CANE FARMING CONTRACTS AS A MECHANISM FOR TRANSFER OF TECHNOLOGY BETWEEN MILLERS AND SUGAR CANE GROWERS IN THE KENYA SUGAR INDUSTRY

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1 CANE FARMNG CONTRACTS AS A MECHANSM FOR TRANSFER OF TECHNOLOGY BETWEEN MLLERS AND SUGAR CANE GROWERS N THE KENYA SUGAR NDUSTRY W.W. Okelo Kenya Sugar Authority, Nairobi NTRODUCTON The overall policy objectives of the agricultural sector in Kenya aim at increased food supply, growth in agricultural employment, expansion of agricultural exports, resource conversion, and poverty alleviation. Provision of food to meet rising population is the major objective of Kenya food policy whose objectives include: a) Maintenance of a position of broad self-sufficiency in the main foodstuffs in order to enable the nation to be fed without using scarce foreign exchange on food imports. b) Achievement, to a calculated degree, of security of food supply for each area of the country. c) Ensuring that foodstuffs are distributed in such a manner that every member of the population has a nutritionally adequate diet. The main measures to increase agricultural employment will be more intensive husbandry and the promotion of agro-industrial processing projects. The Kenya sugar industry's objectives have been evolved in line with the overall national development polioies and objectives. The Government's policy in the sugar sub-sector is self-sufficiency in sugar production with moderate surplus for export. These objectives have reasonably been achieved in the late 1970s and early 1980s. The backbone of this success has been deliberate Government participation from the mid-1960s through direct financing and the encouragement of multinationals to invest in the industry. These efforts have led to the establishment of five sugar factories with Government majority shareholding, at Muhoroni (1966), Chemelil(1968), Mumias (1973), Nzoia (1978) and Sony (1980). The remaining two sugar factories were established by private enterprise in the 1920s at Miwani (1924) and Ramisi (1927). The privately-owned sugar factories account for less than 10 per cent of the country's total sugar production which is currently averaging between and metric tons a year. Sugar cane production is mainly from farmers/outgrowers who account for approximately two-thirds of the cane supply to the factories. The remaining onethird is supplied by factory nucleus estates. To ensure proper planning of cane supply to meet the factory capacities, farmers enter into contractual agreements with the millers especially in the newer factories. This paper attempts to examine the nature

2 and form of the current farming contracts system in Kenya and to assess it as a mechanism for the transfer of technology from the miller to the farmer. CANE FARMNG CONTRACTS The origin of the cane farming contract system can be traced to the late 1960s when the Mumias Sugar Scheme was designed and implemented. The scheme was established as a joint venture between the Government and foreign multinational corporations - BookFr McConnell and Commonwealth Development Corporation. The factory was commissioned in 1973 at a rated capacity of metric tons of sugar a year but has been expanded to the current capacity of metric tons. The scheme relies on nearly small scale growers, owning an average of one hectare each, to supply about 80 to 90 per cent of the factory's cane. The farming contracts started in Mumias were subsequently replicated in the Nzoia and Sony sugar schemes that were started during late 1970s. Nzoia and Sony factories have rated annual capacities of and metric tons,of sugar respectively. Each of these sugar schemes has to small-scale farmers who supply two-thirds of the factories' cane requirements. A slightly modified form of cane farming contract has been introduced in the Muhoroni Sugar Scheme. Muhoroni factory has an annual rated capacity of metric tons of sugar. n this scheme, small-scale cane growers supply about 80 per cent of the factory's requirements. n the case of Chemelil Sugar Scheme, the factory draws its cane mainly from large-scale farmers who have grown cane since the 1920s. The small-scale farmer contribution to cane production is small but rising as the capacity of the factory expands to the ultimate metric tons per annum. The large-scale farmers enter into "supplier" rather than "farming" contracts with Chemelil Sugar Company Limited. Miwani and Ramisi have recently arranged for small-scale farmers to enter into supplier contracts with these companies. The special case of Ramisi needs to be mentioned. n the Ramisi scheme, the farmers supply less than 20 per cent of the crop. The rated annual capacity of Ramisi factory is only metric tons of sugar. This paper will confine itself to cane farming contracts. What are the salient features of the farming contracts? Exhibit shows a standard contract. The conceptual basis of the contracting system in Kenya entails a centrally located factory and nucleus estate, with small-scale outgrowers within a distance of up to 32 kilometres. The sugar factory and its nucleus estate are owned by the miller and act as the centre of each of the sugar schemes. Nucleus estates supply part of the factories' requirements. The millers also use the nucleus estates to test known technologies before they are transferred to the outgrowers who are attached to the schemes through contractual agreements. Basically, the farming contracts indicate the obligations of the two contracting parties, namely the farmer and miller. The contracts are entered into by farmers who own or have leased land and are willing to grow sugar cane to supply to the relevant factory.

