KENYA SUGAR INDUSTRY STRATEGIC PLAN, 2010–2014 Strategic plan.pdf · Strategic Plan, 2010-2014 vii Acknowledgements T he formulation of the Kenya Sugar Industry Strategic Plan 2010-2014

Strategic Plan, 2010-2014 i

Implementation Strategy

Resource Mobilisation &

Utilisation

Monitoring

Evaluation

Reporting

Enhancing Industry Competitiveness

KENYA SUGAR INDUSTRYSTRATEGIC PLAN, 2010–2014

Kenya Sugar Industryii

Strategic Plan, 2010-2014 iii

Table of ContentsAcronyms ......................................................................................................................ii

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

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

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

Chapter 1: Introduction1.1 HistoricalBackground.............................................................................................................11.2 ImportanceoftheSugarcaneSectortotheEconomy................................................................21.3 SugarindustryStakeholders.....................................................................................................31.4 ScopeofServices......................................................................................................................41.5 Methodology............................................................................................................................4

Chapter 2: Kenya’s Development Agenda and Challenges .................................62.1 AttainingVision2030.............................................................................................................62.2 TradeEnvironmentforKenyanSugar......................................................................................8

Chapter 3: Review of the Strategic Plan 2004-2009 ........................................... 123.1 StrategicObjectives(2004-2009)...........................................................................................123.2 Achievements.........................................................................................................................123.3 LessonsfromPlanImplementation........................................................................................213.4 SituationalAnalysis................................................................................................................22

Chapter 4: Strategic Plan 2010-2014 .................................................................... 244.1 Rationaleforthe2010-2014StrategicPlan............................................................................244.2 Vision,MissionandCoreValuesoftheSugarindustry..........................................................244.3 AnalysisofChallengesalongtheSugarindustryValueChain.................................................254.4 StrategicGoals(2010-2014)..................................................................................................264.5 StrategicObjectives(2010-2014)...........................................................................................27

Chapter 5: Implementation Strategy and Resource Requirements ................ 405.1 ImplementationStrategy........................................................................................................405.2 ResourceMobilisationandUtilisation....................................................................................425.3 Accountability.......................................................................................................................445.4 ImplementationRisks............................................................................................................44

Chapter 6: Monitoring, Evaluation and Reporting ............................................. 466.1 Monitoring...........................................................................................................................466.2 Evaluation.............................................................................................................................466.3 Reporting..............................................................................................................................476.4 InformationSharing..............................................................................................................476.5 Conclusion............................................................................................................................47

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

Kenya Sugar Industryiv

ACP African,CaribbeanandPacificCountriesAgGDP AgriculturalGrossDomesticProductAIDS AcquiredImmuneDeficiencySyndromeAMS AgriculturalManagementSystemBPO BusinessProcessOutsourcingCDF ConstituencyDevelopmentFundCET CommonExternalTariffCFC CommonFundforCommoditiesCIF Cost,InsuranceandFreightCOMESA CommonMarketforEasternandSouthernAfricaCSR CorporateSocialResponsibilityCSS CustomerSatisfactionSurveysCU CustomsUnionEAC EastAfricanCommunityERSWEC EconomicRecoveryStrategyforWealthandEmploymentCreationEU EuropeanUnionGDP GrossDomesticProductGOK GovernmentofKenyaHIV HumanImmunodeficiencyVirusICT InformationandCommunicationTechnologyISO InternationalOrganisationforStandardizationKARI KenyaAgriculturalResearchInstituteKECATRA KenyaCaneTransportersAssociationKenGen KenyaElectricityGeneratingCompanyKESGA KenyaSugarGrowersAssociationsKESMA KenyaSugarManufacturersAssociationKESREF KenyaSugarResearchFoundationKIRDI KenyaIndustrialResearchandDevelopmentInstituteKPLC KenyaPowerandLightingCompanyKRB KenyaRoadsBoardKSB KenyaSugarBoardKSSCT KenyaSocietyofSugarcaneTechnologistLATF LocalAuthorityTransferFundM&E MonitoringandEvaluationMCI MillenniumCitiesInitiativeMDG MillenniumDevelopmentGoalsMoA MinistryofAgricultureMoASP MinistryofAgricultureStrategicPlanMoE MinistryofEnergyMoF MinistryofFinanceMoI MinistryofIndustrializationMoLG MinistryofLocalGovernmentMoR MinistryofRoadsMoRDA MinistryofRegionalDevelopmentAuthority

Acronyms

Strategic Plan, 2010-2014 v

MoT MinistryofTradeMoWI MinistryofWaterandIrrigationMT MetricTonneMTER MidTermEvaluationandReviewMTP MediumTermPlanNTB Non-TariffBarriersOGC OutgrowerscompaniesOTE OverallTimeEfficiencyPESTLE Political,Economic,Social,Technological,LegalandEnvironmentPRSP PovertyReductionStrategyPaperPS PermanentSecretaryRRA RuralRoadsAuthoritySACCO SavingsandCreditCooperativesSDF SugarDevelopmentFundSDL SugarDevelopmentLevySMART Specific,Measurable,Attainable,Realistic,TimedSMARTEST Specific,Measurable,Attainable,Realistic,Timed,Engaging,Siring,TeamSTI Science,TechnologyandInnovationSUCAM SugarCampaignforChangeSWOT Strengths,Weaknesses,OpportunitiesandThreatsTARDA TanaandAthiRegionalDevelopmentAuthorityTCD TonnesCrushedperDayTCH TonnesCrushedperHourTNA TrainingNeedsAssessmentUSA UnitedStatesofAmericaVCC ValeColumbiaCenterWTO WorldTradeOrganisation

Kenya Sugar Industryvi

Thesugarindustryisamajorcontributortotheagriculturalsectorwhichisthemainstayoftheeconomyand supports livelihoodsof at least25%of theKenyanpopulation.The subsectoraccounts 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 WesternProvinces.

In2008/2009,theindustryproducedcloseto520,000tonnesofsugaroperatingat56percentoftheinstalledcapacity.Theindustryhasthepotentialofproducingover1milliontonnesofsugarifoperatedat89percentoftheinstalledcapacity.Thiswouldmeetthedomesticneeds,currentlystandingatabout700,000tonnes,andprovideasustainedsurplusforexport.

ByFebruary2012,theindustrywillbeginoperatingunderaliberalizedtraderegimeaftertheCOMESAsafeguardmeasureslapse.Insuchenvironment,theindustrywillhavetoenhanceitscompetitivenessalongtheentirevaluechainandreduceproductioncostsbyatleast39%tobeinlinewithEACpartnerstatesandCOMESAsugarproducingcountries.

At themoment, the industry is facing several challenges includingcapacityunderutilization, lackofregularfactorymaintenance,poortransportinfrastructureandweakcorporategovernance.Consequently,mostfactorieshaveaccumulatedlargedebtsamountingKSh.58billion.InthenewPlan,theindustrywillrequireKSh 51.1 billion.KSh. 15.3 billionwillbeusedtoinitiatepowerco-generationprojectsinvariousfactories.KSh. 12.8 billionwillbeusedtoinitiateethanolproductionprojects.TheremainingKSh. 23 billionwillbeusedtocarryoutotheractivitiesoutlinedinthisPlan.

Asamatterofurgency,theGovernmentthroughthePrivatizationCommissionhasappointedTransactionAdvisorstoworkoutthefinaldetailsfortheprivatizationofallpubliclyownedfactories.Alongsidetheprivatization,theGovernmentwillinitiateaprogrammeforfinancialrestructuringofindebtedpublicfactories.ThiswillbeinadditiontothecontinuedGovernmentsupportinthedevelopmentofessentialinfrastructuresuchasroads,irrigationaswellasbasicresearchandextension.

The 2010-2014 Kenya Sugar Industry Strategic Plan is intended to be the basis of facilitating thetransformationrequiredinthesugarsubsector.Itsetsouttheframeworkthatwillenabletheindustryachieveitsvisionofbeing‘a world class multi-product sugarcane industry’inthenextfiveyears.Despitethe challenges the industry faces, this Plan underlines the industry’s commitment of being efficient, diversified and globally competitive.

Itismyhopethattheobjectives,strategiesandactivitiesrecommendedinthisPlanwillbeimplementedfully torevampandresuscitate the sugar industry. Iamthereforepleased to launchtheKenya Sugar Industry Strategic Plan 2010-2014.

Hon. William S. Ruto, M.P,Minister for Agriculture

Foreword

Strategic Plan, 2010-2014 vii

Acknowledgements

Theformulationof theKenya Sugar Industry Strategic Plan 2010-2014 comes at a timewhentheindustryneedstorethinkitsdirectionasitapproachestheliberalizationofthesugartraderegime in2012. The industryneeds tofindwaysof repositioning itself competitively. This

wouldrequirethattheindustrygoesbeyondsugar,thinkmoreaboutsugarcaneasawholeandexploitmarketopportunitiesthatthebroadersugarcaneindustryprovides.

Thesugarindustrystakeholdershavebeenattheforefrontinchampioningforabetter,efficientanddiversifiedsugarcaneindustry.Itwasthroughtheireffortsthatconsiderableachievementswererealisedintheoutgoingplan.ItwasalsoduetotheirparticipationandconcurrencethattheformulationandpreparationoftheincomingPlanbecamepossible.

First, I wish to thank His Excellency the President of the Republic of Kenya, Hon. Mwai Kibaki,EGH,MPandtheRightHonourablePrimeMinisteroftheRepublicofKenya,Hon.RailaAmolloOdinga,MPfortheirunwaveringsupportforthesugarsub-sector.IamalsogratefulfortheMinisterforAgriculture,Hon.WilliamS.Rutoforhisrobustsupportandvisionforthedevelopmentofthesugarindustry.

Secondly,IwouldliketothanktheBoardmembersandmanagementteamofKenyaSugarBoardfortheirinvaluablecontributionsinsettingtheagendaforthenewPlan.SpecialthankstoMs.RosemaryMkok,ChiefExecutiveOfficer,KenyaSugarBoardandhermanagementteamfortheleadershiptheyprovidedinthepreparationofthisStrategicPlan.

Thirdly,IwishtoexpressmydeepestgratitudeandappreciationtoallindustrystakeholdersfortheiractiveparticipationinthepreparationofthisStrategicPlan.

Lastly,IthankLogAssociatesconsultantsforfacilitatingthereviewandpreparationofthisPlan.IamconfidentthatthisStrategicPlanwillserveastheindustry’sframeworkfordecisionmaking,planning,resourcemobilisationandperformancemonitoringinthenextfiveyears.

Thankyou.

Z. Okoth ObadoBoard Chairman, Kenya Sugar Board

Kenya Sugar Industryviii

I. BackgroundTheKenyansugarcaneindustryisamajoremployerandcontributortothenationaleconomy.Sugarcaneisoneofthemostimportantcropsintheeconomyalongsidetea,coffee,horticultureandmaize.Byfar,thelargestcontributionofthesugarcaneindustryisitssilentcontributiontothefabricofcommunitiesandruraleconomiesinthesugarbelts.Farmhouseholdsandruralbusinessesdependontheinjectionofcashderivedfromtheindustry.Thesurvivalofsmalltownsandmarketplacesisalsodependentontheincomesfromthesame.TheindustryisintricatelyweavedintotheruraleconomiesofmostareasinwesternKenya.

Besidesthesocio-economiccontributions,theindustryalsoprovidesrawmaterialsforotherindustriessuchasbagasseforpowerco-generationandmolassesforawiderangeofindustrialproductsincludingethanol.Molassesisalsoakeyingredientinthemanufacturingofvariousindustrialproductssuchasbeverages,confectioneryandpharmaceuticals.

II. MethodologyInpreparingthisStrategicPlan,theconsultantadoptedaparticipatoryandcollaborativeapproachandmethodologycomprisingLiterature Review, Key Informants Interviews (KII), Focused Group Discussions (FDGs) and Stakeholder Consultative Workshops. Consultationswereheldwith 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. StructureoftheReportThisPlanissetoutinsixchapters.Afteranintroductioninchapterone,Kenya’sDevelopmentAgendaandChallengesisoutlinedinchaptertwofollowedbyareviewofthe2004-2009StrategicPlaninchapterthree.TheproposedStrategic Plan 2010-2014 isdiscussedinchapterfour.ImplementationStrategyandResourceRequirementsispresentedinchapterfive.ThedocumentconcludeswithadiscussiononMonitoring,EvaluationandReportinginchaptersix.

IV. 2004-2009StrategicPlanReviewFindingsAreviewofthe2004-2009 Strategic Plan showedthat:

1. ThePlangoalsof creatingaworldclass sugar industrywere ambitious andhadnotbeenrealized,havingbeensetatatimewhentheindustrywasstillahighcostproducer

2. Theconsumption-productiongapstillpersistsandgrowing,delayingtheindustry’sgoalofbeinganetexporter

3. Yieldlevelsdeclinedfromamodestyieldlevelof73tonnesperhectaretoabout70tonnesperhectareoverthelastfiveyears.

4. Farmersupportservicesprovidedbyoutgrowerinstitutionsandcontractorswereinadequateinquality and timeliness including seed cane, fertilizer supplies, and caneharvesting andtransportation.

Executive Summary

Strategic Plan, 2010-2014 ix

5. Mostthefactories,thatarethebackboneoftheindustrywerestrugglingindebtandwereunabletomaintaineffectivecrushingcapacity,carryoutroutinemaintenanceandessentialrehabilitationandpayfarmersontime.

6. Fundingtotheindustrywasinadequatetomeetinfrastructuraldevelopmentneedssuchasirrigation,roads,researchandfactoriesmodernization

7. Thesafeguards thatwereput inplace toprotect the industry includingCOMESAregionquotasandtaxeshadmanyloopholes

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

Overall,eventhoughthegoalsofthe2004-2009StrategicPlanwereambitious,thePlaninstrumentassistedingettingtheindustrystakeholderstoseekacommongroundforthegoodoftheindustry.

V. The2010-2014StrategicPlanRationale for the PlanTheKenya Sugar Industry Strategic Plan for 2010-2014providesaroadmapofhowtheindustryintendstobe a “world class multi-product sugarcane industry.” Toenable theGovernmentachieve its strategicobjectivesofbeingamiddle-incomecountrybytheyear2030,thisrevisedstrategicplanaimsatmakingthe industry more efficient, diversified and globally competitive to contribute to the overall objectiveoutlinedintheAgriculturalSectorDevelopmentStrategy(2009-2020)andtheKenyaVision2030.

The Plan provides a framework for setting goals, defining key actions, and mobilizing resources forfunding programmes in the industry. It is a unifying instrument at the strategic level for industrystakeholders,whootherwiseareautonomousoperators.Itlaysthegroundforenhancedperformanceofthesugarindustrypremisedonarationalutilizationofallresourcesinthesector.

VisionThenewvisionfortheindustryistobe‘a world-class multi-product sugarcane industry’.

MissionThe new mission of the industry is to ‘facilitate a multi-product sugarcane industry that is efficient, diversified and globally competitive’ through: enhancedindustry’scompetitivenessthroughcostreductionstrategiesandefficiencyimprovements,expandedproductbase,improvedinfrastructureandstrengthenedregulatoryframework.

Strategic GoalsThe formulation of this Plan came at a time when the industry needs to rethink its direction as itapproachesthe liberalizationof thesugar traderegimein2012. Theindustryneedstofindwaysofrepositioningitselfcompetitively.Thiswouldrequirethattheindustrygoesbeyondsugar,thinkmoreaboutsugarcaneasawhole,andexploitmarketopportunitiespresentedbymultiplesugarcaneproducts.ThisPlanwillthereforeputnewpressureontheindustrytofindandinvestresourcesinthenewdirectionwheretheindustryneedstogo.Inthelightoftheabove,the2010-2014StrategicPlanisintendedtoseekamore limitedbutachievable setofgoals. Thestakeholdershave identifiedandendorsed fourstrategicgoals.

1. EnhancingCompetitivenessintheindustryinordertotransformittoaleaner,lowercostindustrythatcantakeonitscompetitorsthrough:

Kenya Sugar Industryx

n Reductioninfarmlevelrisksn Efficient,reliableharvestingandtransportoperationsn Effective,efficient,millingoperationsn Enhancedhumanresourcecapacityn Streamlinedcorporategovernance

2. Expandingtheproductbasetotakeadvantageofopportunitiescreatedintheproductionprocessandincreasefactoryprofitabilitythroughvalueadditionandproductdiversificationby:n Initiatingpowerco-generationprojectsn Initiatingethanolproductionprojectsn Producingindustrialsugarandalcoholn Encouragingintensificationtoincreasefoodsecurity

3. Investingmoreininfrastructureby:n Improvingroadtransportn Investinginirrigationn InvestinginandpromotingtheuseofICTn IncreasingfundinginResearchandDevelopmentn Modernisationofmills

4. Strengtheningthepolicy,institutionalandlegalenvironmentby:n Improvingthemanagementofthesugarimportpolicyn StrengtheningCorporateGovernancen FinalisingandimplementingtheSugarRegulationsn Finalisingtheimplementationoftheprivatisationprogrammen Establishingacoordinationmechanismforroadsmaintenanceinthesugarzonesn Supportingmeasurestodevelopacomprehensivepolicyonco-generationsandexploitation

ofbio-fuelsandothersugarcaneproducts

VI. ImplementationStrategyandResourceRequirementsReportingtheprogressofimplementationwillbecriticalinadjustingstrategicdirectionsandmeasuringperformance.Progress reportswill bemadeonquarterlybasis.The reportswill outline in summaryformprojectedtargets,achievements,facilitatingfactorsandchallenges.ThereportswillbepreparedandsubmittedbyUCstotheSRFwhereasummaryreportwillbepreparedandsubmittedtotheMCforreview.IssuesthatwillrequirepolicyinterventionswillbeforwardedtotheNICCthroughtheKSBBoard.

Strategic Plan, 2010-2014 1

Introduction1.1 HistoricalBackgroundIndustrialsugarcanefarmingwasintroducedinKenyain1902.Thefirstsugarcanefactorywasset-upatMiwani10kmnorthofKisumuin1922andlateratRamisiintheCoastProvincein1927.Afterindependence,theGovernmentexplicitlyexpandeditsvisionoftheroleandimportanceofthesugarindustryassetoutinSessionalPaperNo10of1965whichsought,interalia,to:

n Acceleratesocio-economicdevelopmentn Redressregionaleconomicimbalancesn Promoteindigenousentrepreneurshipn Promoteforeigninvestmentthroughjointventures

Inpursuitof theabovegoals, theGovernmentestablishedfiveadditional factories in the1960sand1970s:Muhoroni(1966),Chemelil(1968),Mumias(1973),Nzoia(1978),andSouthNyanza(1979).Later,severalmoreweretocomeonstream:WestKenya(1981),SoinSugarFactory(2006)andKibosSugar&AlliedIndustries(2007),bringingthetotalnumberofmillingcompaniestoten(10).Thetwoolderfactoriesceasedoperations:Ramisisugarfactorycollapsedin1988andMiwanisugarfactorywasputunderreceivership.

Theestablishmentofthepubliclyownedfactorieswaspredicatedontheneedto:n Achieveselfsufficiencyinsugarwithasurplusforexportinagloballycompetitivemarketn Generategainfulemploymentandcreatewealthn Supplyrawmaterialforsugarrelatedindustriesn Promoteeconomicdevelopmentintheruraleconomyandbeyondthroughactivitieslinked

tothesugarindustry

Insupportoftheabovegoals,theGovernmentinvestedheavilyinsugarfactories,holdingabout83%oftheequity,laterreducedto70%afteritdivested36%ofitsinterestinMumiasSugarCompany.TheseresourceinjectionsintothesubsectorwereinadditiontotheresourcesfromtheSugarDevelopmentFund (SDF), setup in1992, thathascontributedaboutKSh.11billion into the industry forcanedevelopment,factoryrehabilitation,researchandinfrastructuredevelopment.

Theseinvestmentsdidnot,however,helpachievetheself-sufficiencyinsugarasconsumptioncontinuedtooutstripproduction.Totalsugarproductiongrewfrom368,970tonnesin1984to520,000tonnesin2008leavingKenyaanetimporterofsugarwithimportsrisingfrom4,000to220,000tonnesoverthesameperiod.ThedeficitisbeingmetthroughimportsfromtheCOMESAregionandothersugarproducingcountriesincludingBrazil,UnitedKingdomandMexico.Figure1.1showsproductionandconsumptionstatussince2001.

In 2003, the Government set up aTask Force on the Sugar Industry Crisis1 whose objective was toexaminetheproblemsfacingthesugarsubsectorandmakerecommendationsforrevitalizingtheindustry.

1 OtherwiseknownastheAmayoTaskForceReportdated1stJuly2003

1Chapter

Kenya Sugar Industry2

FollowingtheTaskForce’srecommendations,theGovernmentmadethefollowingdecisions:(a) Madechangesinthemanagementofallpubliclyownedmillingcompanieswithaviewto

improvingcorporategovernance(b) ReducedlendingratesonSDFloansfrom10%to5%(c) WroteoffKSh.4.7billiononaccruedinterestandpenaltiesonSDFloans(d) DisbursedKSh.800milliontowardssettlingarrearsowedbymillingcompaniestofarmers(e) Increased research funding from the Sugar Development Levy by (SDL) doubling the

allocationfrom0.5%to1%(f ) Successfully negotiated for a four-year COMESA safeguard to give the industry time to

restructureandbecomegloballycompetitive

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

ConcurrentwiththestructuralreformstheGovernmentwasimplementing,theindustrycontinuedtoexpanditsprocessingcapacity:KenyaSugarBoard(KSB)registeredthreenewmillwhitesugarfactories,namely:Butali,KwaleInternationalSugarCo.LtdandTransMaraSugarCompanieswithacombinedpotentialcapacityof5,000TCD.ItisalsoexpectedthatanadditionalmillwouldbeestablishedintheTanaRiverbasin,withapotentialcapacityof9,000TCD.Withtheoperationalisationofthesenewfactoriesandtheupgradingoftheexistingmills,theindustry’scapacitywouldbecloseto38,000TCD,whichwouldresultinaproductionofabout1milliontonnesofsugarperannum.

Apart from the regular sugar mills, there are four licensed and operational jaggery millers, namely:Lubao,Shajanand,FarmIndustriesandHomaLimeJaggeries,whohaveacombinedcapacityofabout300TCD.Therearealsoinexcessofthreehundredinformalandmostlymobilejaggeries,eachofwhichcrushesbetween3-35tonnesofsugarcaneperday.

1.2 ImportanceoftheSugarcaneSectortotheEconomyTheKenyan sugarcane industry is amajor employer and contributor to thenational economy. It isoneofthemostimportantcropsalongsidetea,coffee,horticultureandmaize.Currently,theindustrydirectlysupportsapproximately250,000small-scale farmerswhosupplyover92percentofthecanemilledbythesugarcompanies.AnestimatedsixmillionKenyansderivetheirlivelihoodsdirectlyor

2001

Production Consumption Imports Exports

0

20

40

60

80

2002 2003 2004 2005

Year

Tonn

es (x

1000

0)

2006 2007 2008


indirectlyfromtheindustry.In2008,theindustryemployedabout500,000peopledirectlyorindirectlyinthesugarcanebusinesschainfromproductiontoconsumption.Inaddition,theindustrysavesKenyainexcessofUSD250million(aboutKSh.19.3billion)inforeignexchangeannuallyandcontributestax revenues to the exchequer (VAT, CorporateTax, personal income taxes, cess). In the sugarbeltzones, the sugar industry contributes to infrastructure development through road construction andmaintenance; construction of bridges; and to social amenities such as education, health, sports andrecreationfacilities2,3.

