NAIROBI, Kenya, Sep 10 – Mumias Sugar Company has disclosed plans to acquire a majority stake at a local sugar miller once the privatisation of six factories gets underway.
Although Mumias Sugar Co. Managing Director Evans Kidero did not reveal the finer details of the plans to Capital Business, he said the modalities were being worked out.
"The government is divesting from about six factories and we will be looking at the possibility of buying one of them just as much as everybody will be," he said adding that they would go for the best deal.
The government plans to privatise all publicly owned sugar factories to enhance their competitiveness and efficiency in the sub-sector before the expiry of the COMESA safeguard measures in 2012.
Mr Kidero said this would enable them to increase their co-generation production so that it can generate more than the 26 Megawatts (MW) it is currently exporting to the national grid among other issues.
The 1,400 tonnes of bagasse produced by the factory generates about 38MW of power, 12 of which is used within the firm with the remainder being sold to the Kenya Power and Lighting Company.
"If we go with (the) acquisition, those new ventures will look pretty much at repeating the model we have in Mumias," he hinted.
Experts have projected that if the local sugar firms invested in the production of electricity from bagasse, they would easily meet up to 17 percent of power demand in the country.
The activities in the industry come at a time when the country is facing a sugar shortage which Mr Kidero however projected would ease in the next two weeks.
He said most sugar factories such as Mumias and Kibos were now back into full operation after a five week closure for their annual maintenance while sugar from the COMESA region was being imported on schedule.
His comments contradict Agriculture Minister William Ruto\’s assertion that the government might be forced to import more sugar to meet an expected shortfall.
But whether this shortage is addressed or not, Mr Kidero said the price of sugar which is currently retailing at an average of Sh115 per kilo will remain high.
Consumers should only expect a Sh10 drop from the current price owing partly to the deficit in the world market, he added.
Africa consumes 15 million tonnes but only produces 10 million tonnes. The COMESA region and Kenya in particular are net importers. On average, Kenya produces about 500,000MT of white-milled sugar against a consumption of about 700,000 metric tonnes annually.
"Probably that\’s the reason why the price of sugar in the world market has gone up from $300 per tonne to about $600 per tonne. The law of supply and demand means that we have to pay more, probably double what we were paying a year ago for the next year or so," he cautioned.
Kenya Sugar Board Chairman Okoth Obado claimed that the shortage that had resulted in high prices was also caused by hoarding of the commodity by some traders.
However he said there was no cause for alarm as the situation would stabilise soon.
"The domestic market is soon stabilising out of our own production. The supplies will be there so there\’s no need for the consumers to get worried," he maintained.
Mr Obado also cautioned against plans to source for sugar from non-COMESA region saying Kenya should first fulfil its trading commitments to the regional economic block.
Meanwhile, the KSB chairman said they are pushing to have 30 percent of the sugar mills owned by farmers once the divestiture program gets underway.
"We don\’t want everything to be owned by the multinationals or foreigners but we want farmers to have a say and also gain from the accrued from the process," he added.