3 The farmer's obligations usually include the following: i) to - clear his land for cultivation. ii) - plant his land witlicane varieties specified by the miller after his land has been prepared and seed cane supplied. iii) - apply fertilizer and other materials as recommended by the miller. iv) - permit free access to the field by the representatives/agents of the miller for inspection and for the construction of access roads for cane haulage by other farmers. v) - maintain any fire breaks around his cane crop. vi) - bear the costs of all the operations and permit these costs to be deducted from his proceeds at harvest. On the other hand, the miller's main obligations are normally the following: i) to - provide all the services required by the farmer for cane production at cost. ii) - supply seed cane, fertilizer and other materials. iii) - provide and operate an efficient transport system. iv) - intervene to undertake operations which the farmer has failed to do as advised and charge him at cost. v) - purchase all the farmer's cane at harvest time and pay the farmer within 30 days of delivery. vi) - recover the service costs including interest from the proceeds of cane. vii) - operate the factory efficiently and for a sufficient period each year to enable contracted farmers to supply their cane. These contracts run for a period long enough to cover a plant and two ratoon crops with the proviso that the farmer may continue to harvest additional ratoon crops as may be agreed upon between the farmer and miller. Termination of the contracts with sufficient notice to allow settlement of any outstanding financial obligation is provided for. 1. Generation, of Technology TECHNOLOGY The existing technology in the Kenya Sugar ndustry is generated and/or packaged through the following agencies within the industry: a). National Sugar Research Station, Kibos This is a national research station under the Ministry of Agriculture and Livestock Development. The station conducts mainly biological research on sugar cane. The priority programmes of the station are: i) Breeding and Variety Selection Programme - the objective is to develop for different sugar zones varieties which are high yielding, disease resistant and capable of producing sugar economically. The main commercial cane varieties being grown were imported into the country. A hybridization programme was introduced during the last five years at Mtwapa at the Coast and it is expected to produce indigenous varieties soon.

4 ii) Soil Fertility and Nutrition Programme - aims at a comprehensive soil survey for all cane growing areas in the country to provide reliable information on soil fertility. This will lead to appropriate fertilizer recommendations. However, apart from the areas of Chemelil, Muhoroni and Miwani most of the cane areas have not been adequately covered by soil survey. iii) Plant Physiology Programme - includes investigation into the various physiological factors that limit cane yields in cane growing zones. The factors covered include the time of planting, effects of climatic cycle on cane yields, harvesting age, and cane growth studies. iv) Plant Pathology Programme - involves annual disease surveys; the screening of varieties against smut, leaf scald, mosaic and eye spot; loss of yield due to disease; hot water treatment of planting material; and screening of new fungicides. Most of the research in this programme has focussed on smut disease. v) Entomology Programme - has included periodic pest surveys which have identified termites and rats as significant pests. Other pests that have been surveyed are scale insects and white grubs mainly at the coast. Apart from these, the station undertakes general agronomy research involving inter-row spacing, intercropping, weeds and weed control. b) Sugar Companies All the sugar companies have nucleus estates on which applied research is conducted. The company agronomists undertake trials to either supplement or coordinate with the activities of the national research station. The individual company research programmes have covered areas highlighted above as adapted to zonal ecological variations. Notwithstanding the above, their trials have included investigations into time of planting, plant population studies, seed preparation studies, depth of planting, variety evaluation studies, weeds and weed control, intercropping and diversification studies. c) Other Agents Suppliers of agro-chemicals and farm machinery also provide useful information on their technologies. These are, however, usually synthesized by millers before they are passed on to the farmer.' 2. Transfer of Technology t is a fact that new scientific knowledge in itself makes no contribution to agricultural development unless it is passed on to the farmer for application. n its raw form such information appears in scientific publications but is of little or no use to the farmer until it is translated into a language which can be easily understood by the farmers. The research station, the individual sugar company agronomist, and input suppliers generate the techniques but these have to be packaged for the cane growers. The sugar companies currently play the vital role of determining packages of useful technology to be passed on to the growers.

