producing sugar with the aim of getting a range of 

products and by-products. Cane is cultivated as a strategic product to support industries such 

as: Beverages, Confectionery, Pharmaceuticals, Wines, Spirits, Power Alcohol, Animal Feeds, 

Energy, Chemicals and Fertilizers. The Kenya sugarcane industry has embraced the market 

reality that the industry needs to expand its product base as a means of strengthening its 

competitiveness globally. Therefore, backward and forward linkages need to be exploited 

to their fullest potential. However, in Kenya, mill white sugar is still the core commodity 

produced from sugarcane. Diversification to other co-products such as power co-generation 

and ethanol production for sale is still very limited and largely unexploited. Figure 4.3 illustrates 

the technical potential for sugarcane products. 

Sugar/Solids 

Raw Sugar 

Re�ned Sugar 

Fertilizers 

Industrial uses 

Sugar Cane 

Fig. 4.3: Potential sugarcane products 20 

Mollasses/Juice 

Industrial uses 

Commercial Products 

Ethanol 

Stillage 

20 Log Associates, 2001, Financial Restructuring Strategy to Sony Sugar Company 

Fertilizer 

Methane 

Crop Residues 

Steam and Electricity 

Fuel Briquettes 

Block Board 

Industrial Paper 


36 

The Kenya sugarcane industry has the raw material and favourable market conditions 

to substantially expand its product base particularly into power generation, ethanol and 

industrial sugar and alcohol. To address this area of concern and to increase profitability and 

competitiveness of the industry, the following programmes will be undertaken: 

Strategy 2.1: Value Addition and Product Diversification 

While the industry will seek to exploit the full range of industrial products from sugarcane and 

sugar, the flagship projects under the theme of value addition and expansion of the product 

base will be power generation and ethanol production. Before the initiation of production of 

co-products, it is important that rigorous technical, financial and economic feasibility studies be 

carried out. 

i. Initiating co-generation projects: The demand for electricity has in the past continuously 

outstripped supply, precipitating a significant level of unmet demand. This shortfall is estimated 

to be 380GWh. The shortfall is further exacerbated by frequent drought occasioned by climate 

change. The sugar industry has large potential for co-generation that if fully exploited may 

help meet some of the power demands. Currently, only an estimated 36.5MW is generated 

through co-generation. Apart from Mumias Sugar Company that has initiated a massive cogeneration 

project to produce 35MW of electricity for their own use and for sale, the rest of 

the factories consume all the power they generate. During this Plan period, sugar factories will 

initiate co-generation projects and produce sufficient electricity for internal use and for sale 

to Kenya Power and Lighting Company (KPLC) to help alleviate the shortfall in the country. 

Through the Tana Integrated Sugar Project, it is proposed that 34MW of power would be 

produced through co-generation 21,22 . Chemelil Sugar Company and KenGen have also signed 

a MoU to develop a 20MW power plant to generate electrical power using bagasse 23 . Table 

4.10 shows the potential revenue from co-generation. 

Table 4.10: Potential Revenue from Co-generation 

Miller 


Potential Local 

use 

Sales Rate Hours/ 

year 

Potential 

Revenue (KSh., 

millions) 

Capital Cost 

Estimates 

MW MW MW KSh Hours Per annum KSh, millions 

Mumias 36.3 11.4 24.9 3000 7,128 532 4,9261 W/Kenya 5.4 1.0 4.4 3000 7,128 94 733 

Muhoroni 9.5 1.7 7.8 3000 7,128 167 1,289 

Nzoia 14.2 2.2 12 3000 7,128 257 1,927 

Chemelil 20.0 2.4 17.6 3000 7,128 376 2,714 

SONY 13.8 2.4 11.4 3000 7,128 244 1,872 

Miwani 13.8 2.4 11.4 3000 7,128 244 1,872 

TARDA 36.3 11.4 24.9 3000 7,128 532 4,926 

Total 149.3 34.9 114.4 300 7,128 2,446 20,259 

Source: Log Associates, 2009, Co-generation Potential and Projected Revenues 

ii. Initiating ethanol production projects: Kenya’s fuel consumption stood at 1.4 and 3.3 

million litres of petrol and automotive diesel respectively per day in 2006 with an average 

21 Tana and Athi Development Authority, 2008-2012 Strategic Plan 

22 The Tana Integrated Sugar Project is estimated to cost KSh. 24 billion 

23 KenGen, Five Year Business Plan, 2007-2012

growth rate of 2.8% per year. Projections indicate that Kenya will require 1.7 and 4.1 

million litres of petrol and automotive diesel respectively per day by 2014. By 2030, the 

fuel consumption will be 2.7 and 6.5 million litres of petrol and automotive diesel per 

day. 

Currently, Kenya requires 85 million litres of ethanol per year for a national 10% (E10) 

blend. At current consumption levels, this would need to grow to 93 million and 148 

million litres by 2014 and 2030 respectively. 

It is estimated that a tonne of molasses can be converted into 220 litres of ethanol. In 

2008, the sugar industries produced approximately 180,000 tonnes of molasses, which 

would have produced 39.6 million litres of ethanol. The current ethanol prices in the 

world are between KSh. 30-35 per litre. In Kenya, the price of ethanol is in the range of 

KSh. 55-70 per litre 24 . This would have translated into KSh. 2.178 billions. It is expected 

that the construction of Tana Integrated Sugar Project would produce 22 million litres 

of ethanol, which would be equivalent to KSh. 1.21 billions. 25 With cane deliveries 

proposed in this Plan, it is possible to realise considerable amounts of revenue as shown in 

the Table 4.11. A conventional ethanol plant capital costs about KSh. 1.6 billion 26 . This 

implies that eight operational sugar factories would require 12.8 billion to initiate ethanol 

production projects. 

Table 4.11: Ethanol Production 

Year 

Cane 

Deliveries 

Molasses 

Produced 

Potential 

Ethanol 

Produced 

Cost per litre Potential 

Revenue 

Tonnes Tonnes Litres KSh. KSh, Billions 

2008/09 5,165,786 180,802 39,776,332 55-70 2.2-2.8 

2009/10 5,110,632 182,000 40,040,000 55-70 2.2-2.8 

2010/11 5,808,049 203,281 44,721,021 55-70 2.5-3.1 

2011/12 6,286,269 220,019 48,404,271 55-70 2.7-3.4 

2012/13 7,192,730 251,745 55,384,021 55-70 3.0-3.9 

2013/14 8,010,834 280,379 61,683,422 55-70 3.4-4.3 

Source: Log Associates, 2009, Projected Ethanol Production Potential and Revenues 

iii. Producing industrial sugar and industrial alcohol: Projections of sugar consumption 

indicate that the demand for industrial sugar is expected to continue to increase. Currently, 

the Kenyan sugar industry does not have the capacity for processing industrial sugar and 

industrial alcohol. Miwani was the only factory that could process these products. In the 

2010-2014 Strategic Plan the industry will revive its capacity for producing refined sugar, 

industrial sugar and industrial alcohol. The distillery and sugar refinery at Miwani Sugar 

Company will provide a starting point but the industry as a whole will diversify into these 

products. 

iv. Encouraging intensification to increase food security: To reduce exit from cane farming 

due to pressure from other agricultural produce, the industry will encourage intercropping 

and mixed farming amongst farmers. 

24 Clint Oguya, Agrochemical, personal communications, 31 August 2009 

25 TARDA Strategic Plan 2008-2012 

26 Each factory should effect a comprehensive feasibility study on the same 


38 

4.5.3 Strategic Objective 3: To Enhance Infrastructure Development 

Inadequate, unreliable and poor state of physical infrastructure in the sugar growing zones 

has led to low productivity, high production and distribution costs; and uncompetitive 

products and service delivery. The industry will improve the state of physical infrastructure by 

implementing the following strategies: 

Strategy 3.1: Improve Road Transport Infrastructure 

This strategy will be achieved by implementing the following activities: 

i. Setting up a mechanism to coordinate utilisation of public funds available for road 

infrastructure development 

ii. Increasing SDF allocation for infrastructure development 

iii. Dedicating 15% of sugar tax revenue to infrastructure development in the sugar belt 

Strategy 3.2: Modernise and Promote the Use of Information and Communication Technology (ICT) 

There are numerous opportunities for the application of ICT in the sugar industry including 

business process improvement in sugarcane production, office operations, management of OGIs, 

strategic management, performance monitoring, research and information sharing. Despite such 

array of uses, the industry has not fully invested, modernised and promoted the use of ICT. 

Apart from Mumias Sugar Company that has invested in the Agricultural Management 

Systems (AMS) to coordinate planting, harvesting, transport and milling operations, the ICT 

infrastructure in most of the sugar factories is still at infancy stage. To tap these opportunities, 

the industry will modernise and promote the use of ICT by: 

i. Improving the ICT infrastructure through networking 

ii. Encouraging e-commerce and e-procurement 

iii. Increasing training of staff on the use of ICT including the new fibre optic cable 

architecture 

iv. Increasing information sharing through ICT 

4.5.4 Strategic Objective 4: To Strengthen the Regulatory Framework 

The passing of the Sugar Act, 2001 went a long way in strengthening the regulatory framework 

in the sugar industry. However, some of the supporting regulations have not been approved. A 

number of proposals that would have improved the business environment in the sugar industry 

including tax proposals are pending approval. To strengthen the legal framework, the following 

specific strategies will be undertaken: 

Strategy 4.1: Finalise the Policy and Legal Framework Work- in- Progress and Implement them 

The review revealed that there were pending actions under the policy and legal framework in 

the outgoing planning period. The industry will conclude the pending actions by: 

i. Passing the Sugar Amendment Bill 

ii. Gazetting Sugar General Rules 

iii. Harmonizing all sugar laws 

iv. Finalising and implementing regulations to restructure outgrower institutions 

Strategy 4.2: Strengthen the Management of Sugar Import Policy 

Illegal and uncoordinated importations of sugar are major contributors to the sub-sector 

problems. To address this concern, the industry will: 


i. Enhance capacity for a robust assessment of market conditions 

ii. Support measures to eliminate tax evasion 

iii. Support the implementation of rules of origin 

iv. Strengthen its advocacy role with KRA, Ministry of Trade (MoT), Ministry of Finance 

(MoF) Ministry of Energy (MoE) and MoA 

Strategy 4.3: Strengthen the Framework for Corporate Governance 

Weak corporate governance has been a problem in the industry for a long time. The sugar 

industry needs to transform itself to profitability and efficiency path through sound management 

ethics. To address corporate governance challenges, the industry will: 

i. Ensure prompt payment to farmers 

ii. Strengthen the management of OGIs, through governance and institutional capacity 

building programmes 

iii. Sign sugar industry agreements between millers, growers and other service providers 

iv. Conclude privatisation of sugar factories 

v. Establish and implement the framework of implementation and M&E system for the 

2010-2014 Strategic Plan 

Strategy 4.4: Development of an Institutional Framework for Coordination of Roads Maintenance 

in the sugarbelt 

There exists an opportunity for the sugar industry, through KSB, to collaborate with central 

and local government in the utilisation of the petroleum and the local government cess funds, 

CDF and LATF for road maintenance and rehabilitation. To ensure efficient utilisation of 

these funds, the industry will: 

i. Establish a sugarbelt roads management committee comprising KSB, Millers, OGIs and 

GoK departments responsible for roads. 

