Kilombero Sugar output growth impresses

Kilombero Sugar Company Limited (KSCL), Tanzania’s biggest sugar firm that operates from Kilombero District in Morogoro Region, is part of Illovo Sugar Group and in the last seven years, it has paid over 136bn/- in taxes to the government.

Kilombero Sugar

Daily  News Writer ABDUEL ELINAZA had an opportunity to interview KSCL Managing Director MARK BRAINBRIDGE…

QUESTION: What are Kilombero Sugar’s economic and social contributions since its privatisation?

ANSWER: KSCL is the country’s largest integrated sugar estate covering about 23,000 hectares, with total investment of 240bn/-. It employs around 5,000 people in full season and generates new wealth of over 100bn/- since 2007.

KSCL works with 8,000 out growers whom it pays 45bn/-, annually. Kilombero Sugar also supports directly and indirectly the livelihoods of between 80,000 and 100,000 people in the Kilombero Valley.

The company has so far invested over 6.5bn/- in social development initiatives covering education, health, social development and sports activities in the region. The firm has paid over 136bn/- in taxes between 2004/5 and 2012/13, with government, which is a shareholder, receiving in excess of 10bn/- in dividends since 2005.

Q: What is the current Kilombero Sugar’s production level?

A: Sugar cane is the only crop we grow at Kilombero. Total area under cane is 23,000 hectares, with KSCL farming 10,000 hectares, 65 per cent of which is under irrigation programme.

The out-growers handle the remaining 13,000 hectares. Total cane production for both independent out growers and estate in the 2012/13 crop season, was around 1.3 million tonnes, almost ten times of the 150,000 tonnes at privatisation in 1998.

The company record high production of 725,000 tonnes last year while sugar production in the 2012/13 season reached the record high of 130,000 tonnes. Kilombero Sugar’s 2012/13 average yield of 78 tonnes per hectare was among the highest in the region.

Q: How much have you invested in the last two years…what are your future investment plans?

A: The total investment in factory and estate rehabilitation, completed in 1998, was around 80bn/- but following the rehabilitation, we invested an additional 16bn/- in a refinery and expansion of both factories.

Over the past two years, we have invested 30bn/- in irrigation, drainage system and further factory expansion. We have just commissioned a 78bn/- ethanol distillery.

Q: What has KSCL achieved regarding the caring of its employees?

A: Kilombero Sugar continues focusing on employee’s development through wide-ranging training and development initiatives that harness talents of employees in their technical and managerial posts of operation.

We have an in-house talent development programme and enjoy support from llovo’s vast international experience in the sugar industry. Kilombero makes good use of the knowledge and facilities of the wider ABF group which also supports Illovo. The company offers over 1,500 housing units in six townships, accommodating 9,500 people.

The company, believing on good health of its people as paramount to productivity, provides the best health facilities and services to its staff.

We run two health clinics and one 80-bed hospital, investing over 750m/- annually for the initiative. Academically, we operate six primary schools and four day care centres. We support community clubs/halls, sporting activities like tennis and golf tournaments as well as community sports days.

Q: How does Kilombero Sugar relate with out-growers?

A: We enjoy positive relations with our independent growers. KSCL has just signed the fourth Cane Supply agreement with 14 out growers’ associations in Kilombero, the largest such agreement in the history of this business as there were only two out grower associations at privatisation in 1998.

The new supply agreement is expected to generate 110bn/- to out-growers over the next three years. The company’s annual cane payments to out growers have increased from 13bn/- in 2006 to 45bn/- last year while contribution of out-growers grew from 17,000 tonnes of cane in 1962 to 103,000 tonnes in 1976. Following expansion in 2007, annual cane contribution rose to 450,000 tonnes.

Out growers contributed 2.3 million tonnes of cane between 2006/7 and 2010/11 crop seasons, about 42 per cent of total cane to KSCL.

Q: How much has KSCL invested in the community it operates?

A: We have invested 6.5bn/- in social development of the local communities since privatisation. We have also set up a trust fund—The Kilombero Community Charitable Trust (KCCT))—which develops and assists out-growers in cane farming as well as improve basic infrastructure within the growers’ communities.

We are currently investing over 500m/- to expand services at Nyandeo health facility that will offer specialised medical X-ray services, surgery and maternal and new born child health (MNCH). KSCL has set up Four Block farms that the trust finances at zero interest rate.

The trust will in 2013/14 crop season conduct an aerial survey of Kilombero region to help out growers improve yields and efficiencies.

Q: What is the magnitude of sugar imports on KSCL’s business?

A: Sugar’s domestic demand for direct consumption stands at 400,000 tonnes annually against the domestic production capacity of 320,000 tonnes, with a deficit of 80,000 tonnes. Industrial users also require 80,000 tonnes of refined sugar, which is not currently produced locally.

However, against the typical direct consumption requirement of 80,000 tonnes, the licenced sugar imports over the past 12 months were slightly over 200,000 tonnes, which entered the market at zero rated duties. The excess importation of sugar has been very highly damaging to domestic manufacturers.

There is huge accumulation of unsold sugar inventory that has proved difficult to sell, resulting into delayed payments to suppliers and difficulties in serving bank loans due to cash flow problems. Indiscriminate and prohibitive Cess (taxes on crops), service levies and land rent are some of the key challenges that the sugar industry faces.

There are proposals to increase cess, which is typically payment to district councils, from the current 200/- to over 3,000/- per tonne. The government recently increased rent for agricultural land from 200/- to 1,000/- per hectare—a fivefold increase. The cost of primary inputs like fertilizers for the sugar sector has also soared dramatically.

Q: What initiatives do you think would lead to a robust sugar industry?

A: Import volumes should be decided as per international consumption trends using expert guidance and be subject to review each year, depending on the local production forecasts.

There is need to review import duty structures and replace the ad valorem with some form of reference price based system, harmonising Tanzanian duties with the rest of EAC whilst providing adequate protection to the producers as well as maintaining security of supply. Export licences for local producers ought to be lifted to guarantee domestic producers in the event of oversupply.

Q: What are KSCL long term goals?

A: Kilombero Sugar intends to continue supporting the livelihoods in and around the sugar estate local townships with the view of promoting economic growth in the region.

Agriculture will remain the mainstay of Kilombero Valley and the company is determined to remain a welcome and relevant entity within the community. KSCL will continue building its strategies around sustainable development and extracting value from each stick of cane.

By ABDUEL ELINAZA, Tanzania Daily News

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