In a significant move that underscores the ongoing transformation within Kenya’s sugar industry, an investor is poised to acquire a 40 percent stake in Angata Sugar Mills, a company currently in the process of establishing a new sugar milling factory in Moyoi, Transmara, Narok County. Savannah Crest KE Limited is expected to inject approximately KSh 500 million into this venture, with the deal anticipated to close by December 2024. This development was reported by Business Daily and marks a notable step in the expansion and modernization of Kenya’s sugar production capabilities.

Background and Context: A Transforming Sugar Industry

The acquisition of a significant stake in Angata Sugar Mills comes at a time when Kenya’s sugar industry is undergoing a period of both challenges and opportunities. Historically, the industry has been concentrated in the western regions of Kenya, including Nyando, Mumias, Migori, Homa Bay, and Kakamega. These regions have long been the backbone of the country’s sugar production, but a combination of factors—including aging infrastructure, mismanagement, and competition from imported sugar—has led to declining productivity and financial instability in these areas.

In recent years, there has been a concerted effort by both the government and private investors to rejuvenate the industry. This includes the introduction of new policies aimed at improving efficiency, reducing production costs, and attracting investment into the sector. The entry of Savannah Crest KE Limited into Angata Sugar Mills is part of this broader trend of revitalization, signaling confidence in the future of the industry.

The Strategic Significance of the Deal

Angata Sugar Mills is currently owned by two equity groups: Firethorn Holding Limited and iCreate Investment Holding Limited. The Competition Authority of Kenya has already approved the transaction, citing that it will not adversely affect competition within the industry. This approval is critical as it paves the way for the successful completion of the deal, ensuring that Savannah Crest KE Limited’s investment will proceed without regulatory hurdles.

The planned sugar milling plant in Moyoi, Transmara, represents a significant capital investment of KSh 4.35 billion (approximately $33.8 million). Scheduled to begin production in September 2025, the factory will occupy about 200 acres and is expected to play a crucial role in meeting the growing demand for sugar in Kenya. This demand has been fueled by a combination of population growth, increased urbanization, and rising incomes, all of which have led to higher consumption of sugar and sugar-based products.

A Shift in the Geographic Focus of Sugar Production

One of the most notable aspects of this investment is the geographic shift it represents within Kenya’s sugar industry. Traditionally, sugar production has been concentrated in the western parts of the country. However, the establishment of new factories like Angata Sugar Mills in Narok County, as well as other upcoming projects in Nandi and Kericho counties, marks a significant shift towards diversifying the locations of sugar production.

This shift is partly driven by the search for new fertile lands that are suitable for sugarcane cultivation. The traditional sugar-growing regions have been facing challenges such as land fragmentation, declining soil fertility, and competition from other crops, making it increasingly difficult to sustain large-scale sugarcane farming. By contrast, regions like Narok and Nandi offer vast tracts of land with favorable conditions for sugarcane cultivation, presenting new opportunities for the industry.

Investment in Greenfield Projects: A Glimpse into the Future

The sugar industry in Kenya is currently witnessing a wave of new investments, with over KSh 15 billion earmarked for greenfield projects. These projects, which include the construction of new factories and the expansion of existing processing plants and sugarcane plantations, are seen as crucial to revitalizing the sector. The Angata Sugar Mills project is a prime example of this trend, reflecting the growing interest of investors in tapping into Kenya’s sugar market.

In addition to Angata Sugar Mills, the Transmara region will also host the Sh1.5 billion Soit Sugar Factory in the Olomismis area. The Soit factory is designed with an initial milling capacity of 1,250 tonnes of cane per day (TCD), expandable to 2,500 TCD. It also has the potential to generate three megawatts of captive power, highlighting the integrated approach being taken by new sugar mills to maximize efficiency and sustainability.

The development of these new factories is expected to have a positive impact on the local economy, particularly in terms of job creation and infrastructure development. For instance, the Angata Sugar Mills project alone is projected to create thousands of direct and indirect jobs, providing a much-needed boost to the local economy in Narok County.

Broader Implications for Kenya’s Economy

The resurgence of the sugar industry, driven by investments such as those in Angata Sugar Mills, has broader implications for Kenya’s economy. The sector is a significant source of employment, particularly in rural areas, and plays a vital role in the livelihoods of millions of Kenyans. By increasing the production capacity and efficiency of sugar mills, these new investments have the potential to reduce Kenya’s reliance on imported sugar, which has been a major drain on the country’s foreign exchange reserves.

Furthermore, the expansion of the sugar industry aligns with the Kenyan government’s broader economic goals, particularly those outlined in the Big Four Agenda. One of the key pillars of this agenda is manufacturing, with the government aiming to increase the sector’s contribution to GDP and create jobs. The development of new sugar factories and the expansion of existing ones are expected to contribute to this goal by boosting the country’s industrial base and enhancing its export potential.

Challenges and Considerations

While the future looks promising for Kenya’s sugar industry, there are still challenges that need to be addressed. One of the key issues is the competition from imported sugar, particularly from countries like Brazil, which can produce sugar at a lower cost due to economies of scale and favorable climatic conditions. To protect the local industry, the Kenyan government has implemented measures such as import tariffs and quotas, but these alone may not be sufficient to ensure the long-term viability of the sector.

Another challenge is the need for continuous improvement in productivity and efficiency within the industry. This includes adopting modern farming techniques, improving the quality of sugarcane, and investing in state-of-the-art processing technology. The success of new projects like Angata Sugar Mills will depend on their ability to implement these improvements and remain competitive in an increasingly globalized market.

Environmental sustainability is also a critical consideration. Sugarcane farming and processing can have significant environmental impacts, including deforestation, water pollution, and greenhouse gas emissions. As new factories are established, it is essential that they adopt sustainable practices that minimize their environmental footprint and contribute to the long-term health of the ecosystems in which they operate.

Conclusion: A New Dawn for Kenya’s Sugar Industry

The planned acquisition of a 40 percent stake in Angata Sugar Mills by Savannah Crest KE Limited marks a significant milestone in the ongoing transformation of Kenya’s sugar industry. With substantial investments in new factories, a strategic shift in production regions, and a focus on sustainability and efficiency, the industry is poised for a renaissance.

The success of these initiatives will not only bolster Kenya’s economy but also enhance food security by reducing the country’s reliance on sugar imports. As Kenya continues to navigate the challenges and opportunities of the global sugar market, the developments in Narok County and beyond represent a new dawn for an industry that has long been a cornerstone of the country’s agricultural sector.

In the coming years, all eyes will be on projects like Angata Sugar Mills as they work to fulfill their potential and contribute to the growth and prosperity of Kenya’s sugar industry. As the sector evolves, it will be crucial for stakeholders—including the government, investors, and local communities—to collaborate closely and ensure that the benefits of these investments are widely shared.

This expanded analysis not only covers the immediate news about the acquisition but also provides a broader context on the state of Kenya’s sugar industry, the strategic importance of the investment, and the potential challenges and opportunities that lie ahead.

Photo source: Google

By: Montel Kamau

Serrari Financial Analyst

9th August, 2024