Strategy 4.5: Development of a comprehensive policy on co-generation and exploitation of bio-fuels 

and other sugarcane products 

The Energy Act, 2006, sets out the National Policies and Strategies for short, medium and 

long-term energy development in Kenya. The Minister for Energy has the mandate through 

the Act, to promote co-generation by sugar millers and sale of the same to the national grid; 

and promote the production and use of gasohol and biodiesel. However, there is still no 

comprehensive policy and legal framework to regulate the production and use of these products. 

In the incoming period, and working closely with the Ministry of Energy, the industry will: 

i. Support measures to develop a comprehensive policy on co-generation and exploitation 

of bio-fuels and other sugarcane products. 


40 

Implementation Strategy and 

Resource Requirements 

5.1 Implementation Strategy 

Implementation responsibilities of this strategy will be devolved to all levels in order to allow for 

maximum participation of all the relevant stakeholders. Formal existing institutional structures including 

the oversight bodies that undertake regulatory responsibilities will be charged with carrying out their 

appropriate roles. Stakeholder institutions such as millers, OGIs, Cane Transporters, KESREF, KSB and 

farmers will be accorded their rightful say in the implementation of this strategy. 

5.1.1 Implementation Framework 

Successful implementation of the Plan will depend significantly on a practical implementation 

framework, which is easy to coordinate. The Kenya Sugar Board (KSB), having the dual legal 

mandate to develop and regulate the industry should exercise its authority towards the same. 

KSB needs to remain as the voice of the industry in consultation with all stakeholders. Given 

the matrix nature of industry decision-making organs, the Plan’s implementation framework 

will have a wide spectrum of players. 

5.1.2 Institutional Structure 

The implementation of the 2010-2014 Strategic Plan will be the responsibility of the following 

institutional structures: 

National Inter-ministerial Coordinating Committee (NICC) 

The Committee will comprise MoF, MoE, MoA, MoT, MoWI, MoR, MoPW, MoLG and 

MoRDA. It will deal with policy and legislative issues affecting the industry. The NICC will be 

convened and chaired by the Permanent Secretary, Ministry of Agriculture from time to time as 

need arises. 

Monitoring Committee (MC) 

The industry will establish a Monitoring Committee (MC) through a legal notice by the 

Minister of Agriculture to monitor the implementation of this Strategic Plan. The committee 

will sit twice yearly. Structured reports will be prepared and presented to the Committee by 

Monitoring and Evaluation Officer who will be stationed at the Kenya Sugar Board headquarters 

in Nairobi. The Committee will assess progress on the status of Plan’s implementation focusing 

on the industry adjustment and preparedness for a liberalized trade regime. The Committee 

will comprise chief executive officers or chairpersons of KSB, KESMA, KESGA, KECATRA 

and KESREF, representatives from MoA and consumers. The committee will be convened and 

chaired by the Chairman of KSB Board. The MC will report to the NICC through the KSB 

Board. 


Chapter 

5

Stakeholders Review Forum (SRF) 

The Stakeholders Review Forum (SRF) will comprise senior managers of stakeholder 

institutions. The Chief Executive, Kenya Sugar Board, will chair it. The SRF will sit quarterly 

to review the progress of implementation of the Plan based on reports prepared by the M&E 

Officer. 

Unit Committees (UC) 

Factories’, OGIs’ and other stakeholders’ level committees will comprise Unit Committees. 

These committees will be set-up at respective stakeholder units and will meet monthly. The 

committees will carry out the specific activities of the Plan and report progress to senior managers 

sitting at the SRF. The composition of the UCs will be senior technical and managerial staff of 

the various stakeholder institutions. Figure 5.1 outlines the proposed institutional structure 

and the implementation framework. 

National Inter-Ministerial Coordinating Committee 

Monitoring Committee 

Stakeholders Review Forum 

KSB, Board Chairman (Chair) 

KESMA 

KESGA 

KESREF 

KECATRA 

Representative MoA 

Consumer Representatives 

Fig. 5.1: Institutional Structure and Implementation Framework 

Factories 

OGIs 

KESREF 

Other Stakeholder Representatives 

Strategic Objectives Resources Implementation M & E 

Review the appropriateness 

of chosen strategy 

KSB, Board 

Unit Committees 

Match Resources and strategies 

Ministry of Agriculture, PS (Chair) 

Ministry of FinanceMinistry of Energy 

Ministry of Water and Irrigation 

Ministry of Trade 

Ministry of Public Works 

Ministry of Roads 

Ministry of Local Government 

Ministry of Regional Development Authority 

KSB, CEO (Chair) 

M&E O�cer 

Senior Management of 

Stakeholder Institutions 

Allocate resources and 

carry out activities 

Measure targets, outputs, 

corrective action 


42 

5.1.3 Private Sector Participation 

The implementation of this Plan calls for close collaboration and participation of the public 

and private sector. While privatization is not a panacea, private sector participation brings 

with it increased financial discipline; capital injection; new management styles; a stronger 

commercial orientation and some insulation from political interference. The privatization of 

the Mumias Sugar Company, and the subsequent improvement in performance, is a case in 

point. In the interim, any decisions made on factories’ rescue, should be synchronized with 

the proposed privatization actions to avoid investing in low priority interventions. The drive 

towards diversification and value addition is also likely to be realized if done in the context of 

wholly or largely privatized sugar subsector. 

5.2 Resource Mobilisation and Utilisation 

The resources required for the Kenya sugar industry to implement the 2010-2014 Strategic Plan include, 

financial, human and physical resources. Successful implementation of the same will not only depend on 

the quality and commitment of the stakeholders, but also on the availability and efficient utilisation of 

resources required to undertake the various activities. Weak corporate governance, high debt burden and 

lack of funds for investment continue to plague the Government owned mills. This was manifested in 

delayed farmer payments; lack of routine and preventive maintenance; failure to invest in new machinery; 

and the overall degeneration of effective processing capacity. The resources from internally generated 

sources and the Sugar Development Levy are inadequate to meet the scope of activities proposed in this 

Plan. Table 5.1 is a summary of financial resources requirements for implementing the same. 

Table 5.1: Plan Implementation Cost Estimates 

Years (KSh, millions) 

Strategic Objective 

2009/10 2010/11 2011/12 2012/13 2013/14 Total 

Enhance sugar industry 


2,905 2,984 5,725 5,745 950 18,309 

Expand product base 58 55 55 9 5 182 

Enhance infrastructure 

development 

607 1,007 1,007 1,007 607 4,235 

Strengthen regulatory 

framework 

77 77 25 25 25 229 

Total 3,647 4,123 6,812 6,786 1,487 22,955 

Source: Log Associates, 2009, Plan’s Implementation Cost Estimates 

The cost inherent in implementing activities outlined in the strategy will be huge. The industry requires 

at least KSh. 23 billion to implement the activities recommended in this Plan (Annex VII), 15.3 

billion to invest in co-generation and 12.8 billion to invest in ethanol production. The industry needs 

a further KSh. 58 billion to clear all debts on sugar factories and OGIs balance sheets. (Annex VIII). 

Funding this Plan will require a public-private partnership comprising budget resources, government 

devolved funds, internally generated funds and loans, grants from development partners and joint 

venture agreements as discussed below. 

5.2.1 Funding Sources 

To realise the objectives of the 2010-2014 Strategic Plan, there will be various financial sources 

as briefly explained below: 


i. Internally Generated Funds at Factory Level 

Most of the sugar companies with the exception of Mumias, Soin, Kibos and West Kenya 

Sugar Companies are barely making surpluses. The scope for factory generated funds is 

thus limited for publicly owned factories. These publicly owned factories are looking for 

grants and soft debt financing. Nevertheless, the funds generated from internal sources 

will be utilized for factory maintenance, modernisation and rehabilitation. 

ii. Sugar Development Fund 

A sugar development levy of 4% of the ex-factory price is charged by the Kenya Government 

on all sugar sales. This levy is collected by the Kenya Revenue Authority and is managed 

by KSB as the Sugar Development Fund (SDF). After 17 years of implementation, SDF 

has grown to become the single largest source of funding for the industry. The fund 

utilisation per component is shown in Figure 5.2. 

KSB administration 

(35%) 

Research and extension 

(23%) 

Fig. 5.2: SDF Allocation per Component 27 

At the present state, the sugar industry requires funding on a much larger scale than can 

be met by the SDF. The funding gaps will be bridged through alternative financing. 

iii. Soft loan financing and Grants 

Given the importance of the sugar sub-sector in poverty reduction, infrastructure 

development, environmental conservation and energy, the subsector will continue to 

attract concessional funding from development partners. The industry will also continue 

seeking for financial grants from the GoK. 

iv. Loans 

The sugar industry is already attracting donor funds from a variety of sources including 

the European Union (EU) and CFC. The subsector can attract more funds from a range 

of initiatives including energy, environment, water and sanitation, and rural roads, all of 

which have a direct impact on sustainable development and MDGs. The industry will 

therefore prepare and present proposals to willing donors for the purposes of sourcing for 

funds for its development. 

v. CDF/LATF Funds 

The sugar industry will collaborate with institutions implementing the CDF and LATF 

funded projects to harness the resources directed towards infrastructural development in 

the sugarbelt. 