The sugarcane industry provides raw materials for other industries such as bagasse for power co-generationandmolassesforawiderangeofindustrialproductsincludingethanol.Molassesisalsoakeyingredientinthemanufacturingofvariousindustrialproductssuchasbeverages,confectioneryandpharmaceuticals.

Byfar,thelargestcontributionoftheindustryisitssilentcontributionstothefabricofcommunitiesandruraleconomiesinthesugarcanebelt.Farmhouseholdsandruralbusinessesdependontheinjectionofcashderivedfromsugarcane.Thesurvivalofsmalltownsandmarketplacesisalsodependentontheincomesfromthesame.TheindustryisintricatelyweavedintotheruraleconomiesofmostareasinWesternKenya.

1.3 SugarindustryStakeholdersTheKenyaSugarindustryhasawiderangeofstakeholders,eachwitharoletoplay.

(i) The Government of Kenya (GoK)The Government of Kenya (GoK) through the Ministry of Agriculture (MoA) has the overallresponsibilityfortheindustry’sdevelopment.TheGoKhasaroleofsupportingtheindustrythroughregulation,enhancementofcompetitionandfairplay,andprovisionofanenablingenvironmentforallstakeholders.Currently,theGoKisthelargestshareholderintheindustry.

(ii) The Kenya Sugar Board (KSB)TheKenyaSugarBoard(KSB)isapublicbodysetupbytheSugarAct,2001,undertheMinistryofAgriculture.TheBoardismandatedto:

i. Regulate,developandpromotethesugarindustryii. Co-ordinatetheactivitiesofindividualsandorganisationsintheindustryiii. 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 theindustry mandated to develop and transfer appropriate technology in the sugar sub-sector. It alsocarries out socio-economic studies to enhance the development of sugar as a commercial business.TheFoundationisfundedmainlythroughgrantsfromtheSugarDevelopmentFund(SDF).IthasitsheadquartersinKibos,Kisumuwithsub-stationsinMumias,MtwapaandOpapo.

2 BracingforCOMESA:KenyanSugarindustry,MumiasSugarCompanyBulletin20083 KenyaSugarBoardStrategicPlan(2008-2012)andYearBookofStatistics(2008)


(iv) Cane Growers/Outgrower Institutions Sugarcanefarmers(outgrowers)supply92%ofthecanemilled.AlargenumberofinstitutionsincludingOutgrower Institutions, Societies, Unions and SACCOs represent these farmers. The role of theseinstitutions is topromote, representandprotect the interestof the farmers.The institutionsoperateundertheKenyaSugarcaneGrowersAssociation(KESGA).

(v) Cane Transporters Canetransportersareresponsibleforprovisionofcanetransportationservicesintheindustry.TransportersoperateundertheKenyaCaneTransportersAssociation(KECATRA).

(vi) Millers/Jaggeries Theroleofthemillersistomakefairreturnoninvestmentthroughefficientoperationofthesugarmillsorjaggeriesfortheproductionofsugarandotherproductsforsaleandmakingtimelypaymentstocanegrowers.ThemillersoperateunderanapexinstitutionknownastheKenyaSugarManufacturersAssociation(KESMA).Millersareacriticalnodeinthesugarcaneindustrybecauseoftheroletheyplayinvalueaddition.Theprofitabilityandhencestrengthoftheindustrydependsonhowefficientlytheyoperate.

(vii) Other Industry Stakeholders Otherindustrystakeholdersinclude:n Importersn Financialinstitutionsn Consumersn Specialinterestgroups

• KenyaSocietyofSugarcaneTechnologist(KSSCT)• SugarCampaignforChange(SUCAM)

1.4 ScopeofServicesThescopeofservicesoutlinedintheTermsofReferenceforthepreparationofthe2010-2014StrategicPlan,wereasfollows:

i. Reviewthecurrentstrategicplanandotherrelevantdocumentationwhichshallinclude,butnotlimitedtotheNationalVision2030;theMinistryofAgricultureStrategicPlan2006-2010;theSugarAct2001;Guidelinesforthepreparationofstrategicplans2008-2010fromtheofficeofthePrimeMinister,MinistryofStateforPlanning,NationalDevelopmentandVision2030;andprepareacritiqueofissuesforconsideration

ii. Conductastakeholders’workshoptocollectviewsonpossibleamendmenttothecurrentdocument

iii. Arisingfrom(1)and(2)above,prepareadraftindustrystrategicplan2010-2014iv. ConductaworkshopfortheBoardandManagementTeamtotakethemthroughthedraft

industrystrategicplan2010-2014v. Prepare a final draft to be presented to the Board, Management Team and sugar

stakeholdersvi. Prepareandpresentthefinaldocument

1.5 MethodologyIn reviewing the strategic plan, the consultant adopted a participatory and collaborative approachcomprising Literature Review, Key Informant Interviews (KII), Focused Group Discussions (FDGs) and Stakeholder Consultative Workshops.


1.5.1 Literature ReviewTheconsultantreviewedawiderangeofpublishedmaterialsanddocumentsinthecourseoftheassignment,including:i. KenyaSugarIndustryStrategicPlan(2004-2009)ii. KenyaSugarBoardStrategicPlan(2008-2012)iii. KenyaVision2030,AGloballyCompetitiveandProsperousKenyaiv. SessionalPaperof2008onRevitalisationofSugarindustry(March2008)v. AgricultureSectorDevelopmentStrategy(2009-2020)vi. EconomicRecoveryStrategyforWealthandEmploymentCreationvii. ReportoftheTaskForceonSugarindustryCrisis,1stJuly2003viii. GuidelinesforPreparationofVision2030basedStrategicPlansix. ReportonCostofCaneandSugarProduction(KSB,2006,2007)x. YearBookofSugarStatistics(KSB,2008)xi. KenyaSugarindustryReport(EPZA,2005)xii. WorkingPapers(MillenniumCitiesInitiative&ValeColumbiaCenter,2008)xiii. NationalPolicyonSugarindustry(GoK,April2001)xiv. NationalSugarConferenceReport(October,2004)xv. EconomicGovernanceReformintheSugarSubsector(February,2005)xvi. EnergyAct,2006xvii. Variousinternetsources

1.5.2 Stakeholder Consultative WorkshopsTheconsultantheldtwostakeholderconsultativeworkshopsinKisumu.Thefirstworkshopwasheldon21and22May2009.The secondworkshopwasheldon17 June2009.Theworkshops’participantscomprisedrepresentativesofOutgrowerInstitutions(OGIs),Millers,Transporters, Cane Researchers, Universities, Ministry of Agriculture, KESREF and KenyaSugarBoard.Theseworkshopswereusedasdiscussionforumstogatherinformationonkeyissuesaffectingtheindustryandthewayforward.

1.5.3 Debriefing WorkshopsTheconsultantconductedthreedebriefingworkshops.Thefirstworkshopwasheldon10July2009withthemanagementteamoftheKenyaSugarBoard.Thesecondandthirdworkshopswereheldon27July2009and14August2009respectivelywiththeBoardandManagementTeamofKSB.Thecommentsandsuggestionsfromthethreedebriefingworkshopshavebeenincorporatedinthisreport.


2ChapterKenya’s Development Agenda

and Challenges2.1 AttainingVision2030Kenya’smediumandlong-termdevelopmentagendaissetoutintheKenya Vision 2030. TheVisionisbuiltonthefoundationoftheEconomic Recovery Strategy for Wealth and Employment Creation (ERWEC) 2003-2007.Itisthecountry’snewdevelopmentblueprintcoveringtheperiod2008-2030.ThevisionaimstotransformKenyaintoa newly industrialising, middle-income country providing a high quality life to all its citizens inacleanandsecureenvironmentbytheyear2030.TheVisionisalsoexpectedtobeamajorvehiclefortherealisationoftheMillenniumDevelopmentGoals(MDGs).Thevisionisbasedonthreepillars:theeconomic,thesocialandthepolitical.Thesepillarsareanchoredonmacroeconomicstability;continuityingovernancereforms;enhancedequityandwealthcreationopportunitiesforthepoor;infrastructure;energy;science,technologyandinnovation(STI);landreform;humanresourcesdevelopment; security as well as public sector reforms. The sugar industry will contribute to theattainmentofthreepillarsthroughvariousinterventionsdiscussedbelow:

2.1.1 Economic PillarTheeconomicpillaraimstoattainanaverageGrossDomesticProduct(GDP)growthrateoftenpercent(10%)perannumandsustainitto2030.Theprogramsenvisagedtomovetheeconomyupthevaluechainaretourism, agriculture, wholesale and retail trade, manufacturing, business process outsourcing and financial services.Thesugarcaneindustrywillplayakeyroleintheattainmentofthegoalssetfortheprogrammesinagricultureandmanufacturing;andtobenefitsubstantiallyfromprogrammesenvisagedinthewholesaleandretail,andfinancialservicesprogrammes.

Agricultural Sector:Thesugarcaneindustryalreadyaccountsforabout15%ofagriculturalGDP.IntheVision2030,Kenyaaimstobuildanagriculturalsectorthatisinnovative,businessorientedandmodernthrough:

n Transformingkeyinstitutionstopromoteagriculturalgrowthn Increasingproductivityinthesectorn Landpolicyandlandusereformsn Expandingirrigationinaridandsemi-aridlandsn Improvingmarketaccessforsmallholdersthroughbettersupplychainmanagement

Torealisetheaboveobjectives,theVisionhasidentifiedsevenflagshipprojectsforimplementationbytheyear2012.Threeoftheprojectsthatarerelevanttothesugarsubsectorincludeirrigation 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 movetowards greater efficiency in the country’s marketing system by lowering transaction coststhroughinstitutionalreforms.Thisinvolvesstrengtheninginformaltrade(throughinvestmentininfrastructure,trainingandlinkingittowiderlocalandglobalmarkets).Thisisexpectedtoraisethemarketshareofproducts(includingsugarandco-products)soldthroughnormalchannels suchas supermarkets from5%to30%by2012. Theenvisagedflagshipprojectssuchas creation of wholesale hubs, building of retail markets and a free trade port aremarketopportunitiesthatwillbeexploitedbythesugarindustryintheincomingplanningperiod.

Manufacturing Sector: Kenyaaimstohavearobust,diversifiedandcompetitivemanufacturingsectorthrough:

n Restructuringlocalindustriesthatuselocalmaterialsbutarecurrentlyuncompetitivee.gsugarandpapermanufacturing

n Exploitingopportunitiesinvalueadditiontolocalagriculturalproducen Addingvaluetointermediateimports

Withfullerexploitationofforwardlinkagesinthevaluechain,theindustryhasanopportunitytoincreasesignificantlyitscontributiontothemanufacturingsector.

Financial Sector: The2030vision forfinancial services is tocreateavibrantandgloballycompetitivefinancialsectorinKenya.Thesectorisexpectedtocreatejobsandpromotehighlevelsofsavingstofinanceinvestmentneeds.OneofthemosturgentstepstowardscreatingacompetitivefinancialenvironmentinKenyaisintroducinglegalandinstitutionalreformsthatwillenhancetransparencyinalltransactions,buildtrustandmakeenforcementofjusticemoreefficient.Thiswillbeachievedby:

n UndertakinglegalandinstitutionalreformstomakeKenyamorecompetitiveasafinancialcentre

n Consolidationofbankstomakethemlargerandstrongern Introductionofcreditreferencingn Strengtheninginformalandmicro-financeinstitutionsandSACCOsn Deepening financial markets by raising institutional capital through pension funds,

expandingbondandequitymarketsaswellastappingexternalsourcesofcapital

The reforms are also expected to strengthen the regulatory and oversight authority whichinturnwillhelp increase investorconfidence intheeconomyandthus increase investmentopportunitiesinthesugarcanesectoraswell.Increasedinvestmentinthesectorwillleadtohigherproductionofsugarandco-products,whichwillthencontributetotherealisationoftheenvisaged10%GDPgrowthrate.

To fully utilize the potential in the sugarcane industry, some essential reforms have beenidentified in the Agricultural Sector Development Strategy 2009-2020 to complement thebroadreformsenvisagedunderVision2030,theseinclude:

n Landreformstoreduceinequalityandincreaseintensificationn Improvingefficienciesinthesupplychaine.g.enhancingaccesstoinputmarkets,raising

caneyields,reducingpost-harvestlossesandupgradingfactorycapacityn Increasingaccesstocreditfacilitiesparticularlyforfarmersn Increasingvalueadditionbymoreprocessingandproductdiversificationn Strengtheningcorporategovernanceinthesugarcaneindustry


2.1.2 Social PillarThesocialcomponentaddressesissuesofequityandsocialjustice;nationalcohesion,securityand environmental concerns. It lays great emphasis on the development of education andtraining,betterhealthcare,improvedwaterandsanitation,sustainableandbetterenvironmentalmanagement aswell as vital national attention to gender equity, youth, vulnerable groups,housing,andpovertyreduction.

Developmentsenvisagedinthesocialpillarwillbeimportantinprovidingopportunitiesforsocialsafetynetsandgreatermobilityinthesocialspace.ThesugarindustrywillcontributesignificantlytothesocialdevelopmentthroughprovisionofemploymentopportunitiesandwealthcreationintheruralareasofKenya.Asasocialtool,avibrantsugarindustrywillactasacatalystforraisingthestandardsoflivinginvariousruralhouseholdsthroughdirectandindirect incomes. The sugar industrywill also contribute to the realisationof thegoalsofthesocialpillarthroughitscorporateresponsibilityactivitiesinhealth,education,waterandsanitation,andrecreationactivities.

2.1.3 Political PillarThepoliticalcomponentaims to realiseademocraticpolitical systempredicatedongreatereconomicandpoliticaldevolution,respect for theruleof law,andprotectionofrightsandfreedomsforallcitizens.Underthiscomponent,Kenya’sdevelopmentagendaistoimproveaccountability,reduceimpunityandbegintherealfightagainstcorruption,andthuspromoteefficiency in thegovernanceandmanagementofpublicaffairs.Goodcorporategovernancein the sugar industry is essential in order to create a climate of fairness, transparency andaccountabilityespeciallynowwhenmajordecisionsareneededtomaketheindustryleaner,efficientandmorecompetitive.

2.2 TradeEnvironmentforKenyanSugar

2.2.1 Global Trade Environment and ObligationsInthelasttwodecades,theworldhaswitnessedrapideconomicgrowthandexpansionoftrade,drivenprimarilybyemergingAsianTigereconomies.TherapidandcontinuedstronggrowthinChinaandIndiawillfurtherputupwardpressureonpricesofcrudeoil.Thiswillcontinuetocausemajorchallenges toKenya’s sugar industrythat is significantlydependentonfossilfuel forcanetransportation. Inaddition, there isevidencetosuggest thatfinancialmarketchallenges in theUnitedStatesofAmerica (USA)andEurope,areaffectingglobalmarketsthus impactingnegatively onKenya’s tradeperformance in goods and services.TheoveralleffectofthecreditcrunchwillbefeltintermsofreducedpurchasingpowerofforeignbuyersofKenyangoods, and lowerdomesticaccess tocredit,grants, anddonor support. CapitalmarketswillalsobemoreconcernedatthelikelyimpactofreducingglobaltradeflowsonthecreditworthinessofcountrieslikeKenya.

TheEuropeanCommission(EU)tradingblock,despitecuttingpricesby36%,willstillbeanattractivesugarexportdestination.Atanaveragepriceof22centsperpound,theEUpriceisstill4centsabovetheopentradeprice.

Internationalcompetitionfromlowcostsugarproducersisabigchallengetothelocalsugarindustry.Theaveragecostofsugarproductionin2006/07inKenyawasKSh.42,192(USD680)pertonne.TheworldaveragecostofproductionforthesameisUSD263pertonne.Asaresult,importersviewKenyaasanattractivemarket.Kenyaneedstobringitscoststructure,


productivityandqualitycontroltolevelscomparabletothoseofitscompetitorsinordertoexploittheopportunitiesavailedbytheglobalmarket.

Kenya’s is a signatory to World Trade Organization (WTO), the Cotonou PartnershipAgreements(ACP-EU),COMESAFreeTradeAgreementandtheEastAfricanCommunityCustoms Union. Sugar imports and exports are affected by what happens in these traderegimes.

2.2.2 COMESA and East African Community Customs Union ObligationsTheKenyansugarindustryisprotectedbyCOMESAsafeguardmeasures.Thesafeguardswerefirstgrantedin2004andweretoexpireinFebruary2008.Despitetheremarkableprogressmadeduring the safeguardperiod, the industrywasnot ready for anopen trade regime insugar. KenyathereforesoughtandwasgrantedanadditionalfouryearsofprotectionfromMarch2008toFebruary2012,withadecliningtariffandanincreasingquota(Table2.1).

Table 2.1: COMESA Import Quota

Year Quota(tonnes) TariffRate(%)

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

Theextensionwasgrantedsubjecttocertainconditions,including:

i. RisingsugarimportquotaintandemwithadecliningtariffasshowninTable2.1ii. The Government adopts a privatization plan within the first 12 months and takes

verifiablestepstoprivatizetheremainingpubliclyownedfactoriesby2011iii. The industry to implementcanepayment systembasedon sucrosecontent insteadof

weightiv. 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 morecompetitive

v. KenyaSugarBoard(KSB) to increase funding for researchonhighyieldingandearlymaturingvarietiesandspearheaditsdisseminationbyfarmers

vi. TheGovernmenttoincreasefundingforroadinfrastructurevii. TheGovernmenttosubmittwiceyearlyperformancereportstotheCOMESACouncil

onallmeasures,activitiesandimprovementsonthesugarsector’scompetitiveness

SugarpricesinKenyaneedtodropbyatleast39%tobeinlinewithCOMESAlevels.Suchapricedropinlessthan3yearsisdrasticandrequiresmajorcostreductionstrategiesfortheindustry.Although thereare eight sugarmills inproduction, industry sources indicate thatonlyWestKenya,MumiasandKibos&AlliedIndustrieswouldsurviveifthesafeguardsweretobeliftednowbecausetheycanproducesugaratcostssimilartootherCOMESAcountries.Thesefactoriesareequippedwithmodernfacilitiesthatcanprocesssugarcaneefficiently4.

4 KSB(2008),CostofCaneandSugarProductionandPersonalInterviews


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

Country CostUSD/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

WhileTanzaniaisnotamemberofCOMESA,UgandaisnotasignatorytotheCOMESAFreeTradeAgreement.Consequently,thetwocountriescananddoimportsugarfromoutsideCOMESA. These sugars find their way into Kenya through Informal Cross BorderTrade(ICBT),whichposesanunfaircompetitiontothelocalsugarproducers.SimilarproblemsalsooccurthroughtranshipmentofsugarviaotherCOMESAcountries(suchasEgypt)fromnon-COMESAcountries(suchasBrazil).

The East African Community (EAC) commenced implementation of a common customsunionin2005.TheCustomsUnionencompassestheremovalofinternaltariffs,applicationofaCommonExternalTariff(CET)andeliminationofNon-tariffbarriers(NTB).TheCETapplieszerotariffratesforrawmaterials,10%forintermediategoodsand25%forfinishedproducts.Whilst this is awelcomemove, it isworthnoting thatwithin theEAC, thecostof sugar production is lowest in Uganda followed byTanzania then Kenya. The practicalconsequenceisthatevenwithintheEAC;adutyfreemovementofsugarwouldimplythatUgandaandTanzaniaproducerswouldposeachallenge to theirKenyancounterparts.TheEACCustomsUnionalsoincludeBurundiandRwandawhoarealsomembersoftheEAC.Ultimately,thecustomunionmightincludeSouthernSudanandtheDemocraticRepublicoftheCongoinfuture.Therefore,itisnecessarythatdomesticproductionbemoreefficient andcompetitive andinternalpricesberealignedwithregionallevelsfortheindustryistosurvivetheanticipatedregionalsugartradeliberalization.

2.2.3 National ChallengesThecountryisfacingamonumentaltaskofovercomingpoverty:56%ofthepopulationlivesbelowthepovertyline;anunemploymentrateinexcessof40%,compoundedbyanincreasingnumberofyouthsleavingschoolwhoarelookingforwhite-collarjobs.Theseproblemsareexacerbatedbyhigh inequality in incomeandassetdistributionandadeterioratinggenderinequality. Thepressuretocreate jobs intheeconomyisthereforeveryhighandthesugarindustryisexpectedtoplayasignificantrole.

These adverse trends have led to considerable disparities in development among thedifferentregionsofthecountry,whichisposingaseriouschallengetonationalcohesionanddevelopment. In addition, insecurity in neighbouring Somalia coupled with homegrowncriminality,includingtheemergenceoforganizedgangsandmilitiaandavailabilityofillegalfirearmshave combined to create anadverse investment climate andhaveput considerablepressureonstateresources.


Thestateofinfrastructureisunsatisfactoryintermsofadequacyandqualitybecauseofyearsof deferred maintenance. Roads in particular, require a major effort for rehabilitation andmaintenance;irrigationinfrastructurehasstagnatedatverylowlevelssincethe1970s–theshareofirrigatedagriculturaloutputislessthan10%ofAgGDP.Thelimiteduseofirrigationhasincreasedfarmlevelrisksandhinderedasustainableincreaseinyields.Theinfrastructureproblemsarelikelytopersistunlessthereisaclearplanandprogrammeofimplementationover themediumand long-term. For the sugar industry, theprocessof seeking tobuildacompetitiveindustrywillbeimpededbyaninadequateandpoorqualityinfrastructure.

Corporategovernancehasbeenachallengefortheindustryforalongtime.Thesugarindustryneedstotransformitselftoprofitabilityandefficiencypaththroughsoundmanagementpractices.Thereisneedtodevelopandimplementpoliciesthatwouldensurethattheprinciplesofgoodgovernanceareinstitutedandmaintained.Thiswouldensurecompetitiveness, transparency, accountabilityandsustainability oftheindustry.

Landisanimportantfactorofproductionasitprovidesthefoundationforallotheractivitiessuchasagriculture,water,settlement,tourism,wildlifeandforestry,andinfrastructuralactivities.However,overtheyears,administrationandmanagementoflandhasbeenachallengeduetolackofacomprehensivelandtenurepolicy.Thishasledtofragmentationoflandintosmallanduneconomiclandunits.Smalllandsizeshasledtostrongcompetitionforlandbetweenfoodcropsandsugarcane,whichhasincreasedfoodinsecurity.TheagriculturalsectorisdevelopingaNationalLandUsePolicyandMasterPlan,whichwillprovideguidelinesregardingtheuseofland.

DevelopmentprojectsrecommendedunderVision 2030 willincreasedemandonKenya’senergysupply.Currently,Kenya’senergycostsarehigherthanthoseofhercompetitors.Kenyamust,therefore,generatemoreenergyatalowercostandincreaseefficiencyinenergyconsumption.Tohelpmeettheenergyneeds,theindustrywillinvestinco-generationwiththeaimofsellingsurpluspowertothenationalgrid.


3ChapterReview of the Strategic Plan

2004-20093.1 StrategicObjectives(2004-2009)To turn around the sugar industry, the outgoing Plan identified nine (9) Strategic objectives forimplementationduringtheperiod2004-2009.TheseobjectivesandactionsarepresentedinAnnex I.

3.2 AchievementsAreviewoftheoutgoingPlanrevealedthatthelevelofimplementationofactivitieswasonlyabout30%ofwhatwasintended,manyoftheactivitiesarework-inprogress.Thepoorimplementationoftheplanwasattributedtothefactthattheobjectiveswerewaytooambitious,notSMART5henceextremelydifficulttoimplementandmonitor.Implementationofsomeactivitieswasdelayedbylackoffunds.

