Licensing of Butali Sugar splits industry regulator

The Butali Sugar tempest and the related suspension of former chief executive officer Rosemary Mkok are threatening to tear the Kenya Sugar Board asunder.

Daggers are now drawn against board chairman Okoth Obado whose statements criticising the suspension of Ms Mkok have been dismissed as personal.

“At no point has the board sat and authored a statement challenging the ministry of Agriculture over the decision. Anybody doing that is merely expressing a personal opinion,” Saulo Busolo, a director, told the Nation on Saturday.

The head of Civil Service Francis Muthaura suspended Ms Mkok after she controversially awarded a licence to the reportedly Sh3 billion Butali Sugar ostensibly to allow investigations into the circumstances surrounding her actions by the Efficiency Monitoring Unit department — based in the PM Raila Odinga’s office — which has also been sucked into the controversy.

Like the sugar board, the government appears divided over whether the investor should operate near the Kakamega-based bitter rival, West Kenya, in the high-stakes commercial war.

Mr Obado has taken issue with the suspension, alleging that it was not procedural. In the past week, he accused ministry of Agriculture officials under minister Sally Kosgey of meddling in the affairs of the board.

“Now the ministry has taken it upon itself to run the affairs of the board on a day-to-day basis, something which is extremely out of order,” Mr Obado told a TV station.

According to him, some outside forces, out to frustrate the wider sugarcane industry were keen on disrupting the business of the board.

He cited the unexplained re-licensing of a number of sugar importers in the country that had previously been banned by former minister William Ruto.

However Mr Busolo, who had earlier in the week claimed that the board would be meeting to discuss the chairman’s conduct, downplayed the differences.

“There is no fallout at all. What we are looking at is to see that we maintain unity and drive the strategic direction of the board. We also want to see cordial relations with the parent ministry, and this little issue of the suspension should not divide us,” he said.

The chairman, an ally told the Sunday Nation, has been the target, especially of a section of millers, over cane pricing. A farmers’ representative to the board, Mr Obado has on several occasions been at the forefront to demand better pay to growers.

Yielding to demands

In September, the latest of his crusades, supported by farmers, culminated in Sony Sugar yielding to demands to increase payments to Sh3,000 for a tonne of cane delivered to the miller.

Farmers had staged a demonstration and burnt cane fields to have their demands addressed. But differences between the West Kenya and Butali factories form the real basis for the split with directors aligning themselves to one or the other.

According to several directors, it is clear that positions are hardening, most likely depending on self-interest. Going by who supports which firm, generally convincing reasons are given for why Butali should be allowed to operate or be de-registered.

Mr Obado has been on record saying that Butali should be encouraged to operate. The alternate licensing and de-licencing of Butali Sugar has haunted the board for close to six years.

West Kenya, the sugar board, the ministry of Agriculture and the Attorney-General’s office have all challenged Butali’s establishment in court, each with its own interpretation of the law that regulates the distance between sugar factories.

Ms Mkok finally issued a registration to Butali on February 26, 2010 with certificate No. KSB-MEG-009; the move tore the board apart. The last de-registration of Butali was issued in October 2008.

“Having regard to all these considerations, the board has resolved to reinstate the registration of Butali Sugar Mills,” Ms Mkok wrote in a letter.
Solomon Odera has since been appointed to replace the suspended chief executive of Butali in an acting capacity.

As parties to the unseemly dispute that is likely test the confidence of large local and foreign manufacturers in the country flex their muscles, Butali Sugar promoters cool their heels.

Suggestions have been made that they shift their attention to the Busia zone where efforts to attract investors have borne no fruit for the past two decades.

Meanwhile, the sugar factory in Manyonje village, Kabras North division, was expected to begin operating in July. But this was not to be as the sugar factory is less than 15 kilometres from West Kenya operation.

The Sugar Act stipulates a 40-kilometre distance between sugar factories. The controversy has cast a dark shadow over the livelihoods of nearly 30,000 cane farmers in the zone who had hoped to prosper from improved cane prices when the new factory would open up the market to competition.

The Sunday Nation team visited the Butali sugar factory and found a fleet of new tractors parked in an open yard, but there was little activity.

The big machines meant to transport raw material from the fields in far-flung parts of the sugar zone are waiting to roar into life and lift the spirits of growers.

Sugar cane producers hoped to reap better returns and improve their livelihoods with the entry of a competitor. But for the last two weeks farmers have been venting their frustrations through demonstrations in hopes of piling pressure on officials in the ministry of Agriculture to act and issue an operating licence to the miller.

The chairman of Butali sugarcane out growers company William Kopi said it was unfortunate that the miller was being frustrated by officials after investing heavily in the construction of the plant.

He said farmers in the zone were not contracted to any miller and should be left to negotiate with one or the other on the pricing before delivering cane.

Farmers have been complaining of loses due to delayed harvesting of mature cane from the fields and high transportation cost for those in far-off areas.

Left to suffer

“We are saddened by what is happening because at the end of the day sugar cane farmers will be left to suffer if the government does not intervene to ensure operations at Butali sugar factory get going,” Mr Kopi said.

Housing Minister Soita Shitanda entered the fray accusing officials in the ministry of Agriculture of being behind the delay in issuing the licence to the miller at Butali.