27 KSB, SDF Operational Manual, February 2006 

Cane development 

(17%) 

Infrastructure 

(7%) 

Factory rehabilitation 

(18%) 


44 

vi. Carbon Credits 

Carbon credits are a key component of national and international attempts to mitigate 

the growth of concentrations of greenhouse gases. One carbon credit is equal to a tonne of 

carbon. The sugar factories through cane farming, co-generation and ethanol production 

will produce environmentally friendlier energy sources, which will allow them to enter 

into agreements with Carbon Finance Companies around the world, through Clean 

Development Mechanism (CDM). These credits will be exchanged for hard currencies to 

help finance some of the activities in this Plan 28 . 

viii. Joint Venture Agreements 

Joint ventures are strategic weapons used by organisations to enhance competitiveness. A 

joint venture is an agreement formed by two or more parties to undertake an economic 

activity together. The parties agree to contribute equity, share revenue, expenses and 

control the enterprise. In the incoming Plan period, the industry will enter into joint 

venture agreements with like-minded organisations/corporations to undertake some of 

the strategies/activities highlighted in this Plan. Possible areas for such agreements are 

power-cogeneration, ethanol production and irrigation. 

5.2.2 Human Resources 

Whilst there are many skilled personnel in the country, the industry has excess unskilled staff. 

The industry lacks human resources capacity to carry out the wide range of research that the 

industry needs. Most of the farmer institutions have also failed to provide essential extension 

services to the farmers. To meet the human resources gaps, the industry will carry out staff 

rationalisation to determine the level of human resource requirements under the strategy for 

enhanced human resource capacity. 

5.3 Accountability 

Accountability for the implementation of this Plan and the use of resources will critical since it will 

require proper utilization of financial, human and material resources. This demands that all stakeholders 

in the sugar industry and other sectors take responsibility and be accountable for their use. All institutions 

using industry resources will account for the same in accordance to the laid down regulations and 

procedures. 

5.4 Implementation Risks 

There are several risks to the implementation of this Strategic Plan, including the timely availability 

of resources and political goodwill. This requires that possible risks be analysed to take precautionary 

measures in good time and prevent failure of the Plan’s implementation. The following are some of the 

major risks identified for consideration: 

i. Failure to Realize the Privatisation Process: The survival of the Kenya sugar industry appears 

directly pegged to privatization and subsequent private sector participation in increasing efficiency. 

Failure to divest GoK shareholding in the industry portends doom. 

ii. Poor Plan Implementation: All of the participating institutions need to diligently carry out the 

actions identified in Chapter 4. Failure to carry out the changes needed to make the industry more 

28 Corporations like Mumias, Ken-Gen just to mention a few, have already signed carbon credit agreements through the Clean 

Development Mechanism (CDM). The CDM is a support scheme under the United Nations Climate Convention and the Kyoto 

Protocol. 


efficient and competitive, will pose a major risk to the industry. Individual institutional plans that 

are intended to help achieve the global industry objectives need to be developed and implemented 

diligently. 

iii. Lack of Political goodwill: Political goodwill is necessary for the implementation of this Strategic 

Plan. If political goodwill is lacking, there remains the risk of failure in implementing the same. 

iv. Lack of resources: Resources are essential for the implementation of the activities highlighted in 

this Plan. Inadequate human, financial and other resources pose risks to the implementation of 

these activities. 

v. Insecurity: Insecurity is both a threat to human life and a major risk against the objective of 

attracting investment. It also often causes disruption of planned activities, leads to business losses 

and increases business costs. For meaningful private sector investment, the industry must operate 

in a conducive and secure environment. 

vi. Poor Communication: The absence of an effective and agreed communication strategy may result 

in poor information flow and thereby delay decision-making. This will result in a risk of failure 

and/or delay in the implementation of the Plan. 

vii. Lack of Ownership: The lack of ownership by the stakeholders, for instance farmers, may lead to 

failure in the implementation of the strategic plan. 

viii. Resistance to change/negative attitude: Resistance to change by farmers, transporters, millers and 

outgrower institutions may result in failure or delay in the Plan’s implementation. 

5.4.1 Risk Mitigation Framework 

The matrix below gives a list of the risks, their ranking and suggested mitigation strategies. 

Table 5.2: Risk Mitigation Framework 

No. Risk Priority Mitigation Measure 

1. Failure to realise privatisation 

process 

High Accelerate the ongoing privatisation efforts 

2. Poor Plan Implementation High Close monitoring and tie funding to agreed 

performance outcome 

3. Lack of Political goodwill High Strong lobbying for political goodwill and 

issue-based decisions 

4. Lack of resources High Design and implement a Sugar Restructuring 

Programmes 

5. Insecurity High Liaise with Provincial Administration to 

address insecurity concerns in the sugar subsector 

6. Poor Communication Medium Prepare and implement a communication 

strategy to ensure effective information flow. 

7. Lack of ownership Low Consultation and involvement of 

stakeholders at all stages of strategy 

formulation and implementation 

8. Resistance to change/ 

Negative attitude 

Low Create awareness of the intended changes in 

good time through active participation and 

discussions with stakeholders 


46 

Monitoring, Evaluation and 

Reporting 

6.1 Monitoring 

The successful implementation of this Plan will depend largely on how the activities and outputs are 

effectively monitored and evaluated. The Plan’s monitoring will be through the institutional arrangements 

defined in section 5.1.2 of this report. Monitoring will be done using the instrument provided in Annex 

IX. The instrument has expected outcomes, indicators and annual targets for gauging performance. 

Monitoring will help determine whether the implementation is on track; establish the need for any 

adjustment in light of the changes in the sugar subsector and political environment. 

6.1.1 Monitoring Mechanism 

Institution Strategic Plans 

For ease of monitoring, the sugar industry stakeholders will align their objectives and strategies 

with the Kenya Sugar Industry Strategic Plan 2010-2014. The individual strategies should have 

clearly defined activities with specific timelines for implementation. The realisation of the 

individual strategic plans will feed into the overall objectives of the sugar industry. 

Supervision 

The KSB will carry out supervision of the overall Plan’s implementation and prepare quarterly 

reports. This will require the cooperation of all industry stakeholders. Findings from the 

supervision missions will be presented to the MC and follow-up actions discussed. KSB will 

ensure prompt submission of the reports. 

Service Delivery Surveys 

The MC will organize surveys on the quality of service delivery. The information from such 

surveys will be disseminated to all the stakeholders. 

Quarterly Review Meetings (QRM) 

Stakeholders review sessions will be held quarterly with stakeholders’ representatives. This is 

will keep the Plan’s activities and outputs on track during implementation, and enable the 

stakeholders to identify and take necessary actions to address emerging challenges. This is will 

give the industry a chance to interrogate what is being done. The QRM will be undertaken 

through the SRF. 

6.2 Evaluation 

The Plan will be subjected to four evaluations, which are two Internal Annual Evaluations; Mid- 

Term Evaluation and Review; and Final Evaluation. The evaluations will be done using the indicatormonitoring 

tool provided in Annex X. 


Chapter 

6

6.2.1 Internal Annual Evaluation (IAE) 

To ensure that the experiences of the previous Plan’s implementation are not repeated, the 

industry will undertake two internal annual evaluations of the Plan. The first annual review will 

be held at end of the year 2010. The second annual review will be held at the end of the year 

2013. The two evaluations will be done by an independent team of consultants with experience 

in the sugar industry. 

6.2.2 Mid-Term Evaluation and Review (MTER) 

The purpose of the Mid- Term Evaluation and Review (MTER) will be to assess the extent 

to which the Plan is meeting its implementation objectives and timelines. The MTER will be 

carried out in December 2011, three months before the expiry of the COMESA protocol and 

will therefore provide an opportunity to: (i) assess readiness for the open trade regime; and (ii) 

provide recommendations for the remaining phase of the Plan. The MTER will be done by an 

independent team of consultants. 

6.2.3 Final Evaluation 

The prime purpose of the Final Evaluation for the Strategic Plan 2010-2014, expected to be 

carried out at the end of May 2014, will be to address four issues: 

• Effectiveness (Impact): The extent to which the implementation of activities met the 

stated strategies and objectives 

• Sustainability: Assesses the sustainability of the achievements made 

• Lessons Learnt: Document lessons learnt 

• Terms of Reference (TORs): Prepare the TORs for the next strategic plan. 

6.3 Reporting 

Reporting the progress of implementation will be critical in adjusting strategic directions and measuring 

performance. Progress reports will be made on quarterly basis. The reports will outline in summary form 

projected targets, achievements, facilitating factors and challenges. The reports will be prepared and 

submitted by unit committees to the SRF, where a summary report will be prepared and submitted to 

the MC for review. Issues that will require policy interventions will be forwarded to the NICC through 

the KSB Board. 

6.4 Information Sharing 

Information sharing and reporting will be key in reviewing this Plan. It will also provide a mechanism for 

monitoring and evaluation. Various stakeholders have established websites through which information 

can be shared. Additionally, the industry stakeholders will be meeting quarterly to share amongst 

themselves and report emerging challenges. Reports on the implementation status of the Plan will also 

be made available quarterly and annually by KSB. 

6.5 Conclusion 

The revised Kenya Sugar Industry Strategic Plan 2010-2014 focuses on objectives, strategies and 

activities that will enhance industry’s competitiveness. If truly implemented, it will lay a firm foundation 

for the industry to become efficient, diversified and globally competitive. 


