Rai tightens his grip on sugar
At least half of the sugar produced in Kenya is now controlled by one man after the billionaire Rai family opened their fourth milling factory in Bungoma.
Naitiri Sugar Company, which began milling in May, is the newest addition to the family-owned sugar conglomerate that now spans the whole country.
The new factory strengthens Rai’s position as the leading sugar manufacturer from a combined capacity of its three existing factories in West Kenya, Olepito and Sukari.
The new player is adding at least 6,000 tons of sugar daily, a move that will increase the supply of this product in the country and reduce cheap imports.
Data from the Sugar Directorate indicates Rai’s sugar mills controlled up to 43% of the country’s total production in the 10 months to October last year.
The fall of Mumias, which controlled nearly 60% of the country’s total sugar production at its peak, and the collapse of some state mills left the space that is now occupied by the private sector.
The companies, which are led by their chairman Jaswant Rai, have extended their catchment area to Trans-Nzoia and Uasin Gishu counties, the areas that mainly grow maize.
Saulo Busolo, former chairman of the Kenya Sugar Board, said as the country remains in sugar deficit, there is no harm in millers increasing their market share to fill the shortage.
“The question we should ask ourselves is whether the company in question pays the farmers promptly after the harvest and whether they issue permits to cut the cane on time,” said Mr Busolo, who is also president of the Kenya National Alliance of Sugarcane Farmers Association.
“If they encounter all of this, then the question of dominance should not arise.”
Mr Rai’s appetite for sugar investment was on display last year when, through his West Kenya Sugar Company, he put out a bid for the Mumias Sugar Company lease.
However, KCB’s receiver manager, in court papers, said he turned down Rai’s offer to hire the ailing miller because the move would have given him a dominant position in the industry.
The controversial lease was granted to his brother’s Uganda-based conglomerate, which also operates a number of sugar mills in the neighboring country. The tender was later stopped by the courts after Western Kenya decided to challenge the award.
Sarrai Group is a Ugandan conglomerate made up of different agro-industrial companies, which operate three factories producing around 170,000 tonnes of sugar per year. It also has operations in Malawi.
The family is not new to conflict. Last year, Sarjij Kaur Rai (now deceased), the wife of Tarlochan Singh Rai, joined her sons, Jasbir and Iqbal, in opposing the will allegedly written by the matriarch, saying it could have been forced to write the document that distributes his property among the eight beneficiaries.
In 2020, Western Kenya was among investors eyeing lease deals for the five state-owned sugar mills.
The Kabras-based miller has expressed interest in operating sugar mills in Chemelil, South Nyanza, Nzoia, Miwani and Muhoroni on lease terms as part of government reforms aimed at reviving struggling factories.
Between 2019 and last year, the West Kenya Sugar Company has invested over 1 billion shillings in sugar cane development, mainly in Nyanza, in the west and parts of the Rift Valley, to create a sustainable supply for its factories.
The Kabras-based miller has engaged more than 200,000 farmers spread across nine counties of Busia, Kakamega, Bungoma, Trans Nzoia, Uasin Gishu, Kericho, Kisumu, Vihiga and Nandi, giving it the largest sugar pool in the country.
This has given rivals such as Butali and Kibos a hard time sourcing raw materials.
These millers have fought over the cane over the years, accusing each other of looting their cane.