In some of my random walks that officially pass for marketing, I peep into many offices.

In one of the sugar millers’ offices, I was shocked at how technology has not affected their operations. Now these guys pay 1,000 farmers per week. About 600 of them get cheques. Can you imagine how many hours it takes to have all the cheques signed by their bank signatories?

A casual glance at one of the payment vouchers shows that it takes five people to process each payment. The cane delivery note is received by one person, the payment voucher prepared by a second, checked by a third person, approved by yet another before the final authorization.

At the foot of the food chain is the cane farmer who pays for all this inefficiency. When it comes to payment, the miller recovers all their costs and leaves the residue for the actual producer. Now this only happens in the matatu industry where the idiot who invests his capital takes last priority when sharing revenue.

For all his labor, the farmer gets paid kes 3,800 per ton of cane.

At the millers, 1 ton of cane yields 115 kilograms of white sugar, 350 kilograms of molasses and 370 kilograms of baggasse. Assuming an ex-factory price of kes 87 per kilogram, the miller makes a gross figure of kes 10,005 from the sugar alone. Mumias sugar sells molasses at kes 1,200 per ton thus makes another kes 420. The miller could choose to convert the molasses to ethanol getting about 77 liters and fetch a higher price. The baggasse can be sold as fuel or burnt to generate electricity. Give and take a few shillings, a miller makes kes 13,000 from one ton of cane.

In Kenya, it costs KES 48.80 to produce on kilo of white sugar. Meaning KES 48,800 to produce one ton of white sugar. Across the border, Kenana Sugar Company in Sudan produces a similar quantity at KES 24,000!

Why does ours cost twice as much? And more importantly, why then do we pay kes 100 plus for the same? Are we subsidizing the gross inefficiency alluded to above? Or financing rent seekers in the production chain?

Back to the farmer.

Let’s take the example of John who has one acre under cane contracted by one of the state run millers. He lives 8 kilometers from the factory. He harvested 29 tonnes for which he was paid the princely sum KES 110,200 after tending the cane for 18 months. The deductions made by the miller are as follows: kes 25,000 for seed cane, KES 11,700 for fertilizer, KES 15,000 for cane transportation,kes  6,264 for harvesting, KES 1,102 for CESS and KES 1,102 for the outgrowers company. The net pay came to KES 50,032 only. Don’t forget that this farmer has either supplied planting, weeding and topdressing labour or paid for it. This reduces the pay even further.

What was that about fighting poverty?