Annex I: Strategic Objectives and Actions (2004-2009) 

48 

Strategic Objective Strategic Actions 

1. Increase sugarcane 

production and 

productivity 

2. Increase sugar 

production 

3. Expand product base • Product diversification 

4. Strengthen Policy, 

Legal and Regulatory 

Framework 

5. Privatisation of Sugar 

Institutions 

6. Sustainable Funding for 

Industry, 

7. Stream Supply Chain 

management 

8. Adopt World Class 

Standards 

9. Enhance Socio- 

Economic Development 

and Environmental 

Management 


Annexes 

• Strengthening research –extension- farmer linkages 

• Irrigation Development 

• Motivation to cane farmers to intensify production 

• Land reform in sugar growing areas 

• Expansion of sugar cane growing into new areas 

• Enhance management capacity within the industry institutions 

• Optimise existing factory capacity 

• Modernising existing factories 

• External interventions 

• Policy reforms on taxation 

• Classify sugar as special commodity 

• Review and implement policy of Revitalisation of Sugar industry 

• Institutionalise inter-ministerial standing committee on sugar 

• Internal interventions 

• Review Sugar Act 2001 and its regulations 

• Develop and document procedures for arbitration among stakeholders 

• Adopt good corporate governance practices 

• Implement industry standards on Environmental Health and Safety 

• Promotions to attract financial service providers 

• Management and financial restructuring 

• Transformation of farmer institutions from advocacy to service provision 

• Promotion of private sector partnerships 

• Divestiture of GoK shareholding 

• Internally generated funds 

• Sugar Development Fund (SDF) 

• External Sources 

• Institutionalisation of policies, strategies and structures 

• Monitoring cost reduction programmes 

• Establishment of Central procurement body for the industry 

• Transforming Stakeholder apex to central procurement units 

• Lobbying for e-commerce in procurement 

• Establish industry consultative forum to negotiate on pricing, costing, timing 

and improved provision of goods and services 

• Develop and implement appropriate standards and policies 

• Establish a national quality control laboratory for the industry 

• Develop and adopt appropriate service delivery standards 

• Develop ICT strategies and systems for the sugar industry 

• Benchmarking with best practices in the world 

• Keeping up to date trends and statistics from leading global sugar producers 

• Adapting to the existing multilateral trading arrangements 

• Enhance industry contribution to socio-economic development in sugar 

growing areas and the country as a whole. 

• Improve industrial relations in the sub-sector 

• Development and improvement of infrastructure 

• Increased environmental health and safety 

• Effective marketing strategy

Annex II: PESTLE Analysis 

Issues Global Regional National Effect 

• Uncertain investment climate 

• Regional crises diverting attention and 

resources from local needs 

• Lack of a long term roadmap for the 

development of the sugar belt 

• Ministry of Agriculture starting to focus 

but it needs to be structured 

• Piracy along the Somalia coastline 

• Conflicts (Darfur Crisis, Southern Sudan, 

Eritrea/Ethiopia) 

Political • World focused mostly on Governance 

and 

• Human Rights 

• Terrorism 

• Unfair competition 

• A disenabling investment climate 

• Strong competitive pressure 

• Need for increased efficiency in the 


• Need for increased funding for market 

development 

• Economic crimes (money laundering, 

corruption, fake currencies), 

• Increasing Oil prices 

• Food insecurity 

• Poor enforcement of tax laws and 

International Agreements and 

• Standards 

• Counterfeit goods 

• High inflation 

• Underdeveloped export market access 

for sugar 

• Low funding for export market 

development 

• Increasing food prices 

• Obligations under Regional 

Agreements 

• And Standards 

• Non-Tariff Barriers (NTBs) 

• World Trade Organization (WTO) 

agreements on bilateral arrangements 

Economic • Increasing Oil prices 

• Increasing food price 

• Counterfeiting 

• WTO) agreements on bilateral trade 

• Standards 

• Non-Tariff Barriers (e.g Minimum 

Residue Limits) 

• Sanitary and Phytosanitary standards 

• Language barriers and insecurity 

increase costs of doing business 

• Diseases leading to absenteeism and 

low labour productivity 

• Drug abuse reduces productivity 

• High population growth rate 

• Low literacy levels 

• High HIV/AIDS and malaria prevalence 

• Language barriers 

• High crime rates 

• Language Barriers 

• High HIV/AIDS prevalence 

• Regional conflicts 

Social • Language barriers resulting in 

additional transactional costs 

• Drug trafficking and Drug abuse 

leading to reduced productivity 

• Human trafficking and brain drain 

• Lack of competitiveness 

• Need for an injection of capital to 

assist in Mill modernization through 

privatization and dilution of public 

capital holding in sugar factories 

• Private Mills (Mumias, West Kenya, Soin 

and Kibos) have invested in upgrades, 

but parastatals Mills are mired in debt 

and unable to upgrade or even carry 

out routine maintenance 

• Low funding for Research and 

Development 

• Slow pace of transformation to shorter 

maturity cane varieties 

• Low funding for Research and 

Development 

Technological • High cost of advanced technologies 

• Low negotiation capability 

• Low adaptability of advanced 

technology 


• Need for simplification of regulations 

• Need for increased corporatization 

• Need for stricter contract enforcement 

• Performance standards needed for 

Judiciary 

• Weak institutional capacity in the sugar 

industry 

• Bureaucratic regulatory and 

administrative framework 

• Few qualified personnel on commercial 

law (both bench and bar) 

• Informality of businesses 

• High legal costs 

Legal • High legal costs • National Ratification of Regional 

Treaties 

50 

• Climate change and desertification 

Slow domestication of Multilateral 

Environmental Agreements(MEAs) 

Environment • Climate change and desertification 

• Slow domestication of Multilateral 

Environmental Agreements(MEAs) 


• Climate-dependent sectors such as 

agriculture adversely affected 

• Degrading environment impacting the 

poor adversely 

• Rapid degradation of water towers, 

biodiversity and habitats 

• Declining availability of fresh water 

• Pollution and waste management 

• Poor enforcement of environmental 

standards 

Annex III: Stakeholder Comparative Advantage Analysis 

Stakeholders Responsibilities Comparative Advantage Target What they can do to the sugar industry 

• Policy formulation • Overall sector • Link to the government 

• Provide policy direction in the sugar 

sub-sector 

• Sector coordination and policy 

formulation 

Government 

(MoA) 

• Issue licenses 

• Provide regulations, procedures 

and guidelines on various areas of 

operation in the industry 

• Efficient, effective quality service 

delivery 

• Regulation 

• Coordination 

• Strategy setting 

• Advisory 

• Regulate, develop and promote the 


• Coordinate activities within the 

industry 

• Facilitate equitable access to benefits 

and resources 

Kenya Sugar 

Board 

• Conduct more research into new 

early maturing seed varieties that 

are disease resistant and have high 

sucrose content 

• Increase farmer training 

• Increase research on irrigation, 

processing, harvesting , transport 

and marketing 

• Enhanced research-extension 

–farmer linkages 

• High and sustained technology 

adoption rates 

• Research 

• Innovation 

• Breeding appropriate cane varieties 

• Recommending appropriate 

fertilizers 

• Appraising, studying, developing 

and monitoring technologies 

• Pest and diseases, agronomic 

packages, farm machinery, 

environment and safety issues in 

sugar. 

• Carry out industrial research 

KESREF 

KIRDI

• To be business oriented 

• Ensure food security through 

intercropping, border cropping 

• Reduce land subdivision 

• Cane Production • Increased cane production 

• Competitive return to land and 

labour 

Farmers • To produce quality cane with high 


• Adopt recommended crop 

husbandry practices 

• Elect competent representatives 

• Must become key partners in the 

drive for efficient sugar production 

• Input supply • Must seek to satisfy farmers, 

transporters 

• Coordinate all cane growing 

activities 

• Supply quality seed cane 

• Harvest and transport cane 

Outgrower 

Institutions 

• Increased efficiency in sugar 

processing 

• Processing • Increased sugar and co-products 

production 

Sugar Millers • Purchase and mill sugarcane 

• Market sugar and its by-products 

• Grow, harvest and transport cane 

• Encourage technology adoption and 

its implementation 

• Advocate for efficient supply chain 

management 

• Advocacy for outgrowers and millers • Advocacy • Effective service delivery to farmers 

• Efficient supply chain management 

Other 

Institutions: 

KESGA,KESMA, 

Transporters • Cane Transport • Transportation • Reduced Transport cost • Provide transport services 

• Reduce on-transit cane losses 

• Demand quality and competitive 

prices 

Consumers • Buy sugar • Feedback on sugar quality • Good quality sugar at competitive 

prices 

• Innovate new products and 

technologies of sugar production 

• Broaden product base 

• Market intelligence 

• Science, technology and innovation • Highly trained personnel 

• Increased collaboration 

• Training 

• Research 

• Innovations 

Universities 

and Research 

Institutions 


Annex IV: Results Matrix (2010-2014) 

52 

Strategic Objective 1:- To Enhance Sugar Industry Competitiveness 

Strategy Activity Responsibility Output Output Indicators Timeframe 

2010-2014/ 

Continuous 

Farmers, KESREF, OGIs, Millers, KSB • Higher yields at lower costs • Area under cane, yield levels/ha, 


Increasing sugarcane production and 

productivity through efficiency farm 

operations 

Reduction in Farm 

Level Risks 

2010-2014/ 

Continuous 

KESREF, MoA, Farmers, MoWI, KSB • Higher yields • Area under irrigation 

• % of water recycled into irrigation 

Developing the use of and financing 

irrigation for sugarcane production 


2011 

KSB, Millers, Insurance firms, Farmers • Lower farm level risks • % of incidence covered 

• Change in farm level investment 

Creating an insurance scheme to cushion 

the farmers from losses arising in the 

industry 

2011/ 

Continuous 

• Increase adoption to high 

yielding varieties 

KESREF, Farmers, OGIs, Millers • Higher productivity 

• High of high yielding and 

early maturing varieties in 

the total crop 

Enhancing results oriented researchextension-farmer 

linkages to accelerate 

adoption rates 

• Reduced land subdivision 2011/ 

continuous 

Farmers, KSB, KESREF, MoA • Block farming 

• Satellite villages 

Implementing a land tenure policy that 

encourages economies of scale 

• % of ratoon crops 2010/ 

continuous 

Ratooning Farmers • Reduced cane production 

cost 

2010-2014/ 

Continuous 

• Reduced staleness index 

• Improved sugar quality 

Improving cane yard management Millers, Transporters • Lower Caneyard losses 

• Reduced cycle times 

Efficient, Reliable 

Harvesting and 

Transport Operations 

Reducing post-harvest losses Transporters, OGIs, Farmers • Increased cane supply • % of losses 2010-2014/ 

