What went wrong with once ambitious Kwale Sugar?

By Ian Njoroge

Aliko Dangote, Africa’s most successful industrialist, has spent the better part of the last year delivering a single, unfashionable message across the continent. Speaking at various investment summits, he has put it as plainly: “The only way for you to attract foreign investments or investors is by having successful local investments. Domestic investors are the ones who actually attract foreign investors. If you don’t make it attractive for local investors to come and invest, no foreigner will come and invest.”

On the southern Coast of Kenya, one of those investments is waiting to be treated as such. Every textbook on industrial investment lists the ingredients that a serious project must combine: credible promoters, deep inanciers, world-class strategic partners, qualiied people, modern technology, the right inputs, and secured land. Kwale International Sugar Company Limited (Kiscol) was structured to deliver every one of them.

The promoters are the Pabari Group of Kenya and Omnicane Limited of Mauritius — two houses with decades of combined experience in trading, agro-industry, energy, infrastructure and large-scale investment, and the inancial capacity to carry a project of this scale across cycles. The inanciers are not fringe lenders.

The project drew longtenor commitments from a regional syndicate that includes KCB Bank, Stanbic Bank, Co-operative Bank and the Trade and Development Bank (TDB) on the Kenyan and regional side, alongside MauritiusCommercial Bank (MCB) and SBM Bank of Mauritius ofshore. That is the kind of syndicate that does not assemble around speculative bets; it assembles around projects that have been independently appraised, structured, and underwritten on the assumption that the legal and operational ground beneath them will hold.

The technology and infrastructure match the ambition: a modern 3,300 tonnes-of-cane-per-day factory, expandable to 5,000 TCD, coupled to an 18MW bagasse-ired co-generation plant that turns mill waste into clean grid power, served by dams, boreholes and water pans feeding the most water-eicient sub-surface drip irrigation system in commercial sugar anywhere in the world.

The agronomy is equally deliberate.

Kiscol introduced fast-maturing cane varieties selected for Kwale’s coastal climate. Cane that takes up to 18 months to mature in the western sugar belt reaches the mill in roughly 12 months here — a third less working capital tied up in every standing crop, a third more turns of the same hectare over a decade.

At full design capacity, the project would close almost 100,000 metric tonnes of Kenya’s annual sugar deicit — close to 10 per cent of the gap the country currently ills with imports. The foreign exchange Kenya spends every year importing that sugar is foreign exchange the same economy could be earning, retaining and recirculating at home. Every ingredient, in other words, is in place. Every ingredient except one.

The land question at Kwale did not begin with Kiscol. The estate sits on 42,000 acres that previously hosted the Madhvani sugar operation. When the project was being re-conceived as Kiscol, the structure agreed with the Government of Kenya was deliberate and, on its face, equitable.

Of the 42,000 acres, 15,000 acres were to be transferred to Kiscol for the nucleus estate and core infrastructure. The remaining 27,000 acres were to be allocated to local occupants under a structured resettlement plan, with each household receiving a 5.5-acre outgrower package: three acres for cane, two acres for subsistence farming, and half an acre for a homestead.

The resettlement never materialised.

The 27,000 acres earmarked for outgrower households were not transferred. The 5.5-acre packages were not issued. The community that the plan was meant to settle on its own land instead remained, understandably, where it had always been — including on the 15,000 acres that had been allocated to Kiscol. The investor honoured its side of the compact. The other half of the compact was never delivered. This led to years of litigation and land access between the Company and the community.

The legal consequences have already crystalised. In litigation arising directly from the non-implementation of the resettlement plan, Kiscol has been awarded approximately Ksh24 billion against the government for breach of contract — a igure that captures, in the cold language of damages, the cost of a promise not kept.

That number is not a windfall. It is a measurement of value foregone: of cane not grown, sugar not milled, power not exported, jobs not created, taxes not paid, loans not fully serviced, and import substitution not achieved.

Resolving the Kwale impasse on the terms originally agreed would be a national-scale answer to that question. It would unlock the full capacity of a project that closes nearly 10 per cent of the country’s sugar deicit. It would convert a Ksh24 billion adverse judgment into a working industrial asset whose returns to the State — in tax, in employment, in foreign exchange saved on imports, in renewable power supplied to the grid, would over time dwarf the cost of doing the right thing.

Above all, it would be a signal. The most powerful signal Kenya could send to the next investor weighing a long-dated commitment to this country is not a tax holiday or a new bilateral treaty. It is the visible, decisive resolution of an investment Kenya has already attracted, on the terms the State itself agreed. Foreign capital, as Dangote keeps reminding the continent, follows that signal. It does not lead it.

The writer is a mechanical engineer registered with the Engineers Board of Kenya