3.2.1 Attainment of the MissionTheKenya Sugar Industry Strategic Plan (2004-2009)setoutthemissionoftheindustryasto:“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 notachievedduringthePlanperiod.Theindustryisstillanetexporter.Thegoalofbeinggloballycompetitiveisstilladreambecausetheindustrydidnotimplementthestructuralmeasuresthatwouldhavebroughtdowncostsandincreaseditscompetitiveness.Butofgreatconcern,is the focus on sugar and self-sufficiency without regard to profitability and efficiency. Itbecameclearthatthesugarindustrycouldnotsimultaneouslyseekself-sufficiencyandglobalcompetitiveness.AsillustratedbytheCOMESAconditionalityforgrantinganextensionofitssafeguards,theindustryneedstobecomecompetitivethroughmajorstructuralchanges.Thiscallsforareviewofthemission.

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

I. Increased Sugarcane Production and Productivity

AreaunderCane

Areaundercanegrewfrom131,507hectaresin2004to169,421hectaresin2008(Fig3.1),representinganincreaseof28.8%.TheincreaseincaneareawasattributedtotheadditionofKibosandSoinSugarZonesasnewcaneareas.Additionally,apartfromSONYSugarCompanyandMiwani,alltheothercompaniesincreasedareasundercane.MostoftheincreasewasfromtheWestKenyazone,whichroseby198.2%(Table3.1)

5 Specific,Measurable,Attainable,Realistic,Timed


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

Source:YearBookofSugarStatistics,KSB,2008

Table 3.1: Area under Cane

Year

Company2004 2008 Increase/

DecreaseIncrease/

(Decrease)Ha Ha Ha %

Chemelil 10,219 13,341 3,122 30.6Muhoroni 11,146 14,259 3,113 27.9Mumias (+Busia Zone) 56,792 64,637 7,845 13.8Nzoia 19,449 23,899 4,450 22.9SONY 20,941 19,322 -1,619 (7.7)Miwani 5,560 4,633 -927 (16.7)Kibos - 2,622 2,622 New zoneWest Kenya 7,400 22,070 14,670 198.2Soin - 4,638 4,638 New zoneTotal 131,507 169,421 37,914 28.8

Source:YearBookofSugarStatistics,KSB,2008

Cane VarietiesIn2008,canevarietyCO945occupied35.72%ofthetotalareaundercane.VarietiesCO421,CO617andN14occupied28.4%,13.29%,10.95%ofthetotalarearespectively.KESREFdeveloped fournewcane varieties (KEN82-062,KEN82-472,EAK73-335 andD8484)in2007.However,theareaundercaneforKenyanbredvarietiesremainedjustunder5%ofthegrossarea.TheslowadoptionratetoKenyanvarietiesisattributedtoinefficientfactoryutilisationcapacitythattranslatesintodelayedharvestingwhichraisestheriskstothefarmers,and to some extentweak research-extension-farmer linkages.Most farmersdonotwant toadoptearlymaturingcanevarietiesbecausetheydeterioratefasterandthefactoriesdonothavethecapacitytoharvestingoodtime.

6 Source:KenyaSugarBoardStrategicPlan(2008-2012),YearBookofSugarStatistics

2001

117,131

126,826

122,580

131,507

144,765

147,730

158,568

169,421

2002 2003 2004 2005

Year

Area

und

er ca

ne (H

a)

2006 2007 2008


Area Harvested, Cane Deliveries and Cane YieldsArea Harvested: Total area harvested in the nucleus estates and the outgrower farms was54,465hectaresin2008comparedto54,191hectaresin2004,indicatinganincreaseof0.51%.Thisdoesnothoweverincludetheareaharvestedbynon-contractedfarmers.Themeanareaharvestedovertheentireplanningperiodwas38.9%ofthetotalareawithastandarddeviationof±3.4.Thelargestareaharvestedwasrecordedin2007(Fig.3.2).However,thebestindustryaveragewasachievedin2002,when42.6%oftheareaundercanewasharvested.

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

Cane Deliveries: Total cane deliveries for the year 2008 were 5,125,821 tonnes against4,660,995 tonnes in2004, representing a cane supply increaseof approximately10%overtheplanningperiod.Thebestsupplywasrecordedin2007at5,204,214.Thedecreaseincanesupplyin2008wasattributedtopoorrains,postelectionrelatedviolenceincludingaspikeincaneburningcaseswhichaffectedoperationsatthefarm,transportationandfactorylevels.

Cane Yields:Theaveragecaneyieldfortheyear2008was72.9TC/Haagainst73.8TC/Hain2004representingadecreaseof1.2%(Fig.3.3).Themeanyield for theentireplanningperiodwas70.4TC/Hawithastandarddeviationof±3.1.HighestcaneyieldswererecordedinSONYsugarbelt(five-yearaverage,86.0TC/Ha)followedbyNzoiaSugarcompany(five-yearaverage,83.6TC/Ha)thenMumiasSugarCompany(fiveyearaverage,70.9TC/Ha).Lowestyieldswere recorded inChemelil (five-yearaverage,60.3TC/Ha).Thechallenge remains inrespectofraisingcaneyields.

7 Source:KenyaSugarBoardStrategicPlan(2008-2012),YearBookofSugarStatistics

200163

65

67

69

71

73

75

2002 2003 2004 2005

Year

Aver

age

yiel

d (T

onne

s/H

a)

2006 2007 2008


Fig. 3.3: Average Yield, Tonnes/Ha8

II. Increased Sugar Production

CaneCrushed,SugarMadeandRecoveries

In2008,atotalof5,165,786tonnesofcanewascrushedatasugarrecoveryrateof10.03%tomake518,026tonnesofsugar.In2004,atotalof4,805,887tonnesofcanewasmilledtomake512,835tonnesofsugar,givingarecoveryrateof10.67.SomesugarfactoriessuchasChemelilandMuhoroniarestillrecordingsugarrecoveriesbelowtheindustrystandardof10.1%.Theindustry’slong-termtargetistoachieverecoverylevelsof11.5%.

Qualityofsugarcanecrusheddeterioratedduringtheoutgoingplanningperiod.In2008,theweightedaveragepole%caneasameasureofcanequalityreducedto12.7%from13.2%in2004(Fig.3.4).Thiswasstilllowerthantheindustry’slong-termtargetof13.50%.Theaveragefibre%caneroseto17.72%from17.46%in2004(Fig.3.4).Thelong-termindustry’stargetforfibreis15.50%.

8 Source:YearBookofSugarStatistics,KSB,2008

200147

49

51

53

55

57

59

61

2002 2003 2004 2005

Year

Harv

este

d ar

ea (H

a)

Thou

sand

s

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%)


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

TimeAccount

Duringtheoutgoingplanningperiod,thetotalgrosstimeavailableforgrindingwas70,112hours.Theactualhoursusedforgrindingoverthesameperiodwas40,188hoursrepresenting57.3%ofthegrossgrindingtime.Theindustrygrindingtimestandarddeviationwascomputedas±417.5hours(±4.8%).Figure3.5showsaccountofthefactorytimewithintheplanningperiodunderreview.

Fig. 3.5: Factory Time Account10

9 Source:YearBookofSugarStatistics,KSB,200810 Source:YearBookofSugarStatistics,KSB,2008

200112.0

13.0

14.0

15.0

16.0

17.0

18.0

19.0

2002 2003 2004

Pol % cane Fibre % cane

2005

Year

Can

e q

ual

ity

(%)

2006 2007 2008

200135

45

55

65

75

85

95

2002 2003 2004

Actual grinding timeGross grinding time

2005

Year

Tim

e (H

ours

)

Hun

dred

s

2006 2007 2008


Causesoftimelosses:

i. Lackofcaneresultingmostlyfromdelaysinharvestingandtransportationii. Frequentfactories’breakdownsduetolackofmaintenance

Basedontheabove,noneofthesugarfactoriesmetthestandardforFactoryTimeEfficiency(FTE) of 92%. Additionally, all the sugar factories with the exception of Mumias SugarCompany,failedtomeettheindustry’sstandardofOverallTimeEfficiency(OTE)of82%.

CapacityUtilisation

Thecombinedinstalledcapacityofsugarfactoriesinthecountryis24,040TCD.Thiscouldproduceabout883,691tonnesofsugarperyear.However,duringtheplanningperiod,theaveragecapacityutilisedwas13,522.50TCD(56.25%),andeventhoughthiswasamodestincreaseoverthepreviousperiod,itisstillfarbelowoptimal(Fig.3.6).Thedeclineincapacityutilisationneedstobeaddressedfirstbeforeexpensiveoptionssuchascapacityexpansionaresought.

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

11 Source:YearBookofSugarStatistics,KSB,2008

200145

50

55

60

65

70

2002 2003 2004 2005

Year

Capa

city

uti

lisat

ion

(%)

2006 2007 2008

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?


III. Expanded Product BaseVerylittlewasachievedunderthisstrategicdirection.Plansforexpandingtheproductbasewerelargelytentative.Partlybecausetheindustrywasbesetwithdebtsandpressingdemandforfactoryrehabilitation.Theindustryalsolackedacomprehensivelegislationtoundertakethesame.

During the outgoingplanningperiod,Mumias SugarCompanywas the exception, havinglaunchedaco-generationplanttogenerateelectricitytosupplythenationalgrid.SomesugarfactoriessuchasMuhoroni,despitetheirindebtedness,weregivingoutbagassefreelytosmallbusinessentrepreneursfortheproductionofbriquettesandsoftboards.Currently,nofeasibilitystudyhasbeencarriedoutontheproductionofethanolandothercaneproducts.

IndustryrecordsindicatethatproductionofpoweralcoholwasundertakenforsometimeattheAgro-ChemicalandFoodCompanyforblendingwithpetrol.Thisprogrammecouldnotbesustainedbecausetherewasnopolicyandlegalframeworktoregulateitsuse.Inaddition,therewasresistancefromthemulti-nationalpetroleumcompanieswhofearedareductionintheirmarketshare.

Thisstrategicdirectionneedstobepursuedinthenextplanningperiod.

ChallengestoProductDiversification:

i. Co-generation:Uncompetitivepricingmechanismii. Limitedtechnologyandfactorycapacitiesiii. Weaklegalandregulatoryframework

IV. Policy and Legal FrameworkThemajorachievementsunderthisstrategicdirectionwere:

i. TheCabinetapprovedthePrivatisationPlanii. CommencedimplementationofthePrivatisationProgrammeiii. DraftingoftheSugarAct,2001AmendmentBilliv. DraftingoftheSugar(General)Regulationsv. Classification of sugar as a special commodity under the East African Community

CustomsUnionhenceaCETof100%orUSD200pertonnewhicheverishighervi. ISO certification is on going in some sugar factories. Already five factories (Mumias,

Muhoroni,Chemelil,NzoiaandWestKenya)areISOcertified.ItshouldbenotedthatISOcertificationfocusesmainlyontheprocessauditsthatmaynotbeanindicatorofsatisfactoryperformanceintermsofservicedelivery.

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


FinalizationandimplementationofallpendingpolicyandlegalinstrumentswillbeamajormilestoneintheincomingPlan.Pendingactionsinclude:i. PassingoftheSugarAmendmentBillii. GazettingoftheSugarGeneralRulesiii. Reclassificationofsugarasafoodiv. Finalisationofregulationstorestructureoutgrowerinstitutions

V. Privatisation of the Sugar IndustryDuringtheperiodunderreview,thePrivatisationBillwaspassedbyparliamentandrecentlythePrivatizationCommissionhascommencedpreparatoryworktowardsofferingthecandidatefactories forprivatization.Speedwillbeofessencebecauseof theurgency to restructure ingoodtimetorealignfactorieswiththenewtraderegimeexpectedaftertheexpiryofCOMESAsafeguardmeasuresin2012.

Workinprogress:

i. ThebasicframeworkforOGIshasbeenprepared.ItenvisagesOGIsthatwillbecomeeffectiveserviceproviders.

VI. Funding for the IndustryThefundingof the industrywasachallenge.Thiswasexacerbatedbypoormanagerialandbusinesspractices.Duringtheperiodunderreview,theindustrywasnotabletoattractstrategicinvestors to inject themuchneededcapital in the sub-sector.Asa result,mostmillers andoutgrowerinstitutionshaveseverecashflowandliquidityproblems.Asacopingmechanism,someofthemillerswerenotremittingSugarDevelopmentLevy(SDL),whichledtogreaterdefaultpenalties.Thelowfundinghascompoundedthefinancialproblemsoffactoriesthatwerealreadyhighlyleveraged.Despitethis,thereweresomenotableachievements,including:

i. Farmereducationontheavailabilityofcreditfacilitiesii. Developmentofproposalsforfunding(KESREF/EU)iii. DevelopmentPartnerships(EUawarded6millionEurostotheindustryforstructural

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

industry

Stakeholders’ Concerns: Delay in the

implementation of policy and legal actions

Stakeholders’ Concerns: Mushrooming of

many outgrower institution with minimal service

delivery


VII. Efficient Supply Chain ManagementSupply chainmanagement is still a challenge in the sub-sector.For the industry to remaincompetitive,improvedmanagementactionssuchascostcuttingandproductivityimprovementsalongthesupplychainshouldcontinueandintensifiedinthenextplanningperiod.Notableachievementsunderthisstrategyincluded:

i. Establishmentofquarterlyconsultativeforumsii. Frequentstakeholderworkshopsiii. Adoptionofe-commerceinprocurementiv. Developmentofsomecostreductionpoliciesv. SimplifiedCanePaymentFormulae

Theindustrywasnotabletoestablishanaccountableandspecializedprocurementbodytohelpstakeholdersreducecoststhrougheconomiesofscale.Eachindustryinstitutioninsistedon itsownprocedures tomaintaincontrolof theprocess. Inaddition,Parastatalsmills areboundbythepublicprocurementprocedures,whicharecumbersomeandcostly.

IX. Socio-Economic DevelopmentThefollowingwereachievedduringtheoutgoingplanningperiod:i. Policyonsocialcorporateresponsibilitydevelopedbutnotyetadoptedii. CommunityempowermentthroughawarenesscreationonHIV/AIDSandMalariaiii. Environmentalhealthandsafetystandardsdevelopediv. Supportedsportsdevelopment

Thefollowingwerenotachieved:

i. Infrastructuraldevelopmentwasconsideredfartoomodestii. Sugarindustrybusinessplanwasnotrealisediii. BrandKenyainitiativewasstillintheinitialstagesofconceptualization

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


3.3 LessonsfromPlanImplementationSeveralinterviewsanddiscussionswereheldtodeterminethesalientlessonslearntsincetheindustry’sStrategicPlan(2004-2009)wasformulatedandtheexperiencesduringitsimplementation.Overall,allstakeholdersinterviewedconcurredthattheStrategicPlaninstrumentwasgood.TheyalsoallagreedthattheoutgoingPlancouldhaveachievedmore.

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

stakeholdersdidnotreportdiligentlyontheiroperationsbothcurrentandplanned.Asaresulttherewasnoreliableempiricalinformationforaccurateforecastingbeyondaquarterortwo.Thismeantthatthedatathatinformedinternaldecision-makingwasnotthesameaswassharedduringthePlan’squarterly implementationreviewmeetings.Thisdeniedtheplanners theopportunitytogatherinformationthatwouldhavebeenessentialinfacilitatingthedesignandredesignofalonger-termstrategyforthetransformationoftheindustry.

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 notSMARTEST12,whichmadeitdifficulttomeasureperformancesagainsttargets.

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

iv. Lackoffundsand/ordelayedfundingledtodelaysintheimplementationofsomeofthestrategicobjectives.

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

vi. TheroleofKSBincarryingoutmonitoringandevaluationofthePlan’simplementationwasfullofchallenges.TheBoardwasnotabletoenforceandsuperviseitsimplementation.

vii. LackofariskmitigationmechanismintheoutgoingPlanwasamajorset-backintherealisationofthestrategicobjectives.Someofthedecliningoutputswereasaresultofriskthatcouldhavebeenanticipatedandmitigated.

viii. Therewereextremelyhighexpectationsat theonsetof thePlan’s implementation.SomeofthestakeholdershadexpectedthePlantobeaninstrumentthroughwhichtheGovernmentwould

12 Specific,Measurable,Attainable,Realistic,Timed,Engaging,Siring,Teameffort

Stakeholders’ Concerns: Dilapidated

infrastructure leading to high cost of cane and

sugar production


identifyfundingneedsandreleasefundstowardsthesame.Essentially,thisgroupofstakeholdersturned to Government as a lender of first resort and seemed disappointed when they learntotherwise.

ix. Highindebtednessbymostofthefactoriesledtolackofimplementationofsomeofthestrategicobjectivesassomeofthefundsforimplementationweretobefrominternalsources.ThisincreasedpressureontheSugarDevelopmentFund(SDF),whichwasalreadyinadequate.

Basedontheforegoing,theincomingStrategic Plan (2010-2014)hasbeenformulatedtakingcognisanceoftheabovelessons.

3.4 SituationalAnalysisAttheendofthe2004-2009planningperiod,thesugarindustryisstillstrugglingtotransformitselfintoavibrant,efficient,diversifiedandcompetitiveindustry.ASWOTandPESTLEanalysisdemonstratedthestateofaffairs.

3.4.1 Strength, Weaknesses, Opportunities and Threats (SWOT) AnalysisTheStrengths,Weaknesses,OpportunitiesandThreats(SWOT)analysisoftheKenya’ssugarindustryinvolvedtheassessmentofboththeinternalandexternalenvironmentinwhichtheindustryoperates.Theresultsareoutlinedbelow:

I. Strengths: The following were identified as the industry main strengths:a. Vastpotentialforexpansionofareaundercaneb. Unutilizedprocessingcapacityc. Strongagronomicresearchcapacityd. Resilient,hardworkingfarmerse. Stakeholderparticipationandconcurrencef. Protectedlocalmarkets

II. Weaknesses: The major weaknesses of the industry are:a. Over-relianceonasingleproduct(sugar)forrevenueb. Limitedirrigationc. Weakcorporategovernanced. Highlevelofindustryindebtednesse. SubstantialGovernmentownershipf. Highpostharvestlosses(estimatedtobeatleast5%)g. Poortransportinfrastructureh. Capacityunderutilisation(56.25%ofTCD)i. Lowcapacitymills(only12.5%ofoperatingfactoriesabove3,500TCD)j. Highcostsofproductionk. Inadequateanduncoordinatedfundingl. Lackofperformancemonitoringandevaluationsystem

IV. Opportunities: Possible opportunities for exploitation in the Industry include: a. Readylocalandregionalmarketsb. Agronomicpotentialc. Governmentgoodwilld. Provenopportunitiesforproductdiversification(co-generation,ethanol)e. Sucrosebasedpricingandcanepaymentsystemf. Sugarcaneproductionthroughirrigation


V. Threats: The threats to the realisation of the vision and mission include:a. ContinuedreductionoftheSDLb. Informalcross-bordertradec. Strongimportcompetitiond. Uneconomiclandsub-divisione. Highenergycostsf. Hightaxburdeng. Riskofinsolvencyofsomeproducersh. Foodinsecurityi. Riskofslowadoptionofnewtechnologiesj. Politicalinterferenceinaffairsoftheindustryk. Climatechangeduetoenvironmentaldegradationl. MalariaandHIV/AIDS

3.4.2 PESTLE AnalysisInadditiontotheSWOTanalysis,ananalysisofPolitical,Economic,Social,Technological,LegalandEnvironmental(PESTLE)challengesthattheKenyasugarindustryfaceswasdone.Theanalysishelped inunderstanding the challenges thatmighthinder the competitivenessoftheindustry.Annex IIisasummaryoftheoutcomeoftheanalysis.Overall,theanalysisshowedthatpoorcorporategovernancecreatesuncertaintiesintheinvestmentclimateandmayhindertheprivatizationprocess.Italsopointedtothehighproductioncostsandthesingularfocusonsugarthathadresultedinanon-competitiveindustry.Theanalysisalsorevealedtheecologicalrisksofenvironmentaldegradationandclimatechangeandtheconsequentnegativeimpactonwaterandfarmingsystems.

3.4.3 Stakeholders Comparative Advantage AnalysisThe sugar industry has strong linkages with stakeholders identified in section 1.3 of thisreport.Allthesestakeholdersplayimportantrolesintheindustry.Theindustryrecognisesthatstakeholderswillfacilitatetheimplementationoftheincomingplanbasedontheircomparativeadvantages.Annex IIIisasummaryofthestakeholders’comparativeadvantageanalysis.


Strategic Plan 2010-20144.1 Rationaleforthe2010-2014StrategicPlanTheAgriculturalSectorDevelopmentStrategy(2009-2020),andtheVision2030emphasizetheneedforincreasingproductivity,commercialisationandcompetitivenessoftheagriculturalsectoraswellastheneedforefficiencyandbettermanagementintheutilisationofpublicresources.ThisistoenabletheGovernmentachieve its strategicobjectivesofbeingamiddle-incomecountrybytheyear2030.The Kenya Sugar Industry Strategic Plan 2010-2014,willbeoneofthekeybuildingblocksforboththeAgriculturalStrategyandVision2030goals.

The2010-2014StrategicPlanwillbeusedtomaintainandbuildonthesuccessesachievedinthe2004-2009StrategicPlan.TherevisedPlanwillaimatconsolidatingthegainsmade,identifynewoptionstoimproveefficiencyandincreasetheindustry’scompetitiveness.Itwillalsotakecognisanceofthelessonslearntinthelastfiveyears.

ThePlanwillprovideaframeworkforsettinggoals,definingkeyactionsandmobilizingresourcestofundprogrammesthatwillachieveagreedgoals.Itwillalsoprovideanopportunityfortheexchangeofideasbyawidearrayofstakeholdersintheindustry.Itwillincreaseawarenessofindustry-widelimitationsandopportunitiesleadingtoagreaterappreciationofactionstobeundertaken.Consequently,therewillbegreaterwillingnesstoshareinformation,gathernewideasandmorecorrectlysituatelocalareaissuesinanindustrycontext.

TheperiodicconsultationforumstoreviewstatusofthePlan’simplementationwillprovideopportunitiesforallindustrystakeholderstolearnfromtheleadersandinnovatorsintheindustry.ThePlanwillbeanempowermenttoolforinternallobbygroupstopresstheirdemandsforresourcesandbetterqualityservices.Inaddition,itwilllaygroundforenhancedperformanceofthesugarcaneindustrypremisedonproperutilisationofresources,arisingfromclearlyidentifiedgoals,targetsandverifiableindicators.ThePlanwillsetstrategicobjectivesthatwillhelpachievethevisionandmissionoftheindustry.

Aboveall,theformulationofthesugarindustryStrategicPlan2010-2014comesatatimewhentheindustryneedstorethinkitsdirectionasitapproachestheliberalizationofthesugartraderegime.Theindustryneedstofindwaysofrepositioningitselfcompetitively.Thisrequiresthattheindustrygoesbeyondsugar,thinkmoreaboutsugarcaneasawholeandexploitmarketopportunitiesthatthebroadersugarcaneindustrycanprovide.Italsoputsnewpressuresontheindustrytofindandinvestresourcesinthenewdirectionwheretheindustryneedstogo.

4.2 Vision,MissionandCoreValuesoftheSugarindustryFollowingextensiveconsultationsanddiscussionsbytheindustrystakeholders,KSBmanagementandtheBoard,itwasagreedasfollows:

4Chapter


4.2.1 VisionThenewvisionfortheindustryistobe‘a world-class multi-product sugarcane industry’.

4.2.2 MissionThenewmissionoftheindustryisto ‘facilitate a multi-product sugarcane industry that is efficient, diversified and globally competitive’. Thiswillberealisedbyenhancingindustry’scompetitiveness through cost reduction strategies and efficiency improvements, expandingproductbase,improvinginfrastructureandstrengtheningtheregulatoryframework.