Continuous 

2010-2011 

• % of cane harvested at maturity 

• Timeliness of evacuation from 

farm 

• Cycle time lapse 

• Timely harvesting 

• Efficient scheduling of 

transport operations 

Transporters, Millers, Farmers, cane 

cutters 

Reducing time lapse between cane 

maturity and harvesting 

2012 

• Lower unit transport cost • Share of transport in production 

cost 

Farmers, Transporters, Millers, KSB, 

MoA (GoK) 

Promoting the use of other modes of 

transport 

2012 

• % of harvesting and 

transportation in total cost 

KESREF, KSB, Millers, MoA • Improved cane transport 

system 

Increasing research funding for harvesting 

and transport

2010-2014 

• Capacity utilised, FTE, recovery 

rates, 

Millers, Private Sector, KSB, KESREF • Higher sugar production at 

lower cost 

Increasing sugar production through 

efficient processing 

Effective, Efficient 

and Reliable Milling 

Operations 

2012 

Creating economies of scale Millers, KSB, MoA, GoK, Private sector • Lower production costs • Integration of factories, mergers, 

acquisitions 

Intensifying industrial and applied research KESREF,KIRDI, Universities • New technologies • New technologies introduced 2014 

KSB, Millers, OGIs • Best practices • International standards adopted 2014 

Benchmarking with international 

standards 

2011 

KSB, Millers, OGIs, KESREF • Number of Staff trained • Efficient, effective and motivated 

staff 

• Optimal staff levels retained 

Undertaking training needs assessment 

and implementing its findings 

Enhanced Human 

Resource Capacity 

Preparation of staff retention policy Millers, KSB, OGIs • Optimal staff levels • Number of staff retained 2010/ 

continuous 

2010/ 

continuous 

Signing of performance contracts Millers, OGIs, KESREF, KSB • Optimal performance • Number of performance contracts 

signed 

Millers, OGIs, KSB, KESREF • Good Performance • Level of targets being achieved 2010/ 

continuous 

Implementing a performance appraisal 

system 

2014/ 

continuous 

• Collaboration agreements 

reached 

Millers, KESREF, OGIs, Universities • Increased skilled human 

resource pool 

Strengthening industry collaboration with 

training institutions 

2012 

• % of customers receiving quality 

service 

KSB, Millers, OGIs, KESREF, Consumers • Report on quality service 

delivery 

Conducting periodic Customer Satisfaction 

Surveys(CSS) 

Streamlined corporate 

governance 

Millers, KSB, Consumers • Quality standards • ISO Certification 2012 

Ensuring the undertaking of International 

Organization of Standards (ISO) 

certification 

2012 

Millers, KSB, Consumers • Quality Standards • % of customers receiving quality 

service 

Sensitization of industries on quality 

standards and certification requirements 

2012 

All stakeholders • Good corporate governance • % of factories that are self 

sustaining 

Advocacy on governance, security, high 

cost of doing business, among others 

• Rate of information flow 2012 

All stakeholders • Efficient communication 

systems 

Improvement of communication amongst 

industry stakeholders and the rest 

• Profit margins 2012 

Training on prudent financial management All stakeholders • Efficient financial 

management 


Strategic Objective 2:- To Expand Product Base 


Value Addition and Encouraging intensification to increase OGIs, KESREF, Millers, Farmers • Integrated and intensive • Number of famers practising 2010-2014 

Product Diversification food security 

farming 

integrated farming 

• Increased food supply • Number of farmers exiting cane 

production 

54 

KSB, Millers • Reports • Number of studies completed 2011 

Commissioning and undertaking value 

chain analysis and product diversification 

studies (feasibility, technological and 

economic studies) 


2011 

• Recommendations adopted • Number of viable 

recommendations 

Farmers, OGIs, Transporters, Millers 

and Distributors 

Implementation of recommendations 

from the value chain analysis and product 

diversification study 

2012 

Millers, KSB • New product lines • Number of new products 

reaching the market 

Developing diversification programmes 

tailored to suit specific factory 

requirements in line with market 

opportunities 

2013 

Initiating co-generation projects Millers, Private sector Partnerships • Electricity • Amount of electricity supplied to 

the grid 

Initiating ethanol production projects Millers, Private sector Partnerships • Ethanol • Litres of ethanol produced 2013 

Producing industrial sugar and alcohol Millers, Private sector Partnership • Industrial sugar and alcohol • Tonnes of industrial sugar 2013 

produced 

• Litres of industrial alcohol 

produced 

Strategic Objective 3:- To Enhance Infrastructure Development 


KSB, GoK, MoR, MORDA, MOLG • Coordinating mechanism • Amount fund allocated to roads 2010-2014 

Setting up a mechanism to coordinate 

utilisation of public funds available for 

road infrastructure development 

Improve road 

transport 


KSB, SDF committee • Infrastructure development • SDF allocation to infrastructure 2010-2014 

Increasing SDF allocation for infrastructure 

development 

2010 

KSB, MoA, MoF, GoK • Improved infrastructure • Amount of sugar tax revenue 

allocated to sugar 

Dedicating 15% of sugar tax revenue to 

infrastructure development

All stakeholders • Networked sugar industry • Common sugar industry database 2011 

Improving the ICT infrastructure through 

networking 

Modernise and 

promote the use of ICT 

• Number of e-procured items 2012 

All stakeholders • Streamlined procurement 

procedures 

Encouraging E-commerce and 

E-procurement 

KSB. OGIs, Millers • Pool of skilled personnel • Number of staff trained 2010-2014 

2010 

• Number of stakeholders with 

websites 

Increasing training of staff on the use of 

ICT 

Increasing information sharing through ICT KSB, Millers, OGIs • Information market place 

e.g. Website, emails etc. 

Strategic Objective 4:- To Strengthen the Regulatory Framework for the Sugar industry 


Pass the Sugar Amendment Bill Parliament, MoA • Revised Sugar Act 2010 

Gazette the Sugar General Rules KSB, MoA • Sugar General Rules 2010 

Harmonise all sugar laws All stakeholders • Sugar Laws 2010 

Finalise and implement regulations to KSB, MoA, OGIs, Farmers • Efficient outgrower 

2010 

restructure OGIs 

institutions 

• Accuracy of estimates 2010-2014 

Finalise the policy 

and legal framework 

work-in-progress and 

implement them 

KSB, GOK • More accurate of import 

requires 

Enhance capacity for a robust assessment 

of market conditions 

Strengthen the 

management of Sugar 

Import Policy 

• % change in SDF collection 2010-2014 

Support measures to eliminate tax evasion KRA, KSB • Higher revenues to KRA and 

SDF 

KRA, MoT, MoF, MoE, MoA, KSB 2010/ 

continuous 

Strengthen advocacy role with other 

stakeholders 

2010-2014 

Ensure prompt payment to farmers Millers, KSB • Timeliness of Payment • Time lapse between cane delivery 

and payment 

Development of a 

Legal Framework for 

Corporate Governance 

Conclude privatisation of sugar factories GOK • Privatised sugar subsector • Numbers of mills privatised 2010-2012 

Strengthen the management of OGIs, Farmers, OGIs, KSB, MoA • Management efficiencies 2010 

through governance and institutional 

capacity building programmes 

Strengthen the management of OGIs KSB, OGIs, GOK • More effective and efficient • Numbers of OGIs restructured 2010-2014 

OGIs 

• Improved service delivery • Number of agreements signed 2010 

Millers, Farmers, Transporters, cane 

cutters 

Sign sugar industry agreements between 

millers, growers and other service 

providers 

2010 

All stakeholders, • Implementation Framework 

• M&E system 

Establish framework of implementation 

and M&E system 


• Functioning committee 2012 

KSB, Millers, MoR, MoLG, GoK • Framework for coordination 

of roads maintenance 

Establish a sugarbelt roads management 

committee 

Development of 

an institutional 

Framework for 

Coordination of Roads 

Maintenance in the 

sugarbelt 

56 

KSB, MoA, MoE • Comprehensive policy 2012 

Support measures to develop a 

comprehensive policy on co-generation 

and exploitation of bio-fuels and other 

sugarcane products 

Development of a 

comprehensive policy 

on co-generation and 

exploitation of bio-fuels 

and other sugarcane 

products 


Annex V: Benchmarking with Competitors 

EFFICIENCY PARAMETERS RSA Swaziland Zimbabwe Malawi Uganda Kenya long term 

Cane quality 1 Cane pol % 12.99 13.7 14 13.96 10.78 13.5 

3 Cane fibre % 14.97 13.74 14.01 15.11 18.47 15.5 

Time Account 1 Annual & mini maintenance, Days - 124 126 170 45 42 

2 Out of field crop, Days 68.4 87.81 81.54 111.96 5.61 - 

Crop length (Average) Days 251 241 239 195 320 323 

6 Available extraction time(days) 201.95 186.48 194.69 161.22 286.08 294 

7 FTE % 94.65 90.74 89.45 92.67 73.31 92 

8 OTE % 80.46 77.38 81.46 82.68 89.4 80 

Throughput 1 TCH 296.25 324.71 461.44 233.69 116.26 300 

2 Mill Numbers 15 3 2 2 1 7 

3 TCD - operational 85,810.59 18,089.98 18,042.48 9,273.56 2,494.47 40,320.00 

4 TCD - Designed 106,650.00 23,379.12 22,148.88 11,216.88 2,790.24 50,400.00 

5 Cane crushed (TCY) 21,156,562.00 4,179,975.00 4,231,784.00 1,817,273.00 710,845.00 13,023,360.00 

6 Sugar Made (T) 2,402,763.00 500,937.00 512,372.00 215,484.00 61,455.05 1,432,569.60 

7 Capacity Utilization % 80.46 77.38 81.46 82.68 89.4 80

Separation efficiency 1 R/Extraction % 98 96.39 96.68 97.06 96.75 96.63 

2 RBHR 88 89.55 88.04 87.53 86.67 89 

3 Rendement % 11.36 11.98 12.11 11.86 11.56 11 

4 ROR % 86.24 86.99 85.6 85.14 83.81 86 

5 ERC % sucrose in cane 86.05 86.38 86.48 87.15 _ 86.25 

6 Undetermined losses % 1.92 1.74 3.14 2.93 0.12 2 

Source: Kenya Sugar Board 

Annex VI: Capacity of Existing and Proposed Sugar Factories 

Factory TCD 

1. Chemelil 3,360 

2. Muhoroni 2,200 

3. Soin 100 

4. Kibos & Allied Sugar Industries 800 

5. Miwani 800 

6. Mumias 9,200 

7. Nzoia 3,360 

8. West Kenya 2,500 

9. SONY 3,120 

10. Butali 1,000 

11. Trans Mara 1,000 

12. Kwale International Sugar Co. 3,000 

13. TARDA 9,000 

Total 39,440 


Annex VII: Plan Implementation Cost Estimates 

58 

Strategic Objective 1: To Enhance Sugar industry Competitiveness 

Estimated Costs (KSh. Millions) 

Strategy Activities 2010 2011 2012 2013 2014 Total 

Increasing efficiency in sugarcane production 10 15 20 20 20 85 

1. Reduction in Farm Level Risks 

Developing the use of and financing irrigation 200 250 300 300 400 1450 

6 15 30 50 50 151 

2. 