5 New technologies are, of course, incorporated in the packages as they become available or are generated from research. The existing technology packages are embodied in the cane farming contracts which constitute the most important mechanism for the transfer of technology from the miller to the growers. Examples of the technology package are considered. a) Planting Material - Proper quality of seed cane is a prerequisite for better crop yields and the control of diseases such as smut and ratoon stunting. The miller is responsible for the supply of good quality seed cane to the farmers. n general, the millers have hot water tredtment plants for the primary nurseries on the nucleus estates. The seed canes from the primary nurseries are then treated and planted in commercial nurseries which are located, some on nucleus estates and some in the outgrower areas. n cases where outgrowers participate in seed cane production, the miller selects good outgrowers to grow seed cane for supply to others; this reduces the cost of transport of seed cane. b) Fertilizers and Other Chemicals - The miller conducts field trials to determine the NPK response curves given the ecological conditions prevailing in its sugar scheme. On the basis of the trial results, fertilizer recommendations are made. n most cases, the miller procures the necessary fertilizer for supply to the contracted farmers. The farmer is responsible for the application of the fertilizer to his field at the rate specified by the miller. c) Land Preparation - The operations under this item include ploughing, ripping, harrowing and furrowing or ridging. The technical specifications for these operations in terms of frequency and depth requirements vary from scheme to scheme, and from farmer to farmer depending on the nature of soils. The sugar company agronomists and agricultural engineers consider these environmental variations and set seed bed preparation standards which will ensure economic crop yields. Machinery and equipment are then acquired by the miller for these operations taking into account the quality of work required, soil type, and the cost of operation including the back-up services of the suppliers. The miller prepares the farmer's field in accordance with the recommended technical standards to meet the satisfaction of the farmer. d) Sugar Cane Transport System - The cost of transport accounts for nearly one-third of the overall cost of sugar cane production. t therefore represents an important potential area for cost reduction. Needless to emphasise, transport supplies the connecting link between the field and the factory. t is critical that sugar cane harvested from the thousands of farmers reaches the factory promptly so as to minimise losses due to spoilage. The design of the transport system is very important and responsibility for this rests squarely on the miller. The miller acquires the necessary transport equipment and/or supplements his own with hired equipment. The harvesting programme is worked out by the miller in consultation with the farmers and the transport equipment is accordingly programmeh to ensure efficient operations. e) Disease Eradication - The main disqkse in the sugar industry is smut. The sugar companies recommend roguing and >the contracted farmers are

6 encouraged to do so in order to eradicate or reduce the losses due to this 1 disease. 3. Dissemination of Technology The main mechanism for the transfer of technology from the miller to the sugar cane grower is through the cane farming contract. This contract enables the miller to undertake, for the farmer, cane growing operations using the latest available technology. Apart from ensuring that operations are executed according to the spirit of the contracts, the miller in collaboration with outgrowers' organizations and the extension officers of the Kenya Sugar Authority and Ministry of Agriculture and Livestock Development conduct field demonstrations, field days and competitions among the outgrowers. The demonstrations are usually conducted at farm level to show some aspects of good crop husbandry. These demonstrations may show the benefits of fertilizer?' use, timely weeding, etc. Field days are organized to demonstrate technical know-how including the latest technologies available. The results of application of the various technologies are also displayed for the farmers to know. Besides, in some sugar schemes, competitions in crop husbandry are arranged and the best farmers are awarded prizes. Have the Kenyan cane growers accepted these innovations? Before considering whether or not farmers have fully accepted the new technology it is imperative to note that firstly the farming contracts are relatively new phenomena in the Kenya sugar industry and their implementation is still being evaluated. Secondly, the farming contracts apply to farmers who have decided to be involved in sugar schemes after they have had the requirements of the contracts explained to them. Thirdly, the majority of the farmers are small-scale growers who cultivate plots of approximately one hectare and who have grown a cash crop for the first time and are therefore amenable to expert advice. Lastly, the success of the contract system depends on the availability of credit and miller-farmer relationships. Where the farmer-miller relations are hostile, each party is likely to look on the other with suspicion and this would adversely affect the carrying out of the obligations embodied in the cane farming contract. When all is considered, the cane farmers have fully accepted the technologies packaged through the millers and have co-operated in ensuring that their respective sugar schemes are successful. n each sugar scheme, the farmers have established their own out-growers organizations who regularly meet with the millers to resolve any operational problems which may arise on the supply of inputs, cane harvesting and transport. The pricing of the operations is discussed and fixed through the Kenya Sugar Authority following submissions from the millers and growers. CONCLUSON The salient features of the cane farming contract used in the Kenya sugar industry have been highlighted. By and large, the contract system ensures a proper planning of raw material supply to meet the factory capacity. Central to this system is

7 1137 the transfer of technology from the miller to the farmer and agricultural credit for crop development. Although the system has been in existence for a short period, it is evident it has worked well in the Kenya sugar industry. ACKNOWLEDGEMENT am greatly indebted to Mr D.P. Nyongesa, Head of Planning of the Kenya

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