4.2.3 Core ValuesToachievetheVision andMissionof the industry, stakeholdershavepledgedtoupholdthefollowingsixcorevalues:

1. Product and Service Excellence:throughexcellentproductandservicedeliveryitwillstrivetoexceedcustomerexpectations

2. Stakeholder Partnership:tooptimisesynergiesinordertomeetsetgoalsbyconsciouslyanddeliberatelynurturingteamspirit,collaborationandconsultation

3. Integrity:toupholdvirtuesofintegritythroughhonestyandfairnessinalloperations4. Accountability: tostrivetoberesponsiblecustodiansofall resourcesentrustedtothe

industryinaprofessionalandtransparentmanner5. Social Responsibility:endeavourtobesociallyresponsibletosocietyandpursueindustry

goals though socially acceptable practices that preserve the environment; promotesocio-economicdevelopment, support vulnerable groups andHIV/AIDS andMalariaprogrammes

6. Gender Mainstreaming:embraceprinciplesofgenderequity,fairnessandbalanceacrossgender

4.3 AnalysisofChallengesalongtheSugarindustryValueChain

AfterfiveyearsofimplementingtheStrategicPlan2004-2009,theoriginalstrategicissuesandobjectivesofthesugarindustrybroadlyremainthesameinspiteofthemarkedimprovementinaddressingthem.Intheincomingplanningperiod,thekeystrategicissueshavebeenderivedafteracomprehensiveanalysisofthechallengesand/orgapsalongtheindustry’svaluechain(Fig4.1).


CHALLENGES

• High cost of inputs

• Weak research-extension-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

• Delayed and uncoordinated harvesting

• Labour intensive• Dilapidated

infrastructure• High post

harvest losses (cane spillage, poaching etc.)

• Inappropriate trailer designs

• Inadequate funding (SDF)

• Poor cane yard management

• Small and uncoordinated planting and harvesting units

• Irregular routine fac-tory maintenance

• Low crushing capac-ity

• 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 process-

ing equipment• Inefficient factory

operations• Wastage in cane yard• Inadequate funding

(SDF)

• High taxation• Strong cartel

of sugar importers

• Limited value addition and product diversification

• Inadequate funding SDF

• Imports cheaper

• Incapacity to process industrial sugar

• Poor • product

quality• Lack of

consumer representation in SDF committees

Fig. 4.1: Challenges along the Sugar Industry Value Chain

4.4 StrategicGoals(2010-2014)Arisingfromthestakeholders’consultations, SWOTandPESTLEanalysis,anumberofstrategicgoalswereidentifiedalongthesugarindustry’svaluechain.TheseissuesandproposedactionsaresummarisedinFig.4.2.

Farm level operations Processing Distribution

NUCLEUS ESTATES

SMALLHOLDERS

CANEYARD OPERATIONS

MILLING OPERATIONS

HARVESTING

TRANSPORTATION

BY PRODUCTS

WHOLESALERS /RETAILERS

INDUSTRIAL CONSUMERS

DOMESTIC CONSUMERS

Pre-FactoryOperations Consumption


STRATEGICISSUES

EnhanceCompetitiveness EnhanceCompetitiveness

EnhanceCompetitiveness

EnhanceCompetitiveness

• 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 post-harvest losses

• Increase research funding

• Modernise and promote the use of ICT

• Intensify industrial and applied research

• Increase processing efficiency

• Reduce cost of sugar production

• Factory rehabilitation and modernisation

• Embrace condition maintenance

• Modernise and promote the use of ICT

• Harmonise marketing pattern

• Increase market research

• Branding• Maintain adequate

stock levels• Modernise and

promote the use of ICT

ExpandProductBase ExpandProductBase ExpandProductBase ExpandProductBase

• Encourage intensification to increase food security

• Increase income streams from expanded product base

• Implement legislation on blending

• Feed in tariff• Implement legislation

on blending

ImproveInfrastructure ImproveInfrastructure ImproveInfrastructure ImproveInfrastructure

Rehabilitate rural roads • Consider other modes of transport

• Increase transport units

• Invest in road improvement

• Invest in ICT• Embrace e-commerce

and e-procurement

RegulatoryFramework RegulatoryFramework RegulatoryFramework RegulatoryFramework

• Pass the Sugar Amendment Bill

• Gazette Sugar General Rules

• Harmonize all sugar laws• Finalise and implement

regulations to restructure outgrower institutions

• Establish a sugarbelt roads management committee

• Encourage good corporate governance

• Enforce measures to eliminate tax evasion

Fig. 4.2: Strategic Issues

4.5 StrategicObjectives(2010-2014)Asynthesisofthe2004-2009Planreviewanddiscussionswithindustrystakeholdersledtoarecognitionoffour (4) key strategic objectives thatwillbethepillarsofthe2010-2014 Strategic Plan.Thesestrategicobjectivesare:

1. Enhancingindustrycompetitiveness2. Expandingproductbase3. Improvinginfrastructure4. Strengtheningtheregulatoryframework

Farm level operations

Pre -Factory Operations

Processing Distribution


Inordertoensurethattheidentifiedstrategicobjectivesarecomprehensivelyaddressed,anumberofstrategieshavebeenformulatedforeachobjective.Asetofactivitieshavebeenidentifiedforeachstrategyinordertoworktowardstheachievementofthedesiredresults.AresultsmatrixhasbeendevelopedandpresentedasAnnex IV.Thefollowingsectionthereforepresentsthestrategicobjectives,proposedstrategiesandactivities/actionstobeundertakenundereachstrategy.

4.5.1 Strategic Objective 1: To Enhance Sugar Industry CompetivenessKenya 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 COMESAcompetitors.Inthe2008/09season,theaverageindustrysugarproductioncostpertonnewasUSD428vs.anestimatedcostofUSD263foritscompetitors13.Thesecostsaretoohightoremaincompetitive,yetwithoutcostreduction,theindustrycannotcompete.Tobringitscostsinlinewithitscompetitors,theindustryneedstoreduceitscostsbyafactorofabout39%.Intheincomingplanningperiod,2010-2014,thesugarindustrywillreducesugarcaneproductioncostby15%and22%forplantcropsandratooncropsrespectivelyasshowninTables4.1a.Duringthesameperiod,sugarproductioncostwillbereducedby46%asshownonTable4.1b.

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

Cost (KSh/Tonne

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

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 - ratoonSource: 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. 76.55Source: Log Associates, 2009, Proposed Cost Reduction in Sugar Production

13 CalculationsbasedonfiguresfromCostofCaneandSugarProduction2008byKSB


Theabovetablesare illustrationscosts in twokeystagesof theproductionandvaluechainbutarenottheonlyareasthatrequirecostreduction.Theindustryneedstogainproductionefficienciesatallstagesofthevaluechain.Oneofthekeyelementsofvaluechainenhancementistheexpansionoftheproductbase.InMauritiusforinstance,theshareofsugarrevenueinthetotalrevenuemixisonlyabout40%.Theremaining60%isderivedfromsugarcaneco-productsincludingpowergeneration,ethanol,industrialsugarandotherproducts.The2010-2014StrategicPlanwillredirecttheKenyasugarindustryinthesamedirection.Toenhancethecompetitivenessoftheindustry,thefollowingstrategieswillbeimplemented:

Strategy 1.1: Reduction in Farm Level RisksFarmersfacemanyrisks intheproductioncycle includingunpredictablerainfall,canefires,uncertaintyinthetimingofcaneharvestingamongmanyothers.Theserisksultimatelyresultinincreasedsugarcaneproductioncostsanddiminishedreturnstothefarmer.Intheincomingperiod,theindustrywillstrivetoreducefarmlevelrisksby:

i. Increasing sugarcane production and productivity through efficient farm operations: Thesearch for an efficient and competitive sugarcane industry startswith the farmer.Farmersneedtoincreasecaneyieldsthroughconsistentfertilizerapplication,usehigheryieldingandearlymaturingvarietiesandwherefeasibleadoptsupplementalirrigationanddrainage.Withgoodhusbandrypractises,farmerscanprofitablyincreasethenumberofratooncropsandsavereplantingcosts.Theindustrywillincreasetheareaundersugarcaneby32%andyieldperhectareby36%(Table4.2).Duringthesameperiod,theERC%sucrosecontentincanewillbeincreasedto87.25%.Itisalsoexpectedthat20,000HaofsugarcanewillbeplantedalongtheTanaRiverBasin14.

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:ThereexistvastpotentialtoincreaseirrigatedsugarcaneproductioninKenyaparticularlyintheTanaRiverBasin,NyandoBasinandNzoiaBasin.Whileestimatesvary,thepotentialirrigableland inthesethreebasinsalone is intherangeof700,000hectares. Inthe incomingperiod, the industry will expand cane area under irrigation by about 40,000 hectaresannuallytoreachanestimatedtotalof2000,000hectaresbytheendofthePlanperiod.Studiesindicatethatyieldsfromirrigatedfieldsrangefrom120-150TCHcomparedtothe70-100TCHfromrain-fedfields.Therefore,200,000Hairrigatedcanefieldwouldproduce 40,500,000 tonnes of sugarcane. In such controlled growing conditions, thesucrose content in the sugarcane can be boosted to an average of 15% compared to13.5%forrain-fedconditions.Duringtheplanningperiod2010-2014,theindustrywill

14 TARDAStrategicPlan2008-2012


invest in irrigationintheTana,NyandoandNzoiariverbasins.Already,theMinistryofWaterandIrrigation(MoWI)isworkingonthedetailsofconstructingmulti-purposedamsinNyandoandNzoiabasinsasalastingsolutiontoperennialfloodingintheseareas.Thewaterfromthesedamswillbeusedbytheindustryforirrigationprojects.TheGoKhasalsosteppedupcampaignsfordevelopingirrigationinfrastructurealongtheTanaRiverbasin.Thesugarindustrywillsupporttheseinitiativestofasttrackimplementation.Table4.3outlinesthetargetedareaundercanetobeirrigatedoverthenextfive-yearperiod.

Table 4.3: Annual Targets for Irrigated Area under Cane

Year IrrigatedArea(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 farmerscontinue to suffer fromunforeseencalamitiesoccasionedbyunpredictableweatherpatternswitherraticandprolongedperiodsofdrought.Canefires and theft have also become increasingly frequent. During the planning period,the industrywill pilot and if successful, expand sugarcane crop insuranceworking incollaborationwithprivatesectorpartners.

iv. Enhancing results oriented research-extension-farmer linkages to accelerate adoption rates of high yielding varieties: Adoptionratesofnewtechnologyat farmlevelhavegenerally been in the 30% range. Despite the advantages of high yielding and earlymaturingvarieties,farmershaveshownlittleenthusiasmforthenewtechnologies.Theextensionmessagesneed tobedisseminatedmore aggressivelywhile keeping inmindthattheprincipleofsugarcanefarmingasabusinessstartswiththefarmerwhoneedstransparentpricing,andpromptpaymenttorunthefarmasabusiness.Intheincomingperiod,sugarfactoriesandoutgrowerswillphaseoutlongmaturingcanevarieties likeCO421while replacing themwith varieties such asCO945,EAK73-335varieties,which are early maturing, rich in sucrose content and resistant to diseases.Table 4.4outlinesthetargetedproportionalareaunderhighyieldingKenyancanevarietiesoverthenextfive-yearperiod.

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: Landfragmentationthroughsubdivisionisamajorthreattoplantationcropssuchassugarcane.A mix of population pressure and cultural practises has led to an escalation of landsubdivisions.Thesugarcaneindustrywillcontinuetoarticulatetherisksofuncontrolledsubdivision. Itwillalsodesignandimplementinnovativearrangementssuchasblockfarming15andsatellitevillages16thatwillhelpincreaselandsizesundercanecultivation.These approaches are consistentwith the recommendationsof theAgricultural SectorDevelopmentStrategy2009-2020andtheKenyaVision2030.

vi. Ratooning: Farmersneedtomakeafairreturnoninvestment.Studieshaveshownthatthemarginsaresmallforplantcrop.Subsequentratoons,ifwellmaintained,bringgoodprofitstothefarmer(Table4.5).Currently,thereareonlytworatoonsintheindustry.Tanzania,whoseproductioncostisthelowestinEACregion,has5-8ratoons.Brazil,whichistheleast-costcaneproducer(USD20/t)intheworld,hasonly20%ofthetotalareaundercaneonnewplantings.Theremaining80%isunderratooncrops.Topsugarproducingcountriesareknowntoproduceover10ratoons,whilemarginalproducershardlygobeyondtworatoonshencesustaininglossesduetohighproductioncosts17.Toincreaseearningsfromcanefarming,farmerswillbeencouragedtoincreasethenumberofratoonstofiveormore.

Table 4.5: Profit Margins Plant Crop vs. Ratoon Crop

SugarbeltProfit(KSh/Tonne)

PlantCrop RatoonCropNyando 310 1,107

Western 621 958

South Nyanza

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 OperationsOnaverage,harvestingandtransportoperationsaccountfor48%ofthetotalcostofsugarcaneproduction with a range of 37%-52%18. In 2008, harvesting, loading and transport costsamountedtoKSh.806pertonne,whichtranslatedintoKSh.4.163billion(assumingallcanetransportedwithin24kmradius19).Thishugecostwasbornebythefarmers.Theindustrywillseektoreducethiscosttolevelsintherangeof10%-15%inthenextfiveyearsby:i. Improving cane yard management: Losses related to a poor transport system are

translatedintounavailabilityandinefficientmovementofsugarcaneinthecaneyard.Thisleadstocapacityunderutilisationinthefactory.Thelossesduetocapacityunderutilisationarehuge.Goodcaneyardmanagementisneededtoreducetheuneconomicallylengthyturnaroundtimesbycanehaulageunits.Efficientcaneyardoperationswillalsoleadtoreducedstalenessandmitigatelossestothefarmer.Toimproveefficiencyofoperations,caneyardswillberehabilitated,automatedandmodernised.Themonitoringbenchmarkswillbereducedstalenessindex(Table4.6)andincreasedcanedeliverytrips.

15 DiscussionsonBlockFarmingarepresentedinXI16 Satellitevillagefarminginvolvesconsolidatingsmallparcelsoflandandconsolidatingfarmersintoeco-friendlyvillages17 KegodeP,2005,EconomicGovernanceReformintheSugarSub-Sector18 Outgrowerscaneproductioncosts,2007/200819 Thetruepictureisthatsomecaneistransportedevenat70km


Table 4.6: Annual Targets for Staleness Index

Year StalenessIndex(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 aresultofpost-harvest losses.A5%loss in2008wasequivalentto258,289.3 tonnesofsugarcane. The cost of sugarcane ranges between KSh. 2,500-3,100 per tonne. ThisimpliesthatfarmerslostapproximatelyKSh.646-800 million.Theindustrywillreducepost-harvestlossestolessthan2%throughstrongeroversight,improvedtrailerdesignsandinfrastructuredevelopment(Table4.7).

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 Lossesiii. Reducing time lapse between cane maturity and harvesting: Theaveragecanematurity

periodis18months.Farmerswaitforupto6-12monthsbeforecaneisharvested.Thishasmadecanefarmingunattractivetomostofthem.Somehaveoptedoutofcanefarming.Thedelays inharvestingoperationsareattributedtouncoordinatedandunpredictableharvesting and transport schedules; and inefficiencies in mill operations. All this ishappeningduetolackofproperplanning.InformationandCommunicationTechnologycanprovidethetoolsneededtocoordinatetransportandharvestingoperations.ThroughICTscheduling,thewaitingperiodforharvestingwillbereducedtolessthanamonth(Table4.8).Theindustrywillalsoinstitutionaliseharvestingoperationstomakeitmorereliableandpredictable.

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:Industryplayersneedtoexperimentwithdifferentmodesofcanetransportincludinglightrailandtrucks.AnimaldrawncartsaresuitableforsmallfactorycapacitiessuchasthosecommoninIndia.

v. Increasing research funding for harvesting and transport: Research in harvestingand transport is lagging behind as most of KESREF research is agronomic. Duringthe incoming Plan period, the industry will increase funding to KESREF to exploremechanisedharvestingoperations.Whilemechanicalharvestingmaysaveonlabour,itincreasespost-harvestlossesandleadstosoilcompaction.Soilcompactionleadstopoorinfiltration,slowdrainageandreducedaeration,limitingrootgrowth,nutrientuptakeandcropyields.KESREFwhileundertakingresearchtowardsmechanisationshouldseekwaysofmitigatingsuchsetbacks.

Strategy 1.3: Effective, Efficient and Reliable Milling OperationsThe role of the millers is to make a fair return on investment through efficient operationofmillsand/or jaggeries fortheproductionofsugarandotherproducts forsale,andmaketimelypayments tocanegrowers. In thenextfiveyears, themillerswill enhance industry’scompetivenessby:

i. Increasing sugar production through efficient processing: Allfactoriesneedto operateoptimallythroughefficientmodernstylemanagementandcarryoutregularconditionmaintenance. Valuable time is lostwhile extensivemaintenance isbeingundertaken.Intheincomingplanperiod,sugarproductionwillbeincreasedby122%bytheyear2014,recoverylevelsandcapacityutilisationincreasedto11.5%and89%respectively(Table4.9).OtherefficiencyperformancebenchmarkssuchasFTEandsugarco-productproductionpertonnewillalsobemonitored.Currently,alltheefficiencybenchmarksarelowerthanthoseofmajorcompetitors.ThevariousefficiencybenchmarksarepresentedinAnnex V.

Table 4.9: Factory Level Targets

Year CapacityUtilisation Rendement(%) MadeSugar(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 proposedTARDA sugarcompany,alltheothersugarfactoriesarebelow4,000TCD(Annex VI). Astheindustryseeks to become more efficient and competitive, all options for achieving economiesof scalewillhave tobe considered. Theenvisagedprivatizationprogrammeoffers anopportunitytoincreaseeconomiesofscalethroughfactorymergersintheWesternandNyando zones. Other opportunities for achieving economies of scalewill be realisedthroughtheconstructionofanew,largercapacityfactoryinTanaRiverBasin.Investingsimplyinrehabilitationandupgradingofmills,whilenecessary,isnotsufficient.


iii. Intensifying industrial and applied research:TheKenyasugarcaneindustryneedsacentreofexcellenceinappliedresearch.ThiswillbeachievedthroughstrengtheningofKESREFresearchcapacityandotherinnovativeapproachessuchastwinningarrangementsbetweenfactoriesandlocaluniversitiestobringtogetherresearchersandpractitioners.

iv. Benchmarking with international standards: For Kenya’s sugar products to becompetitivenationally,regionallyandglobally,millersmustbenchmarktheirproductionprocesses with international best practices. The industry will achieve this by carryingoutthefollowingactivities:(a)Providinginformationonproductiontechnologiesandqualitystandardsandfacilitatingtheirapplication,adaptationanduptake;(b)Providinginformationon internationalbestpractices for localmillers tobenchmark themselves;and (c)Participating in regional and internationalnegotiationson issues affecting thesugarindustry

Strategy 1.4: Enhanced Human Resource CapacityThetwinproblemsofbureaucraticinterferenceandpoorcorporategovernancehavecombinedto obscure the efficacy of the human resource development programmes in the industry.AlthoughKenyahasmanyeducational institutions,bothprivateandpublic,whichprovidequalityeducation,theindustrystilllacksadequateskilledhumanresources.Arrangementsareunderwaytocreatepartnershipsbetweentheindustryandtraininginstitutionstoproducethekindofprofessionalsthattheindustryneeds.AlreadythereareongoingarrangementswithMasindeMuliroUniversityofScienceandTechnology(MMUST),EgertonUniversity,MasenoUniversity andMoiUniversity towards the sameend. More institutionsneed to comeonboardparticularlymiddlelevel,diplomatypetraininginstitutionstosupplementtheseefforts.In addition to the external training programmes, factories and outgrower institutions willbeefuptheirinternaltrainingcapacities.Toreinforceastrongskilldevelopmentprogrammethroughtraining,staffrecruitmentpolicieswillbestrictlymeritbased.Themanagementstyleswillbeprogressiveandresultsoriented.Itisonlythroughacombinationoftheseapproachesthatindustrywilleventuallyovercomethecurrenthumanresourceconstraints.

InordertodeliveronthevisionandmissionsetoutinthisStrategicPlan,theindustrywillrecruit, train, promote and retain its staff, to effectively deliver quality services to all thestakeholders.Inthisregard,staffwillsignperformancecontractswithrespectiveinstitutionsbinding them to deliver on targets.To ensure availability of skills, talents, and knowledgerequired,theindustrywillcarryoutthefollowingactivities:

i. UndertakingasugarindustryTrainingNeedsAssessment(TNA)andimplementingitsfindings

ii. Preparationof a staff retention strategy thoughbetter remunerations, staffmotivationandworkforcecompensation

iii. SigningPerformanceContracts;iv. ImplementingaPerformanceAppraisalSystem(PAS)v. Strengtheningindustry’scollaborationswithtraininginstitutions/universities

Strategy 1.5: Streamlined Corporate GovernanceTherearemajorchallengesincorporategovernanceinsomeoftheinstitutionsintheindustry.Thesechallengesarepronouncedparticularlyininstitutionalandsupplychainmanagementbothinoutgrowerinstitutionsandatthecorporatelevelsofpubliclyownedfactories.Thiswastheresultofpoorrecruitmentpoliciesandpoliticalpatronage.Theindustryismovingtowards


ISOcertificationwhichmayhelphighlightgovernanceweaknessesandifaddressedwillhelpmitigatesomeofthechallenges.GreaterprivatesectorparticipationintheindustrywithinastrongregulatoryenvironmentwillalsocomplementthestepstheGovernment is takingtoimprovethesame.Inordertostreamlinecorporategovernanceintheindustry,thefollowingactivitieswillbecarriedout:

i. ConductingperiodicCustomerSatisfactionSurveys(CSS)ii. EnsuringtheundertakingofInternationalOrganizationofStandards(ISO)certificationiii. Sensitizationofindustryonqualitystandardsandcertificationrequirementsiv. Advocacyongovernance,security,highcostofdoingbusiness,amongothersv. Improvementofcommunicationamongstindustrystakeholdersandtherestvi. Trainingonprudentfinancialmanagement

4.5.2 Strategic Objective 2: To Expand Product BaseMost countries are growing cane and producing sugar with the aim of getting a range ofproductsandby-products.Caneiscultivatedasastrategicproducttosupportindustriessuchas: Beverages,Confectionery,Pharmaceuticals,Wines,Spirits,PowerAlcohol,AnimalFeeds,Energy,Chemicals andFertilizers.TheKenya sugarcane industryhas embraced themarketreality that the industry needs to expand its product base as a means of strengthening itscompetitiveness globally. Therefore, backward and forward linkages need to be exploitedto their fullestpotential. However, inKenya,millwhite sugar is still the core commodityproducedfromsugarcane.Diversificationtootherco-productssuchaspowerco-generationandethanolproductionforsaleisstillverylimitedandlargelyunexploited.Figure4.3illustratesthetechnicalpotentialforsugarcaneproducts.

