Mumias to lock out cane poachers with land lease deals

Sugar miller Mumias is planning to sign long-term land lease contracts with farmers to secure supply of cane and lock out rivals from access to the raw material.

Company chairman Dan Ameyo says the miller is set to depart from the current model of supplying farmers with seeds, fertilisers and other inputs with the expectation that farmers will sell their harvest to them.

This model has exposed Mumias to uncertainties about cane supply, as rivals have been offering contracted farmers better prices, exposing them to shortage of the basic raw material.

“The new model will involve Mumias Sugar leasing the land from the farmers and doing the cane planting  and harvesting (as opposed to the current) partnering  with the farmers on a revenue sharing basis,’’ Said Mr Ameyo in an interview.

The miller reported a smaller loss of Sh73.4 million in the six months to December, helped by better sales as it turned to cost-cutting for profit growth.

It had posted a loss of Sh1.1 billion in for a similar period a year earlier weighed by high operation costs and reduced sugar production.

READ: Mumias posts slimmer losses as it appoints new chair

Mr Ameyo, the former head of Postal Corporation of Kenya, replaced long-serving Mumias chairman John Bosse in November. Mr Ameyo said Mumias will hire the farmers who lease out land to provide labour on the farms.

The cost of leasing per acre will, however, depend on productivity of the various pieces of land.

“The value of the land to be leased will only be determined after thorough valuation of the facility. We want to create a clear strategy in cane supply that will maintain sustainability ’’ he said, adding that this will be optional to farmers.

The new policy is to be implemented by end this year.

Mumias has also been taking cane buying centres closer to farmers to avoid wastage and spillage during transportation.

“Mumias Sugar will instead be transporting the cane from the centres to the factory on behalf of the farmers,’’ said Mr Ameyo.

The sugar miller is in talks with investment partners to help build a $400 million (Sh34.3 billion) factory in Tana Delta in August.

Mumias chief executive Peter Kebati told the Business Daily in an earlier interview that the firm was targeting to complete the fundraising talks with both local and international lenders by June.

The plant is planned to be a joint venture between Tana/Athi River Authority (Tarda) and is expected to boost the firm’s sugar production, which has fallen in recent years due to inadequate cane supplies and poaching from its rivals, Butali Sugar and West Kenya.

Mr Ameyo said Mumias stands to benefit from faster maturing canes through the project.