3. 

4. 


Creating an insurance scheme to cushion the farmers from losses arising 

in the industry 

Enhancing results oriented research-extension-farmer linkages to 

6 20 25 30 30 111 

accelerate adoption rates 

Improving cane yard management 10 10 10 0 0 30 

5. Efficient, Reliable Harvesting and 

Transport Operations 

Reducing post-harvest losses 5 10 15 15 15 60 

Increasing ICT use in scheduling of cane harvesting and transport 

5 15 20 25 30 95 

operations 

Promoting the use of other modes of transport 6 14 20 20 20 80 

Increasing research funding for harvesting and transport 12 20 20 20 20 92 

Increase processing efficiency 

6. Effective, Efficient and Reliable 

Milling Operations 

2500 2500 5000 5000 0 15000 

Invest in rehabilitation of the mills and upgrade them to more modern 

and efficient technology. 

Intensify industrial and applied research 50 100 150 150 150 600 

Carry out regular condition maintenance 80 100 100 100 100 100 

5 5 5 5 5 25 

Providing information on production technologies and quality 

standards and facilitating their application, adaptation and uptake 

7. Benchmarking with International 

standards 

5 5 5 5 5 25 

Providing information on international best practices for local millers to 

benchmark themselves 

5 5 5 5 5 25 

Participating in regional and international negotiations on issues 

affecting the sugar industry 

Strategic Objective 2: To Expand Product Base

5 5 5 5 5 25 

Encouraging intercropping and mixed farming to enhance food security 

reduce exit from cane farming 

8. Value Addition and Product 

Diversification 

3 0 0 4 0 7 

Commissioning and undertaking value chain survey analysis and 

product diversification studies 

0 0 0 0 0 0 

Implementation of recommendations from the value chain analysis and 

product diversification study 

50 50 50 0 0 150 

Developing diversification programmes tailored to suit specific factory 

requirements in line with market opportunities 

Strategic Objective 3: To enhance Infrastructure Development 

Setting up a mechanism to coordinate utilisation of public funds 

1 1 1 1 1 5 

available for road infrastructure development 

Increasing SDF allocation for infrastructure development 500 500 500 500 500 2500 

9. Improve road transport 


Funding road development 100 500 500 500 100 1700 

10. Promote the Use of ICT: Increasing training of staff on the use of ICT 3 3 3 3 3 15 

Increasing information sharing through ICT 3 3 3 3 3 15 

Strategic Objective 4: To Strengthen the Regulatory Framework for the Sugar industry 

Enhance capacity for a robust assessment of market conditions 5 5 5 5 5 25 

11. Strengthen Management of 

Sugar Import Policy 

Support measures to eliminate tax evasion 1 1 0 0 0 2 

Support implementation of rules of origin 1 1 0 0 0 2 

Ensure prompt payment to farmers 0 0 0 0 0 0 

12. Strengthen Framework for 

Corporate Governance 

Strengthen the management of OGIs 5 5 5 5 5 25 

Conclude privatization of sugar factories 50 50 0 0 0 100 

Establish and implement a M&E system for strategic plan 2010-2014 10 10 10 10 10 50 

Establish a sugarbelt roads management committee 5 5 5 5 5 25 

13. Development of a Institutional 

Framework for Coordination 

of Roads Maintenance in the 

sugarbelt 

Total Budget Estimate 3,647 4,223 6,812 6,786 1,487 22,955 


Annex VIII: Loans and Grants to Sugar Factories (31 December 2007) 

60 

Total 

Other 

Creditors 

Performing 

SDF Loans 

Farmers 

Arrears 

Non performing SDF Loans SDL Statutory payments e.g. 

Taxes 

GoK loans Financial Institutions 

Loans 

Penalties Principal Penalties 

Interest Principal Interest Principal Interest Levy 

Arrears 

Principal 

KSh., Millions 


- - - 95 6 601 - 557 574 715 

- 

2,548 

3337 

- - - - - - - - - - - 

3547 

6,884 

22 28 0 1,875 134 411 - 

0 - 2,153 8,666 

366 

1,433 2,244 

361 654 1,892 1268 303 527 - 0 0 175 

9,968 

104 

4,684 

3,807 3,930 682 1892 3,238 443 1,539 1,990 2,244 749 7,552 28,066 

Chemelil Sugar 

Co. 

Agro Chemical 

Co. 

Miwani Sugar 

Co. 

Muhoroni 

Sugar Co. 

Sub-total 

Nyando Sugar 

Belt 

- - - 302 73 - - - - 0 - - 

- 

375 

11,963 

0 787 199 1471 - 

- 200 6,744 

9,774 

5 

1,321 937 

26,657 

- - - - - - - - - - - - - 

- 

9,774 11,963 5 0 1,089 272 1,471 1,321 937 200 6,744 27,032 

Busia Sugar Co. 

Nzoia Sugar Co. 

West Kenya 

Sugar Co. 

Sub-total 

Western Sugar 

Belt 

355 87 242 566 - - 95 23 331 2,998 

254 692 

201 

152 

South Nyanza 

Sugar Belt ( 

Sony Sugar) 

- 

Coastal Sugar 

Belt ( Ramisi) 

Grand Total 13,835 16,585 839 2,093 4,682 802 3,252 566 3,311 3,181 95 972 14,627 58,096 

Source: State of SDF Funds, KSB.

Annex IX: Annual Targets Monitoring Indicators 

Firm/Farm Level Annual Targets 

Goal: Enhanced Sugar industry Competiveness 

Outcome: Optimal yield levels 

Outcome Indicator: Tonnes of cane harvested 

Outcome Indicator Unit Base Year Base Value 2009/10 2010/11 2011/12 2012/13 2013/14 

Optimal yield levels Area under cane Ha 

i. Chemelil Ha 2008/2009 13,341 14,008 14,625 15,342 16,009 16,676 

ii. Muhoroni Ha 2008/2009 14,259 14,972 15,685 16,398 17,111 17,874 

iii. Mumias Ha 2008/2009 64,637 67,869 71,101 74,333 77,111 80,874 

iv. Nzoia Ha 2008/2009 23,899 25,094 26,289 27,434 28,679 29,874 

v. SONY Ha 2008/2009 19,322 20,288 21,254 22,220 23,186 24,153 

vi. West Kenya Ha 2008/2009 22,070 23,174 24,277 25,381 26,434 27,588 

vii. Soin Ha 2008/2009 4,638 4,870 5,102 5,334 5,566 5,798 

viii. Kibos Ha 2008/2009 2,622 2,753 2,884 3,015 3,146 3,278 

ix. Butali** Ha 2008/2009 - - 2,600 2860 3120 3250 

x. Kwale International** Ha 2008/2009 - - 5000 5500 6000 6250 

xi. Transmara** Ha 2008/2009 - - 3,000 3450 3600 3750 

xii. Miwani* Ha 2008/2009 4,633 4,633 4,865 5,096 5,328 5,560 

Total area under cane Ha 2008/2009 169,421 177,892 196,682 206,363 215,290 224,925 

2008/2009 73 79 84 90 95 100 

Yield per hectare TC/ 

Ha 

*Miwani Rehabilitated and Operational by 2011 

**New factories operational by 2013 


Harvesting and Transport Annual Targets 

62 


Outcome: Optimal Harvesting and Transport schedules 

Outcome Indicator: Tonnes of cane harvested and delivered to mills 


Area of Cane Harvested Ha 

i. Chemelil Ha 2008/2009 9,043 9,782 10,524 11,276 12,027 13,380 

Optimal Harvesting 

and Transport 

Schedules 


ii. Muhoroni Ha 2008/2009 5,507 7,105 7,643 8189 8,735 9718 

iii. Mumias Ha 2008/2009 27,191 29,053 28,740 30,792 32,845 36,540 

iv. Nzoia Ha 2008/2009 5,909 7,730 8,316 8910 9,504 10,574 

v. SONY Ha 2008/2009 5,489 8,559 9,208 9866 10,524 11,707 

vi. West Kenya Ha 2008/2009 7,480 7,034 7,565 8105 8,645 9,618 

vii. Soin Ha 2008/2009 297 314 303 325 347 338 

viii. Kibos Ha 2008/2009 1,326 1,404 1,471 1471 1,604 1,672 

ix. Butali Ha 2008/2009 - - - - 1,345 1,560 

x. Kwale International Ha 2008/2009 - - - - 3,360 3,898 

xi. Transmara Ha 2008/2009 - - - - 1,345 1,560 

xii. Miwani Ha 2008/2009 - - 1,076 1,248 1,463 1,614 

Total Ha 2008/2009 62,242 70,981 74,846 80,182 91,744 102,179 

Tonnes of Cane Harvested Tonnes 2008/2009 5,125,821 5,323,575 5,987,680 6,414,560 7,339,520 8,174,320 

Post-harvest losses % 2008/2009 5 4 3 2 2 2 

Cane delivered to mills Tonnes 2008/2009 5,165,786 5,110,632 5,808,049 6,286,269 7,192,730 8,010,834