Fig.4.3: Potential sugarcane products20

20 Log Associates, 2001, Financial Restructuring Strategy to Sony Sugar Company

Raw Sugar

Re�ned Sugar

Fertilizers

Industrial uses

Sugar/Solids

Sugar Cane

Industrial uses

Commercial Products

Ethanol

Mollasses/Juice

Stillage

Fertilizer

Methane

Crop Residues

Industrial Paper

Steam and Electricity

Fuel Briquettes

Block Board


The Kenya sugarcane industry has the raw material and favourable market conditionsto substantially expand its product base particularly into power generation, ethanol andindustrialsugarandalcohol.Toaddressthisareaofconcernandtoincreaseprofitabilityandcompetitivenessoftheindustry,thefollowingprogrammeswillbeundertaken:

Strategy 2.1: Value Addition and Product DiversificationWhiletheindustrywillseektoexploitthefullrangeofindustrialproductsfromsugarcaneandsugar,theflagshipprojectsunderthethemeofvalueadditionandexpansionoftheproductbasewillbepowergenerationandethanolproduction.Beforetheinitiationofproductionofco-products,itisimportantthatrigoroustechnical, financial and economic feasibilitystudiesbecarriedout.i. Initiating co-generation projects: Thedemandforelectricityhasinthepastcontinuously

outstrippedsupply,precipitatingasignificantlevelofunmetdemand.Thisshortfallisestimatedtobe380GWh.Theshortfallisfurtherexacerbatedbyfrequentdroughtoccasionedbyclimatechange.Thesugarindustryhaslargepotentialforco-generationthatiffullyexploitedmayhelpmeetsomeofthepowerdemands.Currently,onlyanestimated36.5MWisgeneratedthroughco-generation.ApartfromMumiasSugarCompanythathasinitiatedamassiveco-generationprojecttoproduce35MWofelectricityfortheirownuseandforsale,therestofthefactoriesconsumeallthepowertheygenerate.DuringthisPlanperiod,sugarfactorieswillinitiateco-generationprojectsandproducesufficientelectricityforinternaluseandforsaletoKenyaPowerandLightingCompany(KPLC)tohelpalleviatetheshortfallinthecountry.ThroughtheTanaIntegratedSugarProject,itisproposedthat34MWofpowerwouldbeproducedthroughco-generation21,22.ChemelilSugarCompanyandKenGenhavealsosignedaMoUtodevelopa20MWpowerplanttogenerateelectricalpowerusingbagasse23.Table4.10showsthepotentialrevenuefromco-generation.

Table 4.10: Potential Revenue from Co-generation

MillerPotential Local

useSales Rate Hours/

yearPotential

Revenue(KSh.,millions)

CapitalCostEstimates

MW MW MW KSh Hours Perannum 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 1,289Nzoia 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’sfuelconsumptionstoodat1.4and3.3millionlitresofpetrolandautomotivedieselrespectivelyperdayin2006withanaverage

21 TanaandAthiDevelopmentAuthority,2008-2012StrategicPlan22 TheTanaIntegratedSugarProjectisestimatedtocostKSh.24billion23 KenGen,FiveYearBusinessPlan,2007-2012


growthrateof2.8%peryear.ProjectionsindicatethatKenyawillrequire1.7and4.1millionlitresofpetrolandautomotivedieselrespectivelyperdayby2014.By2030,thefuelconsumptionwillbe2.7and6.5millionlitresofpetrolandautomotivedieselperday.

Currently,Kenyarequires85millionlitresofethanolperyearforanational10%(E10)blend.Atcurrentconsumptionlevels,thiswouldneedtogrowto93millionand148millionlitresby2014and2030respectively.

Itisestimatedthatatonneofmolassescanbeconvertedinto220litresofethanol.In2008,thesugarindustriesproducedapproximately180,000tonnesofmolasses,whichwouldhaveproduced39.6million litresofethanol.Thecurrentethanolprices in theworldarebetweenKSh.30-35perlitre.InKenya,thepriceofethanolisintherangeofKSh.55-70perlitre24.ThiswouldhavetranslatedintoKSh.2.178 billions.Itisexpectedthat theconstructionofTana Integrated Sugar Project wouldproduce22million litresof ethanol, which would be equivalent to KSh. 1.21 billions.25With cane deliveriesproposedinthisPlan,itispossibletorealiseconsiderableamountsofrevenueasshownintheTable4.11.AconventionalethanolplantcapitalcostsaboutKSh.1.6billion26.Thisimpliesthateightoperationalsugarfactorieswouldrequire12.8billiontoinitiateethanolproductionprojects.

Table 4.11: Ethanol Production

YearCane

DeliveriesMolassesProduced

PotentialEthanol

Produced

Costperlitre PotentialRevenue

Tonnes Tonnes Litres KSh. KSh,Billions2008/09 5,165,786 180,802 39,776,332 55-70 2.2-2.82009/10 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:Projectionsofsugarconsumptionindicatethatthedemandforindustrialsugarisexpectedtocontinuetoincrease.Currently,theKenyansugarindustrydoesnothavethecapacityforprocessingindustrialsugarandindustrialalcohol.Miwaniwastheonlyfactorythatcouldprocesstheseproducts.Inthe2010-2014StrategicPlantheindustrywillreviveitscapacityforproducingrefinedsugar,industrialsugarandindustrialalcohol.ThedistilleryandsugarrefineryatMiwaniSugarCompanywillprovideastartingpointbuttheindustryasawholewilldiversifyintotheseproducts.

iv. Encouraging intensification to increase food security: Toreduceexitfromcanefarmingduetopressurefromotheragriculturalproduce,theindustrywillencourageintercroppingandmixedfarmingamongstfarmers.

24 ClintOguya,Agrochemical,personalcommunications,31August200925 TARDAStrategicPlan2008-201226 Eachfactoryshouldeffectacomprehensivefeasibilitystudyonthesame


4.5.3 Strategic Objective 3: To Enhance Infrastructure DevelopmentInadequate,unreliable andpoor stateofphysical infrastructure in the sugar growing zoneshas led to low productivity, high production and distribution costs; and uncompetitiveproductsandservicedelivery.Theindustrywillimprovethestateofphysicalinfrastructurebyimplementingthefollowingstrategies:

Strategy 3.1: Improve Road Transport InfrastructureThisstrategywillbeachievedbyimplementingthefollowingactivities:

i. Setting up a mechanism to coordinate utilisation of public funds available for roadinfrastructuredevelopment

ii. IncreasingSDFallocationforinfrastructuredevelopmentiii. Dedicating15%ofsugartaxrevenuetoinfrastructuredevelopmentinthesugarbelt

Strategy 3.2: Modernise and Promote the Use of Information and Communication Technology (ICT)TherearenumerousopportunitiesfortheapplicationofICTinthesugarindustryincludingbusiness process improvement in sugarcane production, office operations, management of OGIs, strategic management, performance monitoring, research and information sharing.Despitesucharrayofuses,theindustryhasnotfullyinvested,modernisedandpromotedtheuseofICT.Apart from Mumias Sugar Company that has invested in the Agricultural ManagementSystems(AMS)tocoordinateplanting,harvesting,transportandmillingoperations,theICTinfrastructureinmostofthesugarfactoriesisstillatinfancystage.Totaptheseopportunities,theindustrywillmoderniseandpromotetheuseofICTby:

i. ImprovingtheICTinfrastructurethroughnetworkingii. Encouraginge-commerceande-procurementiii. Increasing training of staff on the use of ICT including the new fibre optic cable

architectureiv. IncreasinginformationsharingthroughICT

4.5.4 Strategic Objective 4: To Strengthen the Regulatory FrameworkThepassingoftheSugarAct,2001wentalongwayinstrengtheningtheregulatoryframeworkinthesugarindustry.However,someofthesupportingregulationshavenotbeenapproved.Anumberofproposalsthatwouldhaveimprovedthebusinessenvironmentinthesugarindustryincludingtaxproposalsarependingapproval.Tostrengthenthelegalframework,thefollowingspecificstrategieswillbeundertaken:

Strategy 4.1: Finalise the Policy and Legal Framework Work- in- Progress and Implement themThereviewrevealedthattherewerependingactionsunderthepolicyandlegalframeworkintheoutgoingplanningperiod.Theindustrywillconcludethependingactionsby:

i. PassingtheSugarAmendmentBillii. GazettingSugarGeneralRulesiii. Harmonizingallsugarlawsiv. Finalisingandimplementingregulationstorestructureoutgrowerinstitutions

Strategy 4.2: Strengthen the Management of Sugar Import PolicyIllegal and uncoordinated importations of sugar are major contributors to the sub-sectorproblems.Toaddressthisconcern,theindustrywill:


i. Enhancecapacityforarobustassessmentofmarketconditionsii. Supportmeasurestoeliminatetaxevasioniii. Supporttheimplementationofrulesoforiginiv. StrengthenitsadvocacyrolewithKRA,MinistryofTrade(MoT),MinistryofFinance

(MoF)MinistryofEnergy(MoE)andMoA

Strategy 4.3: Strengthen the Framework for Corporate GovernanceWeakcorporategovernancehasbeenaproblemintheindustryfora longtime.Thesugarindustryneedstotransformitselftoprofitabilityandefficiencypaththroughsoundmanagementethics.Toaddresscorporategovernancechallenges,theindustrywill:

i. Ensurepromptpaymenttofarmersii. Strengthen the management of OGIs, through governance and institutional capacity

buildingprogrammesiii. Signsugarindustryagreementsbetweenmillers,growersandotherserviceprovidersiv. Concludeprivatisationofsugarfactoriesv. Establishand implement the frameworkof implementationandM&Esystemfor the

2010-2014StrategicPlan

Strategy 4.4: Development of an Institutional Framework for Coordination of Roads Maintenance in the sugarbeltThereexistsanopportunityforthesugarindustry,throughKSB,tocollaboratewithcentralandlocalgovernmentintheutilisationofthepetroleumandthelocalgovernmentcessfunds,CDFandLATFforroadmaintenanceandrehabilitation. Toensureefficientutilisationofthesefunds,theindustrywill:

i. EstablishasugarbeltroadsmanagementcommitteecomprisingKSB,Millers,OGIsandGoKdepartmentsresponsibleforroads.

Strategy 4.5: Development of a comprehensive policy on co-generation and exploitation of bio-fuels and other sugarcane productsTheEnergyAct,2006, setsout theNationalPoliciesandStrategies for short,mediumandlong-termenergydevelopmentinKenya.TheMinisterforEnergyhasthemandatethroughtheAct,topromoteco-generationbysugarmillersandsaleofthesametothenationalgrid;and promote the production and use of gasohol and biodiesel. However, there is still nocomprehensivepolicyandlegalframeworktoregulatetheproductionanduseoftheseproducts.Intheincomingperiod,andworkingcloselywiththeMinistryofEnergy,theindustrywill:

i. Supportmeasurestodevelopacomprehensivepolicyonco-generationandexploitationofbio-fuelsandothersugarcaneproducts.


Implementation Strategy and Resource Requirements

5.1 ImplementationStrategyImplementation responsibilities of this strategy will be devolved to all levels in order to allow formaximumparticipationofalltherelevantstakeholders.Formalexistinginstitutionalstructuresincludingtheoversightbodiesthatundertakeregulatoryresponsibilitieswillbechargedwithcarryingouttheirappropriateroles.Stakeholderinstitutionssuchasmillers,OGIs,CaneTransporters,KESREF,KSBandfarmerswillbeaccordedtheirrightfulsayintheimplementationofthisstrategy.

5.1.1 Implementation FrameworkSuccessfulimplementationofthePlanwilldependsignificantlyonapracticalimplementationframework,whichiseasytocoordinate.TheKenyaSugarBoard(KSB),havingtheduallegalmandatetodevelopandregulatetheindustryshouldexerciseitsauthoritytowardsthesame.KSBneedstoremainasthevoiceoftheindustryinconsultationwithallstakeholders.Giventhematrixnatureofindustrydecision-makingorgans,thePlan’simplementationframeworkwillhaveawidespectrumofplayers.

5.1.2 Institutional StructureTheimplementationofthe2010-2014StrategicPlanwillbetheresponsibilityofthefollowinginstitutionalstructures:

National Inter-ministerial Coordinating Committee (NICC)The Committee will comprise MoF, MoE, MoA, MoT, MoWI, MoR, MoPW, MoLG andMoRDA.Itwilldealwithpolicyandlegislativeissuesaffectingtheindustry.TheNICCwillbeconvenedandchairedbythePermanent Secretary, Ministry of Agriculturefromtimetotimeasneedarises.

Monitoring Committee (MC)The industry will establish a Monitoring Committee (MC) through a legal notice by theMinisterofAgriculturetomonitortheimplementationofthisStrategicPlan.Thecommitteewillsit twice yearly. StructuredreportswillbepreparedandpresentedtotheCommitteebyMonitoring and Evaluation OfficerwhowillbestationedattheKenyaSugarBoardheadquartersinNairobi.TheCommitteewillassessprogressonthestatusofPlan’simplementationfocusingontheindustryadjustmentandpreparednessforaliberalizedtraderegime.TheCommitteewillcomprisechiefexecutiveofficersorchairpersonsofKSB,KESMA,KESGA,KECATRAandKESREF,representativesfromMoAandconsumers.ThecommitteewillbeconvenedandchairedbytheChairmanofKSBBoard.TheMCwillreporttotheNICCthroughtheKSBBoard.

5Chapter


Stakeholders Review Forum (SRF)The Stakeholders Review Forum (SRF) will comprise senior managers of stakeholderinstitutions.TheChiefExecutive,KenyaSugarBoard,willchairit.TheSRFwillsitquarterlytoreviewtheprogressofimplementationofthePlanbasedonreportspreparedbytheM&EOfficer.

Unit Committees (UC)Factories’,OGIs’ andother stakeholders’ level committeeswill compriseUnitCommittees.Thesecommitteeswillbe set-upat respective stakeholderunits andwillmeetmonthly.ThecommitteeswillcarryoutthespecificactivitiesofthePlanandreportprogresstoseniormanagerssittingattheSRF.ThecompositionoftheUCswillbeseniortechnicalandmanagerialstaffofthevariousstakeholderinstitutions.Figure5.1outlinestheproposedinstitutionalstructureandtheimplementationframework.

Fig. 5.1: Institutional Structure and Implementation Framework

OGIs

National Inter-Ministerial Coordinating Committee

Monitoring Committee

Strategic Objectives Resources Implementation M & E

Stakeholders Review Forum

KSB, Board Chairman (Chair)KESMAKESGAKESREFKECATRARepresentative MoAConsumer Representatives

Factories

KESREFOther Stakeholder Representatives

Unit Committees

KSB, CEO (Chair)M&E O�cerSenior Management of Stakeholder Institutions

KSB, Board

Revi

ew th

e ap

prop

riate

ness

of c

hose

n st

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Mat

ch R

esou

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and

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Allo

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urce

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d ca

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out a

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Mea

sure

targ

ets,

out

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n

Ministry of Agriculture, PS (Chair)Ministry of FinanceMinistry of EnergyMinistry of Water and IrrigationMinistry of TradeMinistry of Public WorksMinistry of RoadsMinistry of Local GovernmentMinistry of Regional Development Authority


5.1.3 Private Sector ParticipationTheimplementationofthisPlancallsforclosecollaborationandparticipationofthepublicand private sector.While privatization is not a panacea, private sector participation bringswith it increased financial discipline; capital injection; new management styles; a strongercommercialorientationandsomeinsulationfrompoliticalinterference.TheprivatizationoftheMumiasSugarCompany,andthesubsequentimprovementinperformance,isacaseinpoint.Intheinterim,anydecisionsmadeonfactories’rescue,shouldbesynchronizedwiththeproposedprivatizationactionstoavoidinvestinginlowpriorityinterventions.Thedrivetowardsdiversificationandvalueadditionisalsolikelytoberealizedifdoneinthecontextofwhollyorlargelyprivatizedsugarsubsector.

5.2 ResourceMobilisationandUtilisationTheresourcesrequiredfortheKenyasugarindustrytoimplementthe2010-2014StrategicPlaninclude,financial,humanandphysicalresources.Successfulimplementationofthesamewillnotonlydependonthequalityandcommitmentofthestakeholders,butalsoontheavailabilityandefficientutilisationofresourcesrequiredtoundertakethevariousactivities.Weakcorporategovernance,highdebtburdenandlackoffundsforinvestmentcontinuetoplaguetheGovernmentownedmills.Thiswasmanifestedindelayedfarmerpayments;lackofroutineandpreventivemaintenance;failuretoinvestinnewmachinery;andtheoveralldegenerationofeffectiveprocessingcapacity.TheresourcesfrominternallygeneratedsourcesandtheSugarDevelopmentLevyareinadequatetomeetthescopeofactivitiesproposedinthisPlan.Table5.1isasummaryoffinancialresourcesrequirementsforimplementingthesame.

Table 5.1: Plan Implementation Cost Estimates

StrategicObjectiveYears(KSh,millions)

Total2009/10 2010/11 2011/12 2012/13 2013/14Enhance sugar industry Competitiveness

2,905 2,984 5,725 5,745 950 18,309

Expand product base 58 55 55 9 5 182Enhance 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

Thecostinherentinimplementingactivitiesoutlinedinthestrategywillbehuge.TheindustryrequiresatleastKSh. 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.TheindustryneedsafurtherKSh.58billiontoclearalldebtsonsugarfactoriesandOGIsbalancesheets.(Annex VIII).FundingthisPlanwillrequireapublic-privatepartnershipcomprisingbudgetresources,governmentdevolved funds, internally generated funds and loans, grants from development partners and jointventureagreementsasdiscussedbelow.

5.2.1 Funding SourcesTorealisetheobjectivesofthe2010-2014StrategicPlan,therewillbevariousfinancialsourcesasbrieflyexplainedbelow:


i. Internally Generated Funds at Factory Level MostofthesugarcompanieswiththeexceptionofMumias,Soin,KibosandWestKenya

SugarCompaniesarebarelymakingsurpluses.Thescopeforfactorygeneratedfundsisthuslimitedforpubliclyownedfactories.Thesepubliclyownedfactoriesarelookingforgrantsandsoftdebtfinancing.Nevertheless,thefundsgeneratedfrominternalsourceswillbeutilizedforfactorymaintenance,modernisationandrehabilitation.

ii. Sugar Development Fund Asugardevelopmentlevyof4%oftheex-factorypriceischargedbytheKenyaGovernment

onallsugarsales.ThislevyiscollectedbytheKenyaRevenueAuthorityandismanagedbyKSBastheSugarDevelopmentFund(SDF).After17yearsofimplementation,SDFhas grown to become the single largest source of funding for the industry. The fundutilisationpercomponentisshowninFigure5.2.

Fig. 5.2: SDF Allocation per Component27

Atthepresentstate,thesugarindustryrequiresfundingonamuchlargerscalethancanbemetbytheSDF.Thefundinggapswillbebridgedthroughalternativefinancing.

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 toattractconcessionalfundingfromdevelopmentpartners.TheindustrywillalsocontinueseekingforfinancialgrantsfromtheGoK.

iv. Loans Thesugarindustryisalreadyattractingdonorfundsfromavarietyofsourcesincluding

theEuropeanUnion(EU)andCFC.Thesubsectorcanattractmorefundsfromarangeofinitiativesincludingenergy, environment, water and sanitation, and rural roads,allofwhichhaveadirectimpactonsustainabledevelopmentandMDGs.Theindustrywillthereforeprepareandpresentproposalstowillingdonorsforthepurposesofsourcingforfundsforitsdevelopment.

v. CDF/LATF Funds ThesugarindustrywillcollaboratewithinstitutionsimplementingtheCDFandLATF

fundedprojectstoharnesstheresourcesdirectedtowardsinfrastructuraldevelopmentinthesugarbelt.

27 KSB,SDFOperationalManual,February2006

KSB administration(35%)

Research and extension(23%)

Cane development(17%)

Infrastructure(7%)

Factory rehabilitation(18%)


vi. Carbon Credits Carboncreditsareakeycomponentofnationalandinternationalattemptstomitigate

thegrowthofconcentrationsofgreenhousegases.Onecarboncreditisequaltoatonneofcarbon.Thesugarfactoriesthroughcanefarming,co-generationandethanolproductionwillproduceenvironmentallyfriendlierenergysources,whichwillallowthemtoenterinto agreements with Carbon Finance Companies around the world, through CleanDevelopmentMechanism(CDM).ThesecreditswillbeexchangedforhardcurrenciestohelpfinancesomeoftheactivitiesinthisPlan28.

viii. Joint Venture Agreements Jointventuresarestrategicweaponsusedbyorganisationstoenhancecompetitiveness.A

jointventureisanagreementformedbytwoormorepartiestoundertakeaneconomicactivity together. The parties agree to contribute equity, share revenue, expenses andcontrol theenterprise. In the incomingPlanperiod, the industrywill enter into jointventureagreementswithlike-mindedorganisations/corporationstoundertakesomeofthe strategies/activitieshighlighted in thisPlan.Possibleareas for suchagreementsarepower-cogeneration,ethanolproductionandirrigation.

5.2.2 Human ResourcesWhilsttherearemanyskilledpersonnelinthecountry,theindustryhasexcessunskilledstaff.Theindustrylackshumanresourcescapacitytocarryoutthewiderangeofresearchthattheindustryneeds.Mostofthefarmerinstitutionshavealsofailedtoprovideessentialextensionservicestothefarmers.Tomeetthehumanresourcesgaps,theindustrywillcarryoutstaffrationalisationtodeterminethelevelofhumanresourcerequirementsunderthe strategy for enhanced human resource capacity.

5.3 AccountabilityAccountability for the implementationof thisPlanandtheuseof resourceswillcritical since itwillrequireproperutilizationoffinancial,humanandmaterialresources.Thisdemandsthatallstakeholdersinthesugarindustryandothersectorstakeresponsibilityandbeaccountablefortheiruse.Allinstitutionsusing industry resources will account for the same in accordance to the laid down regulations andprocedures.

5.4 ImplementationRisksThereare several risks to the implementationof thisStrategicPlan, including the timelyavailabilityofresourcesandpoliticalgoodwill.ThisrequiresthatpossiblerisksbeanalysedtotakeprecautionarymeasuresingoodtimeandpreventfailureofthePlan’simplementation.Thefollowingaresomeofthemajorrisksidentifiedforconsideration:

i. Failure to Realize the Privatisation Process:ThesurvivaloftheKenyasugarindustryappearsdirectlypeggedtoprivatizationandsubsequentprivatesectorparticipationinincreasingefficiency.FailuretodivestGoKshareholdingintheindustryportendsdoom.

ii. Poor Plan Implementation:AlloftheparticipatinginstitutionsneedtodiligentlycarryouttheactionsidentifiedinChapter4.Failuretocarryoutthechangesneededtomaketheindustrymore

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.


efficientandcompetitive,willposeamajorrisktotheindustry.Individualinstitutionalplansthatareintendedtohelpachievetheglobalindustryobjectivesneedtobedevelopedandimplementeddiligently.

iii. Lack of Political goodwill: PoliticalgoodwillisnecessaryfortheimplementationofthisStrategicPlan.Ifpoliticalgoodwillislacking,thereremainstheriskoffailureinimplementingthesame.

iv. Lack of resources:ResourcesareessentialfortheimplementationoftheactivitieshighlightedinthisPlan.Inadequatehuman,financialandotherresourcesposeriskstotheimplementationoftheseactivities.

v. Insecurity: Insecurity is both a threat to human life and a major risk against the objective ofattractinginvestment.Italsooftencausesdisruptionofplannedactivities,leadstobusinesslossesandincreasesbusinesscosts.Formeaningfulprivatesectorinvestment,theindustrymustoperateinaconduciveandsecureenvironment.

vi. Poor Communication: Theabsenceofaneffectiveandagreedcommunicationstrategymayresultinpoorinformationflowandtherebydelaydecision-making.Thiswillresultinariskoffailureand/ordelayintheimplementationofthePlan.

vii. Lack of Ownership:Thelackofownershipbythestakeholders,forinstancefarmers,mayleadtofailureintheimplementationofthestrategicplan.

viii. Resistance to change/negative attitude: Resistancetochangebyfarmers,transporters,millersandoutgrowerinstitutionsmayresultinfailureordelayinthePlan’simplementation.