Factory Level Annual Targets 


Outcome: Optimal Processing Levels 

Outcome Indicator: Tonnes of sugar made 


Capacity Utilisation 

i. Chemelil % 2008/2009 50 61 70 75 80 89 

Optimal Processing 

Levels 

ii. Muhoroni % 2008/2009 52 61 70 75 80 89 

iii. Mumias % 2008/2009 66 66 70 75 80 89 

iv. Nzoia % 2008/2009 58 61 70 75 80 89 

v. SONY % 2008/2009 51 61 70 75 80 89 

vi. West Kenya % 2008/2009 60 61 70 75 80 89 

vii. Soin % 2008/2009 68 68 70 75 80 89 

viii. Kibos % 2008/2009 88 88 88 88 88 89 

ix. Butali % 2008/2009 - - - - 50 58 

x. Kwale International % 2008/2009 - - - - 50 58 

xi. Transmara % 2008/2009 - - - - 50 58 

xii. Miwani % 2008/2009 - - 50 58 68 75 

Recovery Levels % 2008/2009 10.0 10.5 11.0 11.5 11.5 11.5 

Sugar Made Tonnes 2008/2009 518,128 565,236 670,830 813,286 982,257 1,151,557* 

*Projected Sugar consumption by 2014 – 877,133 tonnes of sugar 

*Export potential – 500,000 tonnes 

Industry long term goal – 1,432,569 tonnes of made sugar 


Other Critical Annual Targets 

64 


Outcome: Optimal yield levels 

Outcome Indicator: Tonnes of cane harvested 


High yielding varieties % 2008/2009 5 10 25 40 45 50 

Optimal yield levels 

achieved 


Area under cane irrigated Ha 2008/2009 400 44,000 84,000 124,000 164,000 204,000 

Synchronised timely 

Months 2008/2009 6-12 4 3 2 1 1 

harvesting 

Staleness index Days 2008/2009 4 2 2 1 1 1 

Optimal harvesting and 

transport schedules

Annex X: Plan Indicator Tracking Evaluation Tool 

Year Cumulative 

Indicator Target Achieved Variance Scorecard* Comments Improvement Action Achievement to Date Mean Scorecard 

Score Card Comment Target Achievement Level (%) 

5 Very Good 85-100 

4 Good 69-84 

3 Satisfactory 53-68 

2 Below Average 37-52 

1 Poor 0-36 


Annex XI: Sugarcane Production – Recommendations for 


Excerpts from Cost of Sugarcane and Sugar Production, Kenya Sugar Board, 2008 

1.1 Seed Cane Production 

66 

Seed cane for establishment of milling cane be obtained from properly selected “B” nurseries 

which have been developed with seed cane from properly treated and inspected seed from “A” 

nurseries. There is need for all sugar zones to invest in and operationalise seed cane treatment 

units. 

The price for seed cane should be at a premium, higher than that of cane for milling. This will 

motivate selected farmers to produce adequate good quality seed cane. 

There is need for training of seed certification officers and field inspectors for quality 

assurance. 

Procedures for certification must also be developed and documented. KESREF must play a 

leading role in this process, backed by the sugar companies and OGIs. 

Standard variety composition should gradually be restored to 20:40:40 for early, mid and late 

maturing varieties. The seed cane for this restoration should be established in the nucleus 

estate, where all the required standards for seed cane preparation will be adhered to. 

1.2 Fertilizer Application 

There is need for regular undertaking of soil tests to determine actual deficiencies in order to 

apply appropriate corrective measures, instead of sticking to a fixed fertilizer regime regardless 

of the changing soil needs. There is need for equipping of the soil testing laboratory at KESREF 

to meet industry demand for effective and timely testing. 

Fertilizers are applied mostly manually on top of the ridges and are usually washed away when 

applied in the rainy season. Urea is a volatile fertilizer and is less effective when applied on 

top of the ridges. For better effectiveness, fertilizer should be incorporated into the soil using 

fertilizer ridgers or by hand in small furrows adjacent to the cane stools, then covered with 

soil. 

In the MSC zone especially, efforts to stem diversion of fertilizer to sale for cash, could be 

supplemented by: 

� Ensuring prompt payment for cane deliveries 

� Re-instating the farmers’ advance scheme to meet social needs and crop maintenance costs 

before payments are received 

� Undertaking specific research to ascertain the appropriate fertilizer regimes for each zone 

� Supplying fertilizer in a timely manner, when required 

� Closely supervising fertilizer application 

1.3 Cane Harvesting and Transportation 

Effective mechanization is only possible through viable farm units, hence the need for block 

farming with minimum plot sizes of 25 Ha. 


There is need to use purpose built unit for cane haulage eg. Bell instead of general multipurpose 

use units in order to cut down on cost of maintenance and improve on availability, 

hence efficiency. 

Cane Yard management at the factory is key to reduction of the uneconomically lengthy turnaround 

time by cane haulage units. 

Cane transportation rates account for 30-37% of the total cost of sugarcane production. In 

order to minimise on this cost, it makes business sense to increase productivity of existing cane 

areas rather than expanding cane catchment areas to uneconomically distant zones. 

High cane spillage especially in the Mumias Sugar Zone could be mitigated by having the 

trailer baskets fitted with all round expanded metal and secured with rope or cargo netting. 

In areas where farmers have smaller cane plots, it is worthwhile considering animal drawn carts 

to ferry cane from the fields to a collection centre. This would save on costs and protect the 

plots and cane stools from destruction. 

1.4 Roads Infrastructure 

An industry infrastructure development blue print be formulated and implemented. The 

industry collaborates with central and local government in the utilization of petroleum levy 

and the local government cess. 

The following sources of funding have been identified for long-term sugar roads maintenance: 

� The Central Government through the ministry of public Works and the Kenya Roads 

Board, from taxes and fuel levy 

� The local authorities through Cess funds levied on sugarcane sales 

� Funds generated internally by the sugar companies 

� Grants from the Sugar Development Fund. 

In a liberalized market, the use of sugar company resources in maintaining sugar roads, which 

are public roads, is not desirable as it increases production overheads and ultimately adds to 

the cost of sugar. 

It is proposed that the management of sugar roads be placed under a committee comprising 

KSB, millers, outgrower representatives, local government and the Kenya Roads Board. 

1.5 Quality based Cane Payment System 

The modified cane payment formula should be adopted and implemented in all sugar 

companies as a pilot cane testing unit is established to guide the industry towards sucrose 

based cane payment. 

Price of cane = 

Farmer’s sharing ratio: 50% 

TC/TS ratio: 10% 

av. Price of sugar x farmer’s sharing ratio 

TC/TS Ratio 


68 

The system will create incentive for farmers to deliver clean high sucrose sugar and the millers 

to improve sugar recovery, with overall increased productivity for the industry. 

Currently, there exists a Cane Pricing Committee which under the law comprises representation 

from KSB, KESGA and KESMA and has the function of reviewing sugarcane prices which 

Paragraph 8 of the 2nd Schedule of the Sugar Act 2001 demands that it be determined on the 

basis of sucrose content. 

The importance of cane pricing in providing growers with quality incentives and protection 

from poor mill performance cannot be over-emphasized. 

Conditions to be met for a Successful System 

Availability of high sucrose seed cane must be guaranteed (major role for KESREF) 

The grower must guarantee ability to supply and the miller to crush, cane at the optimal 

sucrose level. 

The preferred payment system must be backed by the law and governed by strict and clear 

regulation. In this regard, there must be a neutral and professional arbitration body to police 

the regulation and deal with any queries arising. 

The farmers and millers must be fully enlightened on the system, its implications and what is 

expected of them for the growth of the industry. 

The preferred cane payment system must be one that provides the farmer and the miller an 

equitable share of the industry’s earnings based on their respective costs of production, plus a 

reasonable return on their investments. 

The system must encourage and reward the farmer for supply of good quality cane to the 

mills. 

The system must encourage and reward the factory for operating at optimal efficiency. 

1.6 Ratooning 

Unless in exceptional cases where sugarcane husbandry is of high quality, farmers hardly make 

any profit from the plant crop. Subsequent ratoons, if well maintained to sustain high yields, 

bring good profits to the farmer. Emphasis must therefore be placed in ratoon maintenance 

through selection at planting of varieties with high ratoonability, cane husbandry practices 

such as ridging which stimulates cane growth and proper fertilizer application. 

1.7 Management and Profitability 

The use of inputs and factors of production varies in the different sugar belts due to management 

styles, technologies and geographical characteristics. 

MSC is a high input use scheme attributed to a centrally planned management system. With 

the exception of hired labour, the level of use of inputs is determine and paid for by the miller. 

The profits earned by the farmer are an implicit land rate for leasing out their land. Since the 

inputs are supplied centrally, the farmer has lower leverage in bargaining for better prices. The 

input costs are also higher due to mark up costs for the transactions. In the absence of choice 

of input use, cases of diversion, especially of fertilizer are high. 


In W/Kenya, CSC and MUSCO zones, the input use is generally lower and farmers have more 

autonomy in deciding the level of input use. This autonomy has a disadvantage in that there is 

more variability in production levels. One advantage however is that farmers can access inputs 

at relatively lower prices than in the MSC zone. 

1.8 Research 

KESREF was incorporated in January 2001 with the principal objective of conducting sugar 

research and undertaking technology transfer. Low levels of funding, poor and inadequate 

infrastructure, and reliance on SDF as the only source of funding which is not adequate 

limit the performance of the Foundation. To enable the Foundation effectively carry out its 

mandate, there is need to increase research funding, develop bankable projects proposals to 

attract financial support from donors and venture into other sources of income generation. 

Current R & D activities have concentrated on agronomic and socio-economic research while 

farm mechanization, sugar milling and processing are almost non-existent. Potential research 

capacities that can be exploited exist at KESREF, KIRDI 29 and local universities. 

2.0 Strategies for Smallholder/Outgrower Development 

It is often argued that the smallholder nature of sugarcane production in Kenya is one of the 

key challenges that lead to high cost of production. While the smallholder nature is distinctly 

unique in the case of Kenya compared with other regional producers, it can by all means be 

streamlined and made efficient as is demonstrated by Indian sugarcane production which is 

also largely smallholder yet enviable competitive. 