5.4.1 Risk Mitigation FrameworkThematrixbelowgivesalistoftherisks,theirrankingandsuggestedmitigationstrategies.

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 sub-sector

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


Monitoring, Evaluation and Reporting

6.1 MonitoringThesuccessfulimplementationofthisPlanwilldependlargelyonhowtheactivitiesandoutputsareeffectivelymonitoredandevaluated.ThePlan’smonitoringwillbethroughtheinstitutionalarrangementsdefinedinsection5.1.2ofthisreport.MonitoringwillbedoneusingtheinstrumentprovidedinAnnex IX.The instrumenthas expectedoutcomes, indicators and annual targets for gaugingperformance.Monitoringwillhelpdeterminewhether the implementation ison track; establish theneed for anyadjustmentinlightofthechangesinthesugarsubsectorandpoliticalenvironment.

6.1.1 Monitoring Mechanism

Institution Strategic PlansForeaseofmonitoring,thesugarindustrystakeholderswillaligntheirobjectivesandstrategieswiththeKenya Sugar Industry Strategic Plan 2010-2014.Theindividualstrategiesshouldhaveclearly defined activities with specific timelines for implementation. The realisation of theindividualstrategicplanswillfeedintotheoverallobjectivesofthesugarindustry.

SupervisionTheKSBwillcarryoutsupervisionoftheoverallPlan’simplementationandpreparequarterlyreports. This will require the cooperation of all industry stakeholders. Findings from thesupervisionmissionswillbepresentedtotheMCandfollow-upactionsdiscussed.KSBwillensurepromptsubmissionofthereports.

Service Delivery SurveysTheMCwillorganizesurveysonthequalityofservicedelivery.Theinformationfromsuchsurveyswillbedisseminatedtoallthestakeholders.

Quarterly Review Meetings (QRM)Stakeholdersreviewsessionswillbeheldquarterlywithstakeholders’representatives.Thisiswill keep thePlan’s activities andoutputson trackduring implementation, and enable thestakeholderstoidentifyandtakenecessaryactionstoaddressemergingchallenges.Thisiswillgivetheindustryachancetointerrogatewhatisbeingdone.TheQRMwillbeundertakenthroughtheSRF.

6.2 EvaluationThe Plan will be subjected to four evaluations, which are two Internal Annual Evaluations; Mid-TermEvaluationandReview;andFinalEvaluation.Theevaluationswillbedoneusingtheindicator-monitoringtoolprovidedinAnnex X.

6Chapter


6.2.1 Internal Annual Evaluation (IAE)Toensure that the experiencesof thepreviousPlan’s implementation arenot repeated, theindustrywillundertaketwointernalannualevaluationsofthePlan.Thefirstannualreviewwillbeheldatendoftheyear2010.Thesecondannualreviewwillbeheldattheendoftheyear2013.Thetwoevaluationswillbedonebyanindependentteamofconsultantswithexperienceinthesugarindustry.

6.2.2 Mid-Term Evaluation and Review (MTER)ThepurposeoftheMid-TermEvaluationandReview(MTER)willbetoassesstheextenttowhichthePlanismeetingitsimplementationobjectivesandtimelines.TheMTERwillbecarriedoutinDecember2011,threemonthsbeforetheexpiryoftheCOMESAprotocolandwillthereforeprovideanopportunityto:(i)assessreadinessfortheopentraderegime;and(ii)providerecommendationsfortheremainingphaseofthePlan.TheMTERwillbedonebyanindependentteamofconsultants.

6.2.3 Final EvaluationTheprimepurposeoftheFinalEvaluationfortheStrategicPlan2010-2014,expectedtobecarriedoutattheendofMay2014,willbetoaddressfourissues:

• Effectiveness (Impact): Theextent towhichthe implementationofactivitiesmet thestatedstrategiesandobjectives

• Sustainability: Assessesthesustainabilityoftheachievementsmade• Lessons Learnt:Documentlessonslearnt• Terms of Reference (TORs):PreparetheTORsforthenextstrategicplan.

6.3 ReportingReportingtheprogressofimplementationwillbecriticalinadjustingstrategicdirectionsandmeasuringperformance.Progressreportswillbemadeonquarterlybasis.Thereportswilloutlineinsummaryformprojected targets, achievements, facilitating factors and challenges.The reportswill beprepared andsubmittedbyunitcommitteestotheSRF,whereasummaryreportwillbepreparedandsubmittedtotheMCforreview.IssuesthatwillrequirepolicyinterventionswillbeforwardedtotheNICCthroughtheKSBBoard.

6.4 InformationSharingInformationsharingandreportingwillbekeyinreviewingthisPlan.Itwillalsoprovideamechanismformonitoringandevaluation.Variousstakeholdershaveestablishedwebsitesthroughwhichinformationcan be shared. Additionally, the industry stakeholders will be meeting quarterly to share amongstthemselvesandreportemergingchallenges.ReportsontheimplementationstatusofthePlanwillalsobemadeavailablequarterlyandannuallybyKSB.

6.5 ConclusionThe revised Kenya Sugar Industry Strategic Plan 2010-2014 focuses on objectives, strategies andactivitiesthatwillenhanceindustry’scompetitiveness.Iftrulyimplemented,itwilllayafirmfoundationfortheindustrytobecomeefficient, diversified and globally competitive.


AnnexI: StrategicObjectivesandActions(2004-2009)

StrategicObjective StrategicActions

1. Increase sugarcane production and productivity

• 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

2. Increase sugar production

• Enhance management capacity within the industry institutions• Optimise existing factory capacity• Modernising existing factories

3. Expand product base • Product diversification

4. Strengthen Policy, Legal and Regulatory Framework

• 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

5. Privatisation of Sugar Institutions

• 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

6. Sustainable Funding for Industry,

• Internally generated funds• Sugar Development Fund (SDF)• External Sources

7. Stream Supply Chain management

• 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

8. Adopt World Class Standards

• 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

9. Enhance Socio-Economic Development and Environmental Management

• 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

Annexes


Ann

exII

:PE

STLE

Ana

lysi

s

Issu

esGl

obal

Regi

onal

Nat

iona

lEff

ect

Polit

ical

• W

orld

focu

sed

mos

tly o

n Go

vern

ance

an

d•

Hum

an R

ight

s•

Terro

rism

• Pi

racy

alo

ng th

e So

mal

ia co

astli

ne•

Confl

icts

(Dar

fur C

risis,

Sou

ther

n Su

dan,

Er

itrea

/Eth

iopi

a)

• Re

gion

al cr

ises d

iver

ting

atte

ntio

n an

d re

sour

ces f

rom

loca

l nee

ds

• La

ck o

f a lo

ng te

rm ro

adm

ap fo

r the

de

velo

pmen

t of t

he su

gar b

elt

• M

inist

ry o

f Agr

icul

ture

star

ting

to fo

cus

but i

t nee

ds to

be

stru

ctur

ed

• Un

cert

ain

inve

stm

ent c

limat

e

Econ

omic

• In

crea

sing

Oil

pric

es•

Incr

easin

g fo

od p

rice

• Co

unte

rfeiti

ng•

WTO

) agr

eem

ents

on

bila

tera

l tra

de•

Stan

dard

s•

Non-

Tariff

Bar

riers

(e.g

Min

imum

Re

sidue

Lim

its)

• Sa

nita

ry a

nd P

hyto

sani

tary

stan

dard

s

• In

crea

sing

food

pric

es•

Obl

igat

ions

und

er R

egio

nal

Agre

emen

ts•

And

Stan

dard

s•

Non-

Tariff

Bar

riers

(NTB

s)•

Wor

ld Tr

ade

Org

aniza

tion

(WTO

)ag

reem

ents

on

bila

tera

l arra

ngem

ents

• Ec

onom

ic cr

imes

(mon

ey la

unde

ring,

co

rrupt

ion,

fake

curre

ncie

s),

• In

crea

sing

Oil

pric

es•

Food

inse

curit

y•

Poor

enf

orce

men

t of

tax

law

s and

In

tern

atio

nal A

gree

men

ts a

nd•

Stan

dard

s•

Coun

terfe

it go

ods

• Hi

gh in

flatio

n•

Unde

rdev

elop

ed e

xpor

t mar

ket a

cces

s fo

r sug

ar•

Low

fund

ing

for e

xpor

t mar

ket

deve

lopm

ent

• Un

fair

com

petit

ion

• A

dise

nabl

ing

inve

stm

ent c

limat

e •

Stro

ng co

mpe

titiv

e pr

essu

re•

Need

for i

ncre

ased

effi

cien

cy in

the

suga

r ind

ustr

y•

Need

for i

ncre

ased

fund

ing

for m

arke

t de

velo

pmen

t

Soci

al•

Lang

uage

bar

riers

resu

lting

in

addi

tiona

l tra

nsac

tiona

l cos

ts

• Dr

ug tr

affick

ing

and

Drug

abu

se

lead

ing

to re

duce

d pr

oduc

tivity

• Hu

man

traffi

ckin

g an

d br

ain

drai

n

• La

ngua

ge B

arrie

rs•

High

HIV

/AID

S pr

eval

ence

• Re

gion

al co

nflic

ts

• Hi

gh p

opul

atio

n gr

owth

rate

• Lo

w li

tera

cy le

vels

• Hi

gh H

IV/A

IDS

and

mal

aria

pre

vale

nce

• La

ngua

ge b

arrie

rs•

High

crim

e ra

tes

• La

ngua

ge b

arrie

rs a

nd in

secu

rity

incr

ease

cost

s of d

oing

bus

ines

s •

Dise

ases

lead

ing

to a

bsen

teei

sm a

nd

low

labo

ur p

rodu

ctiv

ity•

Drug

abu

se re

duce

s pro

duct

ivity

Tech

nolo

gica

l •

High

cost

of a

dvan

ced

tech

nolo

gies

• Lo

w n

egot

iatio

n ca

pabi

lity

• Lo

w a

dapt

abili

ty o

f adv

ance

d te

chno

logy

• Lo

w fu

ndin

g fo

r Res

earc

h an

d D

evel

opm

ent

• Pr

ivat

e M

ills (

Mum

ias,

Wes

t Ken

ya, S

oin

and

Kibo

s) h

ave

inve

sted

in u

pgra

des,

but p

aras

tata

ls M

ills a

re m

ired

in d

ebt

and

unab

le to

upg

rade

or e

ven

carr

y ou

t rou

tine

mai

nten

ance

• Lo

w fu

ndin

g fo

r Res

earc

h an

d D

evel

opm

ent

• Sl

ow p

ace

of tr

ansf

orm

atio

n to

shor

ter

mat

urity

cane

var

ietie

s

• La

ck o

f com

petit

iven

ess

• Ne

ed fo

r an

inje

ctio

n of

capi

tal t

o as

sist i

n M

ill m

oder

niza

tion

thro

ugh

priv

atiza

tion

and

dilu

tion

of p

ublic

ca

pita

l hol

ding

in su

gar f

acto

ries


Lega

l•

High

lega

l cos

ts•

Natio

nal R

atifi

catio

n of

Reg

iona

l Tr

eatie

s•

Wea

k in

stitu

tiona

l cap

acity

in th

e su

gar

indu

stry

• Bu

reau

crat

ic re

gula

tory

and

ad

min

istra

tive

fram

ewor

k•

Few

qua

lified

per

sonn

el o

n co

mm

erci

al

law

(bot

h be

nch

and

bar)

• In

form

ality

of b

usin

esse

s•

High

lega

l cos

ts

• Ne

ed fo

r sim

plifi

catio

n of

regu

latio

ns•

Need

for i

ncre

ased

corp

orat

izatio

n•

Need

for s

trict

er c

ontra

ct e

nfor

cem

ent

• Pe

rform

ance

stan

dard

s nee

ded

for

Judi

ciar

y

Envi

ronm

ent

• Cl

imat

e ch

ange

and

des

ertifi

catio

n•

Slow

dom

estic

atio

n of

Mul

tilat

eral

En

viro

nmen

tal A

gree

men

ts(M

EAs)

• Cl

imat

e ch

ange

and

des

ertifi

catio

n

Slow

dom

estic

atio

n of

Mul

tilat

eral

En

viro

nmen

tal A

gree

men

ts(M

EAs)

• Ra

pid

degr

adat

ion

of w

ater

tow

ers,

biod

iver

sity

and

habi

tats

• D

eclin

ing

avai

labi

lity

of fr

esh

wat

er

• Po

llutio

n an

d w

aste

man

agem

ent

• Po

or e

nfor

cem

ent o

f env

ironm

enta

l st

anda

rds

• Cl

imat

e-de

pend

ent s

ecto

rs su

ch a

s ag

ricul

ture

adv

erse

ly a

ffect

ed•

Deg

radi

ng e

nviro

nmen

t im

pact

ing

the

poor

adv

erse

ly

Ann

exII

I:St

akeh

olde

rCom

para

tive

Adv

anta

geA

naly

sis

Stak

ehol

ders

Resp

onsi

bilit

ies

Com

para

tive

Adva

ntag

eTa

rget

Wha

tthe

yca

ndo

toth

esu

gari

ndus

try

Gove

rnm

ent

(MoA

)•

Sect

or co

ordi

natio

n an

d po

licy

form

ulat

ion

• Po

licy

form

ulat

ion

• O

vera

ll se

ctor

• Li

nk to

the

gov

ernm

ent

• Pr

ovid

e po

licy

dire

ctio

n in

the

suga

r su

b-se

ctor

Keny

a Su

gar

Boar

d•

Regu

late

, dev

elop

and

pro

mot

e th

e su

gar i

ndus

try

• Co

ordi

nate

act

iviti

es w

ithin

the

indu

stry

• Fa

cilit

ate

equi

tabl

e ac

cess

to b

enefi

ts

and

reso

urce

s

• Re

gula

tion

• Co

ordi

natio

n•

Stra

tegy

setti

ng•

Advi

sory

• Effi

cien

t, eff

ectiv

e qu

ality

serv

ice

deliv

ery

• Iss

ue li

cens

es•

Prov

ide

regu

latio

ns, p

roce

dure

s an

d gu

idel

ines

on

vario

us a

reas

of

oper

atio

n in

the

indu

stry

KESR

EFKI

RDI

• Br

eedi

ng a

ppro

pria

te ca

ne v

arie

ties

• Re

com

men

ding

app

ropr

iate

fe

rtili

zers

• Ap

prai

sing,

stud

ying

, dev

elop

ing

and

mon

itorin

g te

chno

logi

es•

Pest

and

dise

ases

, agr

onom

ic

pack

ages

, far

m m

achi

nery

, en

viro

nmen

t and

safe

ty is

sues

in

suga

r. •

Carr

y ou

t ind

ustri

al re

sear

ch

• Re

sear

ch•

Inno

vatio

n•

Enha

nced

rese

arch

-ext

ensio

n –f

arm

er li

nkag

es•

High

and

sust

aine

d te

chno

logy

ad

optio

n ra

tes

• Co

nduc

t mor

e re

sear

ch in

to n

ew

early

mat

urin

g se

ed v

arie

ties t

hat

are

dise

ase

resis

tant

and

hav

e hi

gh

sucr

ose

cont

ent

• In

crea

se fa

rmer

trai

ning

• In

crea

se re

sear

ch o

n irr

igat

ion,

pr

oces

sing,

har

vest

ing

, tra

nspo

rt

and

mar

ketin

g


Farm

ers

• To

pro

duce

qua

lity

cane

with

hig

h su

cros

e co

nten

t•

Adop

t rec

omm

ende

d cr

op

husb

andr

y pr

actic

es•

Elec

t com

pete

nt re

pres

enta

tives

• Ca

ne P

rodu

ctio

n•

Incr

ease

d ca

ne p

rodu

ctio

n•

Com

petit

ive

retu

rn to

land

and

la

bour

• To

be

busin

ess o

rient

ed•

Ensu

re fo

od se

curit

y th

roug

h in

terc

ropp

ing,

bor

der c

ropp

ing

• Re

duce

land

subd

ivisi

on

Out

grow

er

Inst

itutio

ns•

Coor

dina

te a

ll ca

ne g

row

ing

activ

ities

• Su

pply

qua

lity

seed

cane

• Ha

rves

t and

tran

spor

t can

e

• In

put s

uppl

y•

Mus

t see

k to

satis

fy fa

rmer

s, tra

nspo

rter

s•

Mus

t bec

ome

key

part

ners

in th

e dr

ive

for e

ffici

ent s

ugar

pro

duct

ion

Suga

r Mill

ers

• Pu

rcha

se a

nd m

ill su

garc

ane

• M

arke

t sug

ar a

nd it

s by-

prod

ucts

• Gr

ow, h

arve

st a

nd tr

ansp

ort c

ane

• Pr

oces

sing

• In

crea

sed

suga

r and

co-p

rodu

cts

prod

uctio

n•

Incr

ease

d effi

cien

cy in

suga

r pr

oces

sing

Oth

er

Inst

itutio

ns:

KESG

A,KE

SMA,

• Ad

voca

cy fo

r out

grow

ers a

nd m

iller

s•

Advo

cacy

• Eff

ectiv

e se

rvic

e de

liver

y to

farm

ers

• Effi

cien

t sup

ply

chai

n m

anag

emen

t•

Enco

urag

e te

chno

logy

ado

ptio

n an

d its

impl

emen

tatio

n•

Advo

cate

for e

ffici

ent s

uppl

y ch

ain

man

agem

ent

Tran

spor

ters

• Ca

ne Tr

ansp

ort

• Tr

ansp

orta

tion

• Re

duce

d Tr

ansp

ort c

ost

• Pr

ovid

e tra

nspo

rt se

rvic

es•

Redu

ce o

n-tra

nsit

cane

loss

es

Cons

umer

s•

Buy

suga

r•

Feed

back

on

suga

r qua

lity

• Go

od q

ualit

y su

gar a

t com

petit

ive

pric

es•

Dem

and

qual

ity a

nd co

mpe

titiv

e pr

ices

Univ

ersit

ies

and

Rese

arch

In

stitu

tions

• Tr

aini

ng•

Rese

arch

• In

nova

tions

• Sc

ienc

e, te

chno

logy

and

inno

vatio

n•

High

ly tr

aine

d pe

rson

nel

• In

crea

sed

colla

bora

tion

• In

nova

te n

ew p

rodu

cts a

nd

tech

nolo

gies

of s

ugar

pro

duct

ion

• Br

oade

n pr

oduc

t bas

e•

Mar

ket i

ntel

ligen

ce


Ann

exIV

:Res

ults

Mat

rix

(201

0-20

14)

Stra

tegi

c Obj

ectiv

e 1:-

To En

hanc

e Sug

ar In

dustr

y Com

petit

ivene

ss

Stra

tegy

Ac

tivity

Resp

onsi

bilit

yO

utpu

tO

utpu

tInd

icat

ors

Tim

efra

me

Redu

ctio

n in

Farm

Le

vel R

isks

Incr

easin

g su

garc

ane

prod

uctio

n an

d pr

oduc

tivity

thro

ugh

effici

ency

farm

op

erat

ions

Farm

ers,

KESR

EF, O

GIs,

Mill

ers,

KSB

• Hi

gher

yie

lds a

t low

er co

sts

• Ar

ea u

nder

cane

, yie

ld le

vels/

ha,

sucr

ose

cont

ent

2010

-201

4/Co

ntin

uous

Dev

elop

ing

the

use

of a

nd fi

nanc

ing

irrig

atio

n fo

r sug

arca

ne p

rodu

ctio

nKE

SREF

, MoA

, Far

mer

s, M

oWI, K

SB•

High

er y

ield

s•

Area

und

er ir

rigat

ion

• %

of w

ater

recy

cled

into

irrig

atio

n20

10-2

014/

Cont

inuo

us

Crea

ting

an in

sura

nce

sche

me

to cu

shio

n th

e fa

rmer

s fro

m lo

sses

aris

ing

in th

e in

dust

ry

KSB,

Mill

ers,

Insu

ranc

e fir

ms,

Farm

ers

• Lo

wer

farm

leve

l risk

s•

% o

f inc

iden

ce co

vere

d•

Chan

ge in

farm

leve

l inv

estm

ent

2011

Enha

ncin

g re

sults

orie

nted

rese

arch

-ex

tens

ion-

farm

er li

nkag

es to

acc

eler

ate

adop

tion

rate

s

KESR

EF, F

arm

ers,

OGI

s, M

iller

s•

High

er p

rodu

ctiv

ity•

High

of h

igh

yiel

ding

and

ea

rly m

atur

ing

varie

ties i

n th

e to

tal c

rop

• In

crea

se a

dopt

ion

to h

igh

yiel

ding

var

ietie

s20

11/

Cont

inuo

us

Impl

emen

ting

a la

nd te

nure

pol

icy

that

en

cour

ages

eco

nom

ies o

f sc

ale

Farm

ers,

KSB,

KES

REF,

MoA

• Bl

ock

farm

ing

• Sa

telli

te v

illag

es•

Redu

ced

land

subd

ivisi

on20

11/

cont

inuo

us

Rato

onin

gFa

rmer

s•

Redu

ced

cane

pro

duct

ion

cost

• %

of r

atoo

n cr

ops

2010

/co

ntin

uous

Effici

ent,

Relia

ble

Harv

estin

g an

d Tr

ansp

ort O

pera

tions

Impr

ovin

g ca

ne y

ard

man

agem

ent

Mill

ers,

Tran

spor

ters

• Lo

wer

Can

eyar

d lo

sses

• Re

duce

d cy

cle

times

• Re

duce

d st

alen

ess i

ndex

• Im

prov

ed su

gar q

ualit

y20

10-2

014/

Cont

inuo

us

Redu

cing

pos

t-har

vest

loss

esTr

ansp

orte

rs, O

GIs,

Farm

ers

• In

crea

sed

cane

supp

ly•

% o

f los

ses

2010

-201

4/Co

ntin

uous

Redu

cing

tim

e la

pse

betw

een

cane

m

atur

ity a

nd h

arve

stin

gTr

ansp

orte

rs, M

iller

s, Fa

rmer

s, ca

ne

cutte

rs

• Ti

mel

y ha

rves

ting

• Effi

cien

t sch

edul

ing

of

trans

port

ope

ratio

ns

• %

of c

ane

harv

este

d at

mat

urity

• Ti

mel

ines

s of e

vacu

atio

n fro

m

farm

• Cy

cle

time

laps

e

2010

-201

1

Prom

otin

g th

e us

e of

oth

er m

odes

of

trans

port

Farm

ers,

Tran

spor

ters

, Mill

ers,

KSB,

M

oA (G

oK)

• Lo

wer

uni

t tra

nspo

rt co

st•

Shar

e of

tran

spor

t in

prod

uctio

n co

st20

12

Incr

easin

g re

sear

ch fu

ndin

g fo

r har

vest

ing

and

trans

port

KESR

EF, K

SB, M

iller

s, M

oA•

Impr

oved

cane

tran

spor

t sy

stem

• %

of h

arve

stin

g an

d tra

nspo

rtat

ion

in to

tal c

ost

2012


Effec

tive,

Effi

cien

t an

d Re

liabl

e M

illin

g O

pera

tions

Incr

easin

g su

gar p

rodu

ctio

n th

roug

h effi

cien

t pro

cess

ing

Mill

ers,

Priv

ate

Sect

or, K

SB, K

ESRE

F•

High

er su

gar p

rodu

ctio

n at

lo

wer

cost

•

Capa

city

util

ised,

FTE

, rec

over

y ra

tes,

2010

-201

4

Crea

ting

econ

omie

s of s

cale

Mill

ers,

KSB,

MoA

, GoK

, Priv

ate

sect

or•

Low

er p

rodu

ctio

n co

sts

• In

tegr

atio

n of

fact

orie

s, m

erge

rs,

acqu

isitio

ns20

12

Inte

nsify

ing

indu

stria

l and

app

lied

rese

arch

KESR

EF,K

IRDI

, Uni

vers

ities

• Ne

w te

chno

logi

es•

New

tec

hnol

ogie

s int

rodu

ced

2014

Benc

hmar

king

with

inte

rnat

iona

l st

anda

rds

KSB,

Mill

ers,

OGI

s•

Best

pra

ctic

es•

Inte

rnat

iona

l sta

ndar

ds a

dopt

ed20

14

Enha

nced

Hum

an

Reso

urce

Cap

acity

Unde

rtak

ing

train

ing

need

s ass

essm

ent

and

impl

emen

ting

its fi

ndin

gsKS

B, M

iller

s, O

GIs,

KESR

EF•

Num

ber o

f Sta

ff tra

ined

• Effi

cien

t, eff

ectiv

e an

d m

otiv

ated

st

aff•

Opt

imal

staff

leve

ls re

tain

ed

2011

Prep

arat

ion

of st

aff re

tent

ion

polic

yM

iller

s, KS

B, O

GIs

• O

ptim

al st

aff le

vels

• Nu

mbe

r of s

taff

reta

ined

2010

/co

ntin

uous

Sign

ing

of p

erfo

rman

ce co

ntra

cts

Mill

ers,

OGI

s, KE

SREF

, KSB

• O

ptim

al p

erfo

rman

ce•

Num

ber o

f per

form

ance

cont

ract

s sig

ned

2010

/co

ntin

uous

Impl

emen

ting

a pe

rform

ance

app

raisa

l sy

stem

Mill

ers,

OGI

s, KS

B, K

ESRE

F•

Good

Per

form

ance

• Le

vel o

f tar

gets

bei

ng a

chie

ved

2010

/co

ntin

uous

Stre

ngth

enin

g in

dust

ry co

llabo

ratio

n w

ith

train

ing

inst

itutio

nsM

iller

s, KE

SREF

, OGI

s, Un

iver

sitie

s•

Incr

ease

d sk

illed

hum

an

reso

urce

poo

l•

Colla

bora

tion

agre

emen

ts

reac

hed

2014

/co

ntin

uous

Stre

amlin

ed co

rpor

ate

gove

rnan

ceCo

nduc

ting

perio

dic C

usto

mer

Sat

isfac

tion

Surv

eys(

CSS)

KSB,

Mill

ers,

OGI

s, KE

SREF

, Con

sum

ers

• Re

port

on

qual

ity se

rvic

e de

liver

y•

% o

f cus

tom

ers r

ecei

ving

qua

lity

serv

ice

2012

Ensu

ring

the

unde

rtak

ing

of In

tern

atio

nal

Org

aniza

tion

of S

tand

ards

(ISO

) ce

rtifi

catio

n

Mill

ers,

KSB,

Con

sum

ers

• Q

ualit

y st

anda

rds

• IS

O C

ertifi

catio

n20

12

Sens

itiza

tion

of in

dust

ries o

n qu

ality

st

anda

rds a

nd ce

rtifi

catio

n re

quire

men

tsM

iller

s, KS

B, C

onsu

mer

s•

Qua

lity

Stan

dard

s•

% o

f cus

tom

ers r

ecei

ving

qua

lity

serv

ice

2012

Advo

cacy

on

gove

rnan

ce, s

ecur

ity, h

igh

cost

of d

oing

bus

ines

s, am

ong

othe

rsAl

l sta

keho

lder

s•

Good

corp

orat

e go

vern

ance

• %

of f

acto

ries t

hat a

re se

lf su

stai

ning

2012

Impr

ovem

ent o

f com

mun

icatio

n am

ongs

t in

dust

ry st

akeh

olde

rs a

nd th

e re

stAl

l sta

keho

lder

s•

Effici

ent c

omm

unic

atio

n sy

stem

s•

Rate

of i

nfor

mat

ion

flow

2012

Trai

ning

on

prud

ent fi

nanc

ial m

anag

emen

tAl

l sta

keho

lder

s•

Effici

ent fi

nanc

ial

man

agem

ent

• Pr

ofit m

argi

ns20

12


Strat

egic O

bjecti

ve 2:

- To E

xpan

d Pro

duct

Base

Stra

tegy

Ac

tivity

Resp

onsi

bilit

yO

utpu

tO

utpu

tInd

icat

ors

Tim

efra

me

Valu

e Ad

ditio

n an

d Pr

oduc

t Div

ersifi

catio

nEn

cour

agin

g in

tens

ifica

tion

to in

crea

se

food

secu

rity

OGI

s, KE

SREF

, Mill

ers,

Farm

ers

• In

tegr

ated

and

inte

nsiv

e fa

rmin

g•

Incr

ease

d fo

od su

pply

• Nu

mbe

r of f

amer

s pra

ctisi

ng

inte

grat

ed fa

rmin

g•

Num

ber o

f far

mer

s exi

ting

cane

pr

oduc

tion

2010

-201

4

Com

miss

ioni

ng a

nd u

nder

taki

ng v

alue

ch

ain

ana

lysis

and

pro

duct

div

ersifi

catio

n st

udie

s (fe

asib

ility

, tec

hnol

ogic

al a

nd

econ

omic

stud

ies)

KSB,

Mill

ers

• Re

port

s•

Num

ber o

f stu

dies

com

plet

ed20

11

Impl

emen

tatio

n of

reco

mm

enda

tions

fro

m th

e va

lue

chai

n an

alys

is an

d pr

oduc

t di

vers

ifica

tion

stud

y

Farm

ers,

OGI

s, Tr

ansp

orte

rs, M

iller

s an

d Di

strib

utor

s•

Reco

mm

enda

tions

ado

pted

• Nu

mbe

r of v

iabl

e re

com

men

datio

ns20

11

Dev

elop

ing

dive

rsifi

catio

n pr

ogra

mm

es

tailo

red

to su

it sp

ecifi

c fac

tory

re

quire

men

ts in

line

with

mar

ket

oppo

rtun

ities

Mill

ers,

KSB

• Ne

w p

rodu

ct li

nes

• Nu

mbe

r of n

ew p

rodu

cts

reac

hing

the

mar

ket

2012

Initi

atin

g co

-gen

erat

ion

proj

ects

Mill

ers,

Priv

ate

sect

or P

artn

ersh

ips

• El

ectri

city

• Am

ount

of e

lect

ricity

supp

lied

to

the

grid

2013

Initi

atin

g et

hano

l pro

duct

ion

proj

ects

Mill

ers,

Priv

ate

sect

or P

artn

ersh

ips

• Et

hano

l•

Litre

s of e

than

ol p

rodu

ced

2013

Prod

ucin

g in

dust

rial s

ugar

and

alc

ohol

Mill

ers,

Priv

ate

sect

or P

artn

ersh

ip•

Indu

stria

l sug

ar a

nd a

lcoh

ol•

Tonn

es o

f ind

ustri

al su

gar

prod

uced

• Li

tres o

f ind

ustri

al a

lcoh

ol

prod

uced

2013

Strat

egic O

bjecti

ve 3:

- To E

nhan

ce In

frastr

uctu

re De

velop

ment

Stra

tegy

Ac

tivity

Resp

onsi

bilit

yO

utpu

tO

utpu

tInd

icat

ors

Tim

efra

me

Impr

ove

road

tra

nspo

rt

infra

stru

ctur

e

Setti

ng u

p a

mec

hani

sm to

coor

dina

te

utili

satio

n of

pub

lic fu

nds a

vaila

ble

for

road

infra

stru

ctur

e de

velo

pmen

t

KSB,

GoK

, MoR

, MO

RDA,

MO

LG•

Coor

dina

ting

mec

hani

sm•

Amou

nt fu

nd a

lloca

ted

to ro

ads

2010

-201

4

Incr

easin

g SD

F al

loca

tion

for i

nfra

stru

ctur

e de

velo

pmen

tKS

B, S

DF co

mm

ittee

• In

frast

ruct

ure

deve

lopm

ent

• SD

F al

loca

tion

to in

frast

ruct

ure

2010

-201

4

Ded

icat

ing

15%

of s

ugar

tax

reve

nue

to

infra

stru

ctur

e de

velo

pmen

tKS

B, M

oA, M

oF, G

oK•

Impr

oved

infra

stru

ctur

e•

Amou

nt o

f sug

ar ta

x re

venu

e al

loca

ted

to su

gar

2010


Mod

erni

se a

nd

prom

ote

the

use

of IC

TIm

prov

ing

the

ICT

infra

stru

ctur

e th

roug

h ne

twor

king

All s

take

hold

ers

• Ne

twor

ked

suga

r ind

ustr

y•

Com

mon

suga

r ind

ustr

y da

taba

se20

11

Enco

urag

ing

E-co

mm

erce

and

E-

proc

urem

ent

All s

take

hold

ers

• St

ream

lined

pro

cure

men

t pr

oced

ures

• Nu

mbe

r of e

-pro

cure

d ite

ms

2012

Incr

easin

g tra

inin

g of

staff

on

the

use

of

ICT

KSB.

OGI

s, M

iller

s•

Pool

of s

kille

d pe

rson

nel

• Nu

mbe

r of s

taff

train

ed20

10-2

014

Incr

easin

g in

form

atio

n sh

arin

g th

roug

h IC

TKS

B, M

iller

s, O

GIs

• In

form

atio

n m

arke

t pla

ce

e.g.

Web

site,

em

ails

etc.

• Nu

mbe

r of s

take

hold

ers w

ith

web

sites

2010

Strat

egic O

bjecti

ve 4:

- To S

treng

then

the R

egula

tory

Fram

ewor

k for

the S

ugar

indu

stry

Stra

tegy

Ac

tivity

Resp

onsi

bilit

yO

utpu

tO

utpu

tInd

icat

ors

Tim

efra

me

Final

ise th

e po

licy

and

lega

l fra

mew

ork

wor

k-in

-pro

gres

s and

im

plem

ent t

hem

Pass

the

Suga

r Am

endm

ent B

illPa

rliam

ent,

MoA

• Re

vise

d Su

gar A

ct20

10

Gaze

tte th

e Su

gar G

ener

al R

ules

KSB,

MoA

• Su

gar G

ener

al R

ules

2010

Harm

onise

all

suga

r law

sAl

l sta

keho

lder

s•

Suga

r Law

s20

10

Fina

lise

and

impl

emen

t reg

ulat

ions

to

rest

ruct

ure

OGI

sKS

B, M

oA, O

GIs,

Farm

ers

• Effi

cien

t out

grow

er

inst

itutio

ns20

10

Stre

ngth

en th

e m

anag

emen

t of S

ugar

Im

port

Pol

icy

Enha

nce

capa

city

for a

robu

st a

sses

smen

t of

mar

ket c

ondi

tions

KS

B, G

OK

• M

ore

accu

rate

of i

mpo

rt

requ

ires

• Ac

cura

cy o

f est

imat

es20

10-2

014

Supp

ort m

easu

res t

o el

imin

ate

tax

evas

ion

KRA,

KSB

• Hi

gher

reve

nues

to K

RA a

nd

SDF

• %

chan

ge in

SDF

colle

ctio

n20

10-2

014

Stre

ngth

en a

dvoc

acy

role

with

oth

er

stak

ehol

ders

KRA,

MoT

, MoF

, MoE

, MoA

, KSB

2010

/co

ntin

uous

Dev

elop

men

t of a

Le

gal F

ram

ewor

k fo

r Co

rpor

ate

Gove

rnan

ce

Ensu

re p

rom

pt p

aym

ent t

o fa

rmer

sM

iller

s, KS

B•

Tim

elin

ess o

f Pay

men

t•

Tim

e la

pse

betw

een

cane

del

iver

y an

d pa

ymen

t20

10-2

014

Conc

lude

priv

atisa

tion

of su

gar f

acto

ries

GOK

• Pr

ivat

ised

suga

r sub

sect

or•

Num

bers

of m

ills p

rivat

ised

2010

-201

2

Stre

ngth

en th

e m

anag

emen

t of O

GIs,

thro

ugh

gove

rnan

ce a

nd in

stitu

tiona

l ca

paci

ty b

uild

ing

prog

ram

mes

Farm

ers,

OGI

s, KS

B, M

oA•

Man

agem

ent e

ffici

enci

es20

10

Stre

ngth

en th

e m

anag

emen

t of O

GIs

KSB,

OGI

s, GO

K•

Mor

e eff

ectiv

e an

d effi

cien

t O

GIs

• Nu

mbe

rs o

f OGI

s res

truct

ured

2010

-201

4

Sign

suga

r ind

ustr

y ag

reem

ents

bet

wee

n m

iller

s, gr

ower

s and

oth

er se

rvic

e pr

ovid

ers

Mill

ers,

Farm

ers,

Tran

spor

ters

, can

e cu

tters

• Im

prov

ed se

rvic

e de

liver

y•

Num

ber o

f agr

eem

ents

sign

ed20

10

Esta

blish

fram

ewor

k of

impl

emen

tatio

n an

d M

&E sy

stem

All s

take

hold

ers,

• Im

plem

enta

tion

Fram

ewor

k•

M&E

syst

em20

10


Dev

elop

men

t of

an in

stitu

tiona

l Fr

amew

ork

for

Coor

dina

tion

of R

oads

M

aint

enan

ce in

the

suga

rbel

t

Esta

blish

a su

garb

elt r

oads

man

agem

ent

com

mitt

eeKS

B, M

iller

s, M

oR, M

oLG,

GoK

• Fr

amew

ork

for c

oord

inat

ion

of ro

ads m

aint

enan

ce•

Func

tioni

ng co

mm

ittee

2012

Deve

lopm

ent o

f a

com

preh

ensiv

e po

licy

on co

-gen

erat

ion

and

expl

oita

tion

of b

io-fu

els

and

othe

r sug

arca

ne

prod

ucts

Supp

ort m

easu

res t

o de

velo

p a

com

preh

ensiv

e po

licy

on co

-gen

erat

ion

and

expl

oita

tion

of b

io-fu

els a

nd o

ther

su

garc

ane

prod

ucts

KSB,

MoA

, MoE

• Co

mpr

ehen

sive

polic

y20

12

Ann

exV

:Ben

chm

arki

ngw

ith

Com

peti

tors

EFFI

CIEN

CY

P

ARA

MET

ERS

RSA

S

waz

iland

Z

imba

bwe

Mal

awi

Uga

nda

Ken

yalo

ngte

rm

Can

e qu

ality

1

Can

e po

l %

12.9

913

.714

13.9

610

.78

13.5

3

Can

e fib

re %

14

.97

13.7

414

.01

15.1

118

.47

15.5

Tim

e Ac

coun

t 1

Ann

ual &

min

i m

aint

enan

ce, D

ays

-

124

126

170

4542

2

Out

of fi

eld

crop

, Day

s 68

.487

.81

81.5

411

1.96

5.61

-

Cro

p le

ngth

(Ave

rage

) Day

s 25

124

123

919

532

032

3

6

Ava

ilabl

e ex

trac

tion

time(

days

) 20

1.95

186.

4819

4.69

161.

2228

6.08

294

7

FTE

%

94.6

590

.74

89.4

592

.67

73.3

192

8

OTE

%

80.4

677

.38

81.4

682

.68

89.4

80

Thr

ough

put

1 T

CH

296.

2532

4.71

461.

4423

3.69

116.

2630

0

2

Mill

Num

bers

15

32

21

7

3

TCD

- o

pera

tiona

l 85

,810

.59

18,0

89.9

818

,042

.48

9,27

3.56

2,49

4.47

40,3

20.0

0

4

TCD

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esig

ned

106,

650.

0023

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22,1

48.8

811

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2,79

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50,4

00.0

0

5

Can

e cr

ushe

d (T

CY)

21,1

56,5

62.0

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179,

975.

004,

231,

784.

001,

817,

273.

0071

0,84

5.00

13,0

23,3

60.0

0

6

Sug

ar M

ade

(T)

2,40

2,76

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500,

937.

0051

2,37

2.00

215,

484.

0061

,455

.05

1,43

2,56

9.60

7

Cap

acity

Util

izat

ion

%

80.4

677

.38

81.4

682

.68

89.4

80


Sep

arat

ion

effici

ency

1

R/E

xtra

ctio

n %

98

96.3

996

.68

97.0

696

.75

96.6

3

2

RBH

R 88

89.5

588

.04

87.5

386

.67

89

3

Ren

dem

ent %

11

.36

11.9

812

.11

11.8

611

.56

11

4

RO

R %

86

.24

86.9

985

.685

.14

83.8

186

5

ERC

% s

ucro

se in

can

e 86

.05

86.3

886

.48

87.1

5

_

86.2

5

6

Und

eter

min

ed lo

sses

%

1.92

1.74

3.14

2.93

0.12

2

Sour

ce: K

enya

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ar B

oard

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exV

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gan

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in10

0

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bos

& A

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ar In

dust

ries

800

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iwan

i80

0

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umia

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7.N

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est K

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s M

ara

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Kwal

e In

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atio

nal S

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lan

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ess

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ions

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Stra

tegy

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ivit

ies

2010

2011

2012

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l

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ctio

nin

Far

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ks

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ng e

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ency

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ugar

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duct

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elop

ing

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use

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nanc

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atio

n20

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ting

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me

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tive,

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e M

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g O

pera

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Inve

st in

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atio

n of

the

mill

s an

d up

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aint

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100

100

100

100

100

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king

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rnat

iona

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g in

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tech

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d fa

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Prov

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ctic

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s to

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ark

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25

Part

icip

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g in

regi

onal

and

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l neg

otia

tions

on

issu

es

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ting

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suga

r ind

ustr

y5

55

55

25

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g in

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and

mix

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food

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re

duce

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5 5

55

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mis

sion

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n st

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Impl

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tions

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pr

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ficat

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0

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avai

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11

11

5

Incr

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allo

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n fo

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500

500

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t 10

050

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ote

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of I

CT:

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ng tr

aini

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f sta

ff on

the

use

of IC

T3

33

33

15

Incr

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ng in

form

atio

n sh

arin

g th

roug

h IC

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33

33

15

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then

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lato

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ram

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kfo

rthe

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arin

dust

ry

11.

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ngth

en M

anag

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r Im

port

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nce

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city

for a

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55

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easu

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ate

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atiz

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blis

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plem

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for s

trat

egic

pla

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10-2

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13.

Dev

elop

men

t of a

Inst

itutio

nal

Fram

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atio

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aint

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ce in

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suga

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t

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blis

h a

suga

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t roa

ds m

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emen

t com

mitt

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55

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Tota

l Bud

get E

stim

ate

3,64

74,

223

6,81

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786

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Ann

exV

III:L

oans

and

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nts

toS

ugar

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tori

es(3

1D

ecem

ber2

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G

oKlo

ans

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ncia

lInst

itutio

ns

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sN

onp

erfo

rmin

gSD

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ns

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Stat

utor

ypay

men

tse.

g.

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sFa

rmer

sAr

rear

sPe

rform

ing

SDFL

oans

Othe

rCr

edito

rsTo

tal

Prin

cipal

In

tere

st

Prin

cipal

In

tere

st

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cipal

In

tere

st

Levy

Ar

rear

sPe

nalti

es

Prin

cipal

Pe

nalti

es

KSh.

, Mill

ions

Chem

elil

Suga

r Co

.

-

-

-

- 95

6 60

1

-

557

574

7

15

2,

548

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mic

al

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333

7

3547

-

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ani S

ugar

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.

36

6

22

28

0 1,

875

134

411

-

1,

433

2,

244

0

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53

8,6

66

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oron

i Su

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1 65

4 1,

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1268

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5

27

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175

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9

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tota

l N

yand

o Su

gar

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3,80

73,

930

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539

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244

749

7,55

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a Su

gar C

o.

-

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-

-

302

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-

0

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375

Nzo

ia S

ugar

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9,

774

11,9

63

5

0

787

1

99

1471

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1

937

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20

0 6,

744

26

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t Ken

ya

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r Co.

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Sub-

tota

l W

este

rn S

ugar

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lt

9,77

411

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50

1,08

927

21,

471

1,32

193

720

06,

744

27,0

32

Sout

h N

yanz

a Su

gar B

elt (

So

ny S

ugar

)

254

692

15

2

20

1

355

87

2

42

5

66

-

-

95

2

3

331

2,99

8

Coas

tal S

ugar

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lt ( R

amis

i)

-

Gra

nd To

tal

13,8

3516

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839

2,09

34,

682

802

3,25

256

63,

311

3,18

195

972

14,6

2758

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Sour

ce: S

tate

of S

DF

Fund

s, KS

B.


Ann

exIX

:Ann

ualT

arge

tsM

onit

orin

gIn

dica

tors

Firm

/Far

m Le

vel A

nnua

l Tar

gets

Goa

l:En

hanc

edS

ugar

indu

stry

Com

peti

vene

ss

Out

com

e:O

ptim

aly

ield

leve

ls

Out

com

eIn

dica

tor:

Ton

nes

ofc

ane

harv

este

d

Out

com

eIn

dica

tor

Uni

tBa

seY

ear

Base

Val

ue20

09/1

020

10/1

120

11/1

220

12/1

320

13/1

4

Opt

imal

yie

ldle

vels

Are

aun

derc

ane

Ha

i. Ch

emel

ilH

a20

08/2

009

13,3

4114

,008

14,6

2515

,342

16,0

0916

,676

ii.

Muh

oron

iH

a20

08/2

009

14,2

5914

,972

15,6

8516

,398

17,1

1117

,874

iii.

Mum

ias

Ha

2008

/200

964

,637

67,8

6971

,101

74,3

3377

,111

80,8

74

iv.

Nzo

iaH

a20

08/2

009

23,8

9925

,094

26,2

8927

,434

28,6

7929

,874

v.

SON

YH

a20

08/2

009

19,3

2220

,288

21,2

5422

,220

23,1

8624

,153

vi.

Wes

t Ken

yaH

a20

08/2

009

22,0

7023

,174

24,2

7725

,381

26,4

3427

,588

vii.

Soin

Ha

2008

/200

94,

638

4,87

05,

102

5,33

45,

566

5,79

8

viii.

Kib

osH

a20

08/2

009

2,62

22,

753

2,88

43,

015

3,14

63,

278

ix.

Buta

li**

Ha

2008

/200

9-

-2,

600

2860

3120

3250

x.

Kwal

e In

tern

atio

nal*

*H

a20

08/2

009

--

5000

5500

6000

6250

xi.

Tran

smar

a**

Ha

2008

/200

9-

-3,

000

3450

3600

3750

xii.

Miw

ani*

Ha

2008

/200

94,

633

4,63

34,

865

5,09

65,

328

5,56

0

Tota

l are

a un

der c

ane

Ha

2008

/200

916

9,42

117

7,89

219

6,68

220

6,36

321

5,29

022

4,92

5

Yiel

d pe

r hec

tare

TC/

Ha

2008

/200

973

7984

9095

100

*Miw

aniR

ehab

ilita

ted

and

Ope

ratio

nalb

y20

11**

New

fact

orie

sope

ratio

nalb

y20

13


Harv

estin

g and

Tran

spor

t Ann

ual T

arge

ts

Goa

l:En

hanc

edS

ugar

indu

stry

Com

peti

vene

ss

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com

e:O

ptim

alH

arve

stin

gan

dTr

ansp

orts

ched

ules

Out

com

eIn

dica

tor:

Ton

nes

ofc

ane

harv

este

dan

dde

liver

edto

mill

s

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com

eIn

dica

tor

Uni

tBa

seY

ear

Base

Val

ue20

09/1

020

10/1

120

11/1

220

12/1

320

13/1

4

Opt

imal

Har

vest

ing

and

Tran

spor

tSc

hedu

les

Are

aof

Can

eH

arve

sted

Ha

i. Ch

emel

ilH

a20

08/2

009

9,04

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10,5

2411

,276

12,0

2713

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ii.