2.1 Measures to Address Smallholder Constraints 

In order to address the typical constraints of smallholder production system, the following 

measures have to be considered: 

� Improved access to long term and affordable cane development finance 

� Improved access to higher yielding and disease resistant cane varieties, and seed cane 

� Improved capacity of cane growers in: cane growing techniques, business understanding, 

enforcement of grower/miller contracts, continuous civic education programmes 

� Improved capacity of the management systems: MIS to make operations more effective 

and efficient; staff capacity through training and development; engaging with technical 

partners to facilitate development. 

Improved road network to improve haulage and reduce transportation costs; and 

Equitable division of proceeds through the cane pricing formula. 

A study undertaken by the ISO has identified the following four possible strategies for further 

development of smallholder/ outgrower cane production: 

• The Business Linkages Model; 

• Block Farming; 

• Adoption of new cane varieties; and 

• Strengthening of Grower Association. 

29 Collaboration MOU between KESREF and KIRDI was signed in August 2006. This led to a joint study involving KSB on the Assessment of 

Industrial Research and Development needs of the Kenyan Sugar industry. 


2.2 The Business Linkages Model 

70 

The ‘business linkages’ model was developed by Kilombero Sugar Company Ltd (KSCL) in 

Tanzania and the International Finance Corporation (IFC) which financed a project proposal 

entitled – the Kilombero Business Linkages Project (KBLP). The project, assessed as successful, 

involves promoting business and commercial linkages between KSCL and the outgrower 

community through innovative financing mechanisms and capacity building programmes. It 

has allowed new farmers to enter the market and existing farmers to expand and improve their 

cane farming activities. Support was provided for vital infrastructural development, creation 

of an information management system, and delivery of agriculture and business training 

to farmers, farm groups and local entrepreneurs through leveraging commercial and donor 

funding. 

KBLP’s initial analysis revealed that it was necessary to increase outgrowers’ access to finance 

and assist farmers to improve crops, adopt new technologies and view their farms as profit 

making operations. Under KBLP, the KSCL aimed to provide a reliable and stable market for 

outgrower cane while all other services such as land preparation, weeding, cane loading and 

infrastructure maintenance, is provided by the community for the community. 

The following were identified by KBLP as priority areas to achieve the objectives: 

• Develop a comprehensive management information system; 

• Enhance business, agricultural and technical skills; 

• Contribute to SME and micro-enterpreneur development; 

• Develop Kilombero Community Trustand Trust Farm to provide finance for outgrower 

community development projects; 

• Improve infrastructure in outgrower areas; 

• Increased access to finance for existing and new farmers; and 

• Build the capacity of associations that represent outgrower farmers. 

The success of this project is hinged on supporting partners and a market to outgrower 

production, all driven by clear economic objectives. 

2.3 Block Farming 

The problem of land fragmentation is notable in East Africa, and has been cited as a key constraint 

to efficient sugarcane production. One strategy being pursued to address land fragmentation is 

Block farming – a contiguous farming area operated under shared ownership. 

2.3.1 Benefits of Block Farming 

� As a result of continuous plots, roads, drainage and other necessary infrastructure can be 

more easily constructed and maintained 

� Easier to provide extension services for improved husbandry and higher productivity 

� Reduced incidence of accidental fire because the grid road network acts as a firebreak 

� Planting lines will be more uniform, ensuring more accurate and easier application of 

herbicide and fertilizer 

� Easier harvesting due to uniform maturity period and easy accessibility to cane. Harvest 

efficiency also improved because cane loaders no longer have to travel long distances 

when loading cane into trucks 

� Cost per unit of cane planting and maintenance operations will decline through the 

exploitation of economies of scale 


� A drainage system will ensure productivity losses associated with water logging will be 

reduced and even allow harvesting of cane during the rainy season if required. 

2.3.2 Challenges of Block Farming 

� All participating growers must start planting at the same time; 

� A high risk of free-riding; and 

� Farmers must stay with the block arrangement whilst the agreed period is in force. 

2.3.3 Requirements for Successful Block Farming 

� Strong institutional factors are crucial to the success of block farming. Strong farmer 

associations at local and apex levels are needed to sensitize growers to build consensus 

skills among block members 

� Financing mechanisms must be made available 

� Extension and training Services 

� Supportive sugar miller and government to ensure appropriate institutions for policy and 

regulation 

� At least 4 hectare blocks are necessary for sustainable commercial sugarcane farming. 

Maximum number of farmers per block is 20. 

� Aerial photographs and GPS should be used to indicate block boundaries. 

2.4 Improved Cane Varieties 

One of the factors leading to low production and productivity of sugarcane is the existence of 

low yielding varieties which are also susceptible to diseases and insect pests. The diseases are 

generally seed-borne and are easily spread by use of unclean seed cane. 

While improved cane varieties can increase productivity in O/G farms, sustainability will only 

be guaranteed by better cultural practises and a business sense. The incentive to use treated 

seed cane, proper zone specific varieties and good crop husbandry can only be sustained by the 

following factors: 

Much greater focus on grower extension and training; 

Introduction/ enforcement of legislative sanction; 

A cane payment system that properly rewards growers for the quality of their cane. 

The ISO and CFC (providing grant financing) approved a project submitted by the Sugar 

Board of Tanzania aimed at addressing the problems of low productivity and profitability in 

the smallholder sector in East Africa (Tanzania, Kenya and Uganda) through importation and 

evaluation of superior sugarcane varieties, multiplication, production, use of certified seed cane 

and promotion of proper practices of crop husbandry and management. The project is also 

expected to overcome the current short falls of lack of clean planting material by introducing 

certified seed cane production systems which will ensure healthy seed cane and effective control 

over the spread of diseases and pests. 

2.5 Strengthening Outgrower Institutions 

(a) In order to address the low levels of education among farmer leaders, training and 

capacity building of the management of Outgrower institutions is a priority. Directors 

of Outgrower bodies must have acceptable minimum levels of education to enable then 

understand and interpret policy. 


72 

(b) Immediate independent audits of each of the Outgrower institutions should be undertaken 

to determine the nature and extent of the liabilities. Restructuring of the financial state of 

the Outgrower bodies is a pre-requisite in making them viable. 

(c) Accountability in the leadership of Outgrower Institutions could be enhanced through 

reviewing the Memoranda and Articles of Association, such that the grower bodies are 

limited by shares rather than guarantee. Under their present structure, the outgrower 

directors have nothing to lose by running down the institutions. 

(d) For effective operation of outgrower institutions, they must be focused on the farmers 

needs at the grass root and be accountable to the grower members who shall be 

shareholders of the company. Essentially then, the outgrower bodies shall be governed by 

the Co-operatives Act. 

(e) Outgrower bodies must be run by competent management, based on sound commercial 

principles with proper checks and balances in place to ensure that set targets are achieved. 

KSB could play a coordinating role ensuring that the controls are in place and that the 

institutions so established take advantage of the existing community strengths. 

(f) Directors and management of Outgrower institutions should be put on binding 

Performance Contracts modeled in the form of those currently obtaining in the Civil 

Service in order to ensure quality service delivery and accountability. 

(g) The OGIs need to develop and adhere to a risk management policy to enable them 

identify, assess and manage risks in order to minimize the negative impact thereof. 

(h) There is a programme supported by the World Association of Beet and Cane Growers 

(WABCG) to strengthen sugarcane and beet producers’ organizations in developing 

countries (undertaken by Agricord). The basic premise of the programme is that grower/ 

miller relationships determine the level of income generation by a smallholder farmer. 

The organizational degree of outgrowers determines the degree of bargaining power and 

the way proceeds are shared. 

Annex XII: Sugar Production – Recommendations for Efficiency 

Excerpts from Cost of Sugarcane and Sugar Production, Kenya Sugar Board, 2008 

i. Undertake financial restructuring of government owned sugar companies to prepare them for 

privatization within a given period; Government should gradually divest from ownership of sugar 

companies through sale of its equity in parastatal mills to strategic partners. Such divestiture should 

take cognizance of the socio-economic impact on the local community. 

ii. Promote rehabilitation, modernization and expansion of the factories to maintain sufficient 

capacity for the production of sugar to meet domestic consumption requirements at all times and 

surplus for export; 

iii. Promote the development of new factories in viable regions of the country by the private sector; 

iv. Support industrial and applied research. Seek in-house support for mill maintenance e.g. enlisting 

the services of institutions such as KIRDI and Numeric Machining for fabrication of mill parts. 


v. Enhance income streams through value addition of co-products 

vi. Guard against diseconomies of scale as introduced by overheads from dominant functional 

departments and systems rigidity as may be evident in the local best of the breed companies 

compared to regional competitors. 

vii. Empower managers through-out the company to approach cost containment differently by 

modifying the manner in which they produce, report, supervise, control, appraise and market 

products and services. 

viii. The industry must identify and eliminate low value-adding tasks, which increase overheads but 

must limit the frequency of cost cutting activities as they wear down morale. 

ix. Tune corporate structure to emerging conditions of lean innovative and balanced production 

systems. 

x. Carry out assessment of the working patterns in the industry that lead to high costs and encourage 

modification of such factors to reduce costs. 

xi. To avoid impaired decision making, the industry should standardize its accounting reports and 

monitor its cost data more consistently to reduce irrelevance, inaccuracy and issuance of misleading 

information. 

xii. Industry must modify its decision making process to cut down paper work, filing etc., without 

diluting the management of financial and staff resources. Effective use of IT by senior managers in 

finding out the accurate details of occurrences and making decisions must be encouraged. It must 

receive equal attention as labour, materials and overheads. 

xiii. The industry must map out its value chain in order to quantify value added by each activity and set 

out equitable rates and prices for all inputs to support sustainability for the benefit of all players. 

xiv. Probably allow the Agriculture Department to run the nucleus estate as a semi autonomous business 

selling its cane to the company to help assess the real cost of cane and due returns. This may further 

encourage other growers contracts, such as leases, where grower practices are wanting. 

xv. De-link the cost of cane handling (harvesting, loading, transport e.t.c) from the grower’s proceeds. 

In any case all such services are secured by contracts between the millers and service contractors 

without consulting the grower. A review of value addition activities in these operations among the 

accountable parties should bring down the costs. 

xvi. Embrace condition maintenance at the factory to pre-empt breakdowns and ensure that valuable 

time is not lost while extensive repairs and maintenance are being undertaken. 


74

STRATEGIC PLAN,2010â€“2014 - Kenya Sugar Board

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