Muh

oron

iH

a20

08/2

009

5,50

77,

105

7,64

381

898,

735

9718

iii.

Mum

ias

Ha

2008

/200

927

,191

29,0

5328

,740

30,7

9232

,845

36,5

40

iv.

Nzo

iaH

a20

08/2

009

5,90

97,

730

8,31

689

109,

504

10,5

74

v.

SON

YH

a20

08/2

009

5,48

98,

559

9,20

898

6610

,524

11,7

07

vi.

Wes

t Ken

yaH

a20

08/2

009

7,48

07,

034

7,56

581

058,

645

9,61

8

vii.

Soin

Ha

2008

/200

929

731

430

332

534

733

8

viii.

Kib

osH

a20

08/2

009

1,32

61,

404

1,47

114

711,

604

1,67

2

ix.

Buta

liH

a20

08/2

009

--

--

1,34

51,

560

x.

Kwal

e In

tern

atio

nal

Ha

2008

/200

9-

--

-3,

360

3,89

8

xi.

Tran

smar

aH

a20

08/2

009

--

--

1,34

51,

560

xii.

Miw

ani

Ha

2008

/200

9-

-1,

076

1,24

81,

463

1,61

4

Tota

lH

a20

08/2

009

62,2

4270

,981

74,8

4680

,182

91,7

4410

2,17

9

Tonn

es o

f Can

e H

arve

sted

Tonn

es20

08/2

009

5,12

5,82

15,

323,

575

5,98

7,68

06,

414,

560

7,33

9,52

08,

174,

320

Post

-har

vest

loss

es%

2008

/200

95

43

22

2

Cane

del

iver

ed to

mill

sTo

nnes

2008

/200

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36


AnnexXI:SugarcaneProduction–RecommendationsforCompetitiveness

Excerpts from Cost of Sugarcane and Sugar Production, Kenya Sugar Board, 2008

1.1 SeedCaneProduction

Seedcaneforestablishmentofmillingcanebeobtainedfromproperlyselected“B”nurserieswhichhavebeendevelopedwithseedcanefromproperlytreatedandinspectedseedfrom“A”nurseries.Thereisneedforallsugarzonestoinvestinandoperationaliseseedcanetreatmentunits.

Thepriceforseedcaneshouldbeatapremium,higherthanthatofcaneformilling.Thiswillmotivateselectedfarmerstoproduceadequategoodqualityseedcane.

There is need for training of seed certification officers and field inspectors for qualityassurance.

Proceduresforcertificationmustalsobedevelopedanddocumented.KESREFmustplayaleadingroleinthisprocess,backedbythesugarcompaniesandOGIs.Standardvarietycompositionshouldgraduallyberestoredto20:40:40forearly,midandlatematuring varieties. The seed cane for this restoration should be established in the nucleusestate,wherealltherequiredstandardsforseedcanepreparationwillbeadheredto.

1.2 FertilizerApplication

Thereisneedforregularundertakingofsoilteststodetermineactualdeficienciesinordertoapplyappropriatecorrectivemeasures,insteadofstickingtoafixedfertilizerregimeregardlessofthechangingsoilneeds.ThereisneedforequippingofthesoiltestinglaboratoryatKESREFtomeetindustrydemandforeffectiveandtimelytesting.

Fertilizersareappliedmostlymanuallyontopoftheridgesandareusuallywashedawaywhenapplied intherainyseason.Urea isavolatile fertilizerandis lesseffectivewhenappliedontopoftheridges.Forbettereffectiveness,fertilizershouldbeincorporatedintothesoilusingfertilizerridgersorbyhandinsmall furrowsadjacenttothecanestools, thencoveredwithsoil.

In theMSCzoneespecially, efforts to stemdiversionof fertilizer to sale forcash,couldbesupplementedby:

Ensuringpromptpaymentforcanedeliveries Re-instatingthefarmers’advanceschemetomeetsocialneedsandcropmaintenancecosts

beforepaymentsarereceived Undertakingspecificresearchtoascertaintheappropriatefertilizerregimesforeachzone Supplyingfertilizerinatimelymanner,whenrequired Closelysupervisingfertilizerapplication

1.3 CaneHarvestingandTransportation

Effectivemechanizationisonlypossiblethroughviablefarmunits,hencetheneedforblockfarmingwithminimumplotsizesof25Ha.


There is need touse purpose built unit for canehaulage eg.Bell insteadof generalmulti-purposeuseunitsinordertocutdownoncostofmaintenanceandimproveonavailability,henceefficiency.

CaneYardmanagementatthefactoryiskeytoreductionoftheuneconomicallylengthyturn-aroundtimebycanehaulageunits.

Canetransportationratesaccountfor30-37%ofthetotalcostofsugarcaneproduction.Inordertominimiseonthiscost,itmakesbusinesssensetoincreaseproductivityofexistingcaneareasratherthanexpandingcanecatchmentareastouneconomicallydistantzones.

High cane spillage especially in theMumiasSugarZone couldbemitigatedbyhaving thetrailerbasketsfittedwithallroundexpandedmetalandsecuredwithropeorcargonetting.

Inareaswherefarmershavesmallercaneplots,itisworthwhileconsideringanimaldrawncartstoferrycanefromthefieldstoacollectioncentre.Thiswouldsaveoncostsandprotecttheplotsandcanestoolsfromdestruction.

1.4 RoadsInfrastructure

An industry infrastructure development blue print be formulated and implemented. Theindustrycollaborateswithcentralandlocalgovernmentintheutilizationofpetroleumlevyandthelocalgovernmentcess.

Thefollowingsourcesoffundinghavebeenidentifiedforlong-termsugarroadsmaintenance:

TheCentralGovernmentthroughtheministryofpublicWorksandtheKenyaRoadsBoard,fromtaxesandfuellevy

ThelocalauthoritiesthroughCessfundsleviedonsugarcanesales Fundsgeneratedinternallybythesugarcompanies GrantsfromtheSugarDevelopmentFund.

Inaliberalizedmarket,theuseofsugarcompanyresourcesinmaintainingsugarroads,whicharepublicroads,isnotdesirableasitincreasesproductionoverheadsandultimatelyaddstothecostofsugar.

ItisproposedthatthemanagementofsugarroadsbeplacedunderacommitteecomprisingKSB,millers,outgrowerrepresentatives,localgovernmentandtheKenyaRoadsBoard.

1.5 QualitybasedCanePaymentSystem

The modified cane payment formula should be adopted and implemented in all sugarcompanies as a pilot cane testing unit is established to guide the industry towards sucrosebasedcanepayment.

Priceofcane=

av.Priceofsugarxfarmer’ssharingratio TC/TSRatio

Farmer’ssharingratio:50% TC/TSratio:10%


Thesystemwillcreateincentiveforfarmerstodelivercleanhighsucrosesugarandthemillerstoimprovesugarrecovery,withoverallincreasedproductivityfortheindustry.

Currently,thereexistsaCanePricingCommitteewhichunderthelawcomprisesrepresentationfromKSB,KESGAandKESMAandhasthefunctionofreviewingsugarcanepriceswhichParagraph8ofthe2ndScheduleoftheSugarAct2001demandsthatitbedeterminedonthebasisofsucrosecontent.

Theimportanceofcanepricinginprovidinggrowerswithqualityincentivesandprotectionfrompoormillperformancecannotbeover-emphasized.

ConditionstobemetforaSuccessfulSystem

Availabilityofhighsucroseseedcanemustbeguaranteed(majorroleforKESREF)The grower must guarantee ability to supply and the miller to crush, cane at the optimalsucroselevel.

Thepreferredpayment systemmustbebackedby the lawandgovernedbystrictandclearregulation.Inthisregard,theremustbeaneutralandprofessionalarbitrationbodytopolicetheregulationanddealwithanyqueriesarising.

Thefarmersandmillersmustbefullyenlightenedonthesystem,itsimplicationsandwhatisexpectedofthemforthegrowthoftheindustry.

Thepreferredcanepaymentsystemmustbeonethatprovidesthefarmerandthemilleranequitableshareoftheindustry’searningsbasedontheirrespectivecostsofproduction,plusareasonablereturnontheirinvestments.

The system must encourage and reward the farmer for supply of good quality cane to themills.

Thesystemmustencourageandrewardthefactoryforoperatingatoptimalefficiency.

1.6 Ratooning

Unlessinexceptionalcaseswheresugarcanehusbandryisofhighquality,farmershardlymakeanyprofitfromtheplantcrop.Subsequentratoons,ifwellmaintainedtosustainhighyields,bringgoodprofitstothefarmer.Emphasismustthereforebeplacedinratoonmaintenancethrough selection at planting of varietieswithhigh ratoonability, canehusbandrypracticessuchasridgingwhichstimulatescanegrowthandproperfertilizerapplication.

1.7 ManagementandProfitability

Theuseofinputsandfactorsofproductionvariesinthedifferentsugarbeltsduetomanagementstyles,technologiesandgeographicalcharacteristics.

MSCisahighinputuseschemeattributedtoacentrallyplannedmanagementsystem.Withtheexceptionofhiredlabour,thelevelofuseofinputsisdetermineandpaidforbythemiller.Theprofitsearnedbythefarmerareanimplicitlandrateforleasingouttheirland.Sincetheinputsaresuppliedcentrally,thefarmerhaslowerleverageinbargainingforbetterprices.Theinputcostsarealsohigherduetomarkupcostsforthetransactions.Intheabsenceofchoiceofinputuse,casesofdiversion,especiallyoffertilizerarehigh.


InW/Kenya,CSCandMUSCOzones,theinputuseisgenerallylowerandfarmershavemoreautonomyindecidingthelevelofinputuse.Thisautonomyhasadisadvantageinthatthereismorevariabilityinproductionlevels.OneadvantagehoweveristhatfarmerscanaccessinputsatrelativelylowerpricesthanintheMSCzone.

1.8 Research

KESREFwasincorporatedinJanuary2001withtheprincipalobjectiveofconductingsugarresearch and undertaking technology transfer. Low levels of funding, poor and inadequateinfrastructure, and reliance on SDF as the only source of funding which is not adequatelimittheperformanceoftheFoundation.ToenabletheFoundationeffectivelycarryoutitsmandate, there isneedto increaseresearchfunding,developbankableprojectsproposals toattractfinancialsupportfromdonorsandventureintoothersourcesofincomegeneration.

CurrentR&Dactivitieshaveconcentratedonagronomicandsocio-economicresearchwhilefarmmechanization,sugarmillingandprocessingarealmostnon-existent.PotentialresearchcapacitiesthatcanbeexploitedexistatKESREF,KIRDI29andlocaluniversities.

2.0 StrategiesforSmallholder/OutgrowerDevelopment

ItisoftenarguedthatthesmallholdernatureofsugarcaneproductioninKenyaisoneofthekeychallengesthatleadtohighcostofproduction.WhilethesmallholdernatureisdistinctlyuniqueinthecaseofKenyacomparedwithotherregionalproducers,itcanbyallmeansbestreamlinedandmadeefficientasisdemonstratedbyIndiansugarcaneproductionwhichisalsolargelysmallholderyetenviablecompetitive.

2.1 MeasurestoAddressSmallholderConstraints

Inorder to address the typical constraintsof smallholderproduction system, the followingmeasureshavetobeconsidered:

Improvedaccesstolongtermandaffordablecanedevelopmentfinance Improvedaccesstohigheryieldinganddiseaseresistantcanevarieties,andseedcane Improvedcapacityofcanegrowersin:canegrowingtechniques,businessunderstanding,

enforcementofgrower/millercontracts,continuousciviceducationprogrammes Improvedcapacityofthemanagementsystems:MIStomakeoperationsmoreeffective

andefficient;staffcapacitythroughtraininganddevelopment;engagingwithtechnicalpartnerstofacilitatedevelopment.

Improvedroadnetworktoimprovehaulageandreducetransportationcosts;andEquitabledivisionofproceedsthroughthecanepricingformula.

AstudyundertakenbytheISOhasidentifiedthefollowingfourpossiblestrategiesforfurtherdevelopmentofsmallholder/outgrowercaneproduction:

• TheBusinessLinkagesModel;• BlockFarming;• Adoptionofnewcanevarieties;and• StrengtheningofGrowerAssociation.

29 CollaborationMOUbetweenKESREFandKIRDIwassignedinAugust2006.ThisledtoajointstudyinvolvingKSBontheAssessmentofIndustrialResearchandDevelopmentneedsoftheKenyanSugarindustry.


2.2 TheBusinessLinkagesModel

The‘businesslinkages’modelwasdevelopedbyKilomberoSugarCompanyLtd(KSCL)inTanzaniaandtheInternationalFinanceCorporation(IFC)whichfinancedaprojectproposalentitled–theKilomberoBusinessLinkagesProject(KBLP).Theproject,assessedassuccessful,involves promoting business and commercial linkages between KSCL and the outgrowercommunitythroughinnovativefinancingmechanismsandcapacitybuildingprogrammes.Ithasallowednewfarmerstoenterthemarketandexistingfarmerstoexpandandimprovetheircanefarmingactivities.Supportwasprovidedforvitalinfrastructuraldevelopment,creationof an information management system, and delivery of agriculture and business trainingto farmers, farmgroups and local entrepreneurs through leveraging commercial anddonorfunding.

KBLP’sinitialanalysisrevealedthatitwasnecessarytoincreaseoutgrowers’accesstofinanceandassist farmers to improvecrops, adoptnew technologies andview their farmsasprofitmakingoperations.UnderKBLP,theKSCLaimedtoprovideareliableandstablemarketforoutgrowercanewhileallotherservicessuchaslandpreparation,weeding,caneloadingandinfrastructuremaintenance,isprovidedbythecommunityforthecommunity.

ThefollowingwereidentifiedbyKBLPaspriorityareastoachievetheobjectives:

• Developacomprehensivemanagementinformationsystem;• Enhancebusiness,agriculturalandtechnicalskills;• ContributetoSMEandmicro-enterpreneurdevelopment;• DevelopKilomberoCommunityTrustandTrustFarmtoprovidefinanceforoutgrower

communitydevelopmentprojects;• Improveinfrastructureinoutgrowerareas;• Increasedaccesstofinanceforexistingandnewfarmers;and• Buildthecapacityofassociationsthatrepresentoutgrowerfarmers.

The success of this project is hinged on supporting partners and a market to outgrowerproduction,alldrivenbycleareconomicobjectives.

2.3 BlockFarming

TheproblemoflandfragmentationisnotableinEastAfrica,andhasbeencitedasakeyconstrainttoefficientsugarcaneproduction.OnestrategybeingpursuedtoaddresslandfragmentationisBlockfarming–acontiguousfarmingareaoperatedundersharedownership.

2.3.1 Benefits of Block Farming

Asaresultofcontinuousplots,roads,drainageandothernecessaryinfrastructurecanbemoreeasilyconstructedandmaintained

Easiertoprovideextensionservicesforimprovedhusbandryandhigherproductivity Reducedincidenceofaccidentalfirebecausethegridroadnetworkactsasafirebreak Planting lineswillbemoreuniform,ensuringmoreaccurateandeasierapplicationof

herbicideandfertilizer Easierharvestingduetouniformmaturityperiodandeasyaccessibilitytocane.Harvest

efficiency also improved because cane loaders no longer have to travel long distanceswhenloadingcaneintotrucks

Cost per unit of cane planting and maintenance operations will decline through theexploitationofeconomiesofscale


Adrainagesystemwillensureproductivitylossesassociatedwithwaterloggingwillbereducedandevenallowharvestingofcaneduringtherainyseasonifrequired.

2.3.2 Challenges of Block Farming Allparticipatinggrowersmuststartplantingatthesametime; Ahighriskoffree-riding;and Farmersmuststaywiththeblockarrangementwhilsttheagreedperiodisinforce.

2.3.3 Requirements for Successful Block Farming Strong institutional factors are crucial to the success of block farming. Strong farmer

associationsat localandapex levelsareneededtosensitizegrowerstobuildconsensusskillsamongblockmembers

Financingmechanismsmustbemadeavailable ExtensionandtrainingServices Supportivesugarmillerandgovernmenttoensureappropriateinstitutionsforpolicyand

regulation At least 4 hectare blocks are necessary for sustainable commercial sugarcane farming.

Maximumnumberoffarmersperblockis20. AerialphotographsandGPSshouldbeusedtoindicateblockboundaries.

2.4 ImprovedCaneVarieties

Oneofthefactorsleadingtolowproductionandproductivityofsugarcaneistheexistenceoflowyieldingvarietieswhicharealsosusceptibletodiseasesandinsectpests.Thediseasesaregenerallyseed-borneandareeasilyspreadbyuseofuncleanseedcane.

WhileimprovedcanevarietiescanincreaseproductivityinO/Gfarms,sustainabilitywillonlybeguaranteedbybetterculturalpractisesandabusinesssense.Theincentivetousetreatedseedcane,properzonespecificvarietiesandgoodcrophusbandrycanonlybesustainedbythefollowingfactors:

Muchgreaterfocusongrowerextensionandtraining;Introduction/enforcementoflegislativesanction;Acanepaymentsystemthatproperlyrewardsgrowersforthequalityoftheircane.

The ISOandCFC (providing grantfinancing) approved aproject submittedby theSugarBoardofTanzaniaaimedataddressingtheproblemsoflowproductivityandprofitabilityinthesmallholdersectorinEastAfrica(Tanzania,KenyaandUganda)throughimportationandevaluationofsuperiorsugarcanevarieties,multiplication,production,useofcertifiedseedcaneandpromotionofproperpracticesofcrophusbandryandmanagement.Theproject isalsoexpectedtoovercomethecurrentshortfallsoflackofcleanplantingmaterialbyintroducingcertifiedseedcaneproductionsystemswhichwillensurehealthyseedcaneandeffectivecontroloverthespreadofdiseasesandpests.

2.5 StrengtheningOutgrowerInstitutions

(a) In order to address the low levels of education among farmer leaders, training andcapacitybuildingofthemanagementofOutgrowerinstitutionsisapriority.DirectorsofOutgrowerbodiesmusthaveacceptableminimumlevelsofeducationtoenablethenunderstandandinterpretpolicy.


(b) ImmediateindependentauditsofeachoftheOutgrowerinstitutionsshouldbeundertakentodeterminethenatureandextentoftheliabilities.RestructuringofthefinancialstateoftheOutgrowerbodiesisapre-requisiteinmakingthemviable.

(c) AccountabilityintheleadershipofOutgrowerInstitutionscouldbeenhancedthroughreviewingtheMemorandaandArticlesofAssociation,suchthatthegrowerbodiesarelimitedby shares rather than guarantee.Under their present structure, the outgrowerdirectorshavenothingtolosebyrunningdowntheinstitutions.

(d) Foreffectiveoperationofoutgrowerinstitutions,theymustbefocusedonthefarmersneeds at the grass root and be accountable to the grower members who shall beshareholdersofthecompany.Essentiallythen,theoutgrowerbodiesshallbegovernedbytheCo-operativesAct.

(e) Outgrowerbodiesmustberunbycompetentmanagement,basedonsoundcommercialprincipleswithproperchecksandbalancesinplacetoensurethatsettargetsareachieved.KSBcouldplayacoordinatingroleensuringthatthecontrolsareinplaceandthattheinstitutionssoestablishedtakeadvantageoftheexistingcommunitystrengths.

(f ) Directors and management of Outgrower institutions should be put on bindingPerformanceContractsmodeled in the formof thosecurrentlyobtaining in theCivilServiceinordertoensurequalityservicedeliveryandaccountability.

(g) The OGIs need to develop and adhere to a risk management policy to enable themidentify,assessandmanagerisksinordertominimizethenegativeimpactthereof.

(h) ThereisaprogrammesupportedbytheWorldAssociationofBeetandCaneGrowers(WABCG) to strengthen sugarcane and beet producers’ organizations in developingcountries(undertakenbyAgricord).Thebasicpremiseoftheprogrammeisthatgrower/millerrelationshipsdeterminethe levelof incomegenerationbyasmallholder farmer.Theorganizationaldegreeofoutgrowersdeterminesthedegreeofbargainingpowerandthewayproceedsareshared.

AnnexXII:SugarProduction–RecommendationsforEfficiency

Excerpts from Cost of Sugarcane and Sugar Production, Kenya Sugar Board, 2008i. Undertake financial restructuring of government owned sugar companies to prepare them for

privatizationwithinagivenperiod;Governmentshouldgraduallydivestfromownershipofsugarcompaniesthroughsaleofitsequityinparastatalmillstostrategicpartners.Suchdivestitureshouldtakecognizanceofthesocio-economicimpactonthelocalcommunity.

ii. Promote rehabilitation, modernization and expansion of the factories to maintain sufficientcapacityfortheproductionofsugartomeetdomesticconsumptionrequirementsatalltimesandsurplusforexport;

iii. Promotethedevelopmentofnewfactoriesinviableregionsofthecountrybytheprivatesector;

iv. Supportindustrialandappliedresearch.Seekin-housesupportformillmaintenancee.g.enlistingtheservicesofinstitutionssuchasKIRDIandNumericMachiningforfabricationofmillparts.


v. Enhanceincomestreamsthroughvalueadditionofco-products

vi. Guard against diseconomies of scale as introduced by overheads from dominant functionaldepartments and systems rigidity as may be evident in the local best of the breed companiescomparedtoregionalcompetitors.

vii. Empower managers through-out the company to approach cost containment differently bymodifying the manner in which they produce, report, supervise, control, appraise and marketproductsandservices.

viii. Theindustrymust identifyandeliminate lowvalue-addingtasks,whichincreaseoverheadsbutmustlimitthefrequencyofcostcuttingactivitiesastheyweardownmorale.

ix. Tune corporate structure to emerging conditions of lean innovative and balanced productionsystems.

x. Carryoutassessmentoftheworkingpatternsintheindustrythatleadtohighcostsandencouragemodificationofsuchfactorstoreducecosts.

xi. Toavoid impaireddecisionmaking, the industryshouldstandardize itsaccountingreportsandmonitoritscostdatamoreconsistentlytoreduceirrelevance,inaccuracyandissuanceofmisleadinginformation.

xii. Industrymustmodify itsdecisionmakingprocesstocutdownpaperwork,filingetc.,withoutdilutingthemanagementoffinancialandstaffresources.EffectiveuseofITbyseniormanagersinfindingouttheaccuratedetailsofoccurrencesandmakingdecisionsmustbeencouraged.Itmustreceiveequalattentionaslabour,materialsandoverheads.

xiii. Theindustrymustmapoutitsvaluechaininordertoquantifyvalueaddedbyeachactivityandsetoutequitableratesandpricesforallinputstosupportsustainabilityforthebenefitofallplayers.

xiv. ProbablyallowtheAgricultureDepartmenttorunthenucleusestateasasemiautonomousbusinesssellingitscanetothecompanytohelpassesstherealcostofcaneandduereturns.Thismayfurtherencourageothergrowerscontracts,suchasleases,wheregrowerpracticesarewanting.

xv. De-linkthecostofcanehandling(harvesting,loading,transporte.t.c)fromthegrower’sproceeds.Inanycaseallsuchservicesaresecuredbycontractsbetweenthemillersandservicecontractorswithoutconsultingthegrower.Areviewofvalueadditionactivitiesintheseoperationsamongtheaccountablepartiesshouldbringdownthecosts.

xvi. Embraceconditionmaintenanceatthefactorytopre-emptbreakdownsandensurethatvaluabletimeisnotlostwhileextensiverepairsandmaintenancearebeingundertaken.


Documents

KENYA SUGAR INDUSTRY STRATEGIC PLAN, 2010–2014 Strategic plan.pdf · Strategic Plan, 2010-2014 vii Acknowledgements T he formulation of the Kenya Sugar Industry Strategic Plan 2010-2014