Kibos Sugar and Allied Industries Limited

MIGA has issued $6.7 million in guarantees to Mr. R. S. Chatthe, a United Kingdom national, and the Industrial Development Corporation of South Africa Limited covering their $.5 million equity investment in, and $6.5 million non-shareholder loan (including $.5 million in interest) to, Kibos Sugar and Allied Industries Limited of Kenya. The investment is for a new sugar factory in Kibos, less than 10 kilometers east of Kisumu.

The guaranteed percentages are up to 90 percent for the equity and about 95 percent for the non-shareholder loan, for a period of up to eight years against the risks of expropriation, transfer restriction, and war and civil disturbance.

The project involves establishing a greenfield sugar factory and 2,000 hectares of irrigated sugarcane estates. The factory will also support small growers in the project area who will cultivate up to 2,000 hectares of sugarcane as feedstock for the factory. The sugar is expected to be supplied to the Kisumu market and to surrounding rural areas within a 100 km radius via wholesalers and traders representing a total market size of approximately 4.5 million people. The project is expected to revitalize the sugarcane farming industry in the Kisumu region.

In the last five years, sugar consumption in Kenya has grown, while local production has failed to meet current demand. The local industry is mainly state-owned and suffers from outdated technology and a lack of inward investment. This has led to the decline and stagnation of regional sugarcane industries as local farmers, who relied on income from the cultivation of cane at one time, have turned to uneconomic subsistence farming. In the Kisumu region, the closure of the local mill in Miwani in 2001 and subsequent neglect of local sugarcane production led to a negative impact on the local economy.

The MIGA-supported project is anticipated to rejuvenate the economy of the sugarcane farming industry in the Kisumu region. The project will operate with new technology and an experienced team to manage the project from inception to operation. The project is expected to contribute to Kenya’s self-sufficiency in the production and supply of sugar domestically and reduce the country’s reliance on imported sugar. This will represent an important source of foreign exchange savings through the substitution of sugar imports. It is also expected to create 250 permanent jobs in the factory and 3,416 permanent and annualized jobs in the cultivation of cane. More importantly, these jobs will be created in rural areas, thus alleviating absolute poverty.

The project is consistent with MIGA’s strategic objective of increasing the agency’s presence in Africa. In addition, the project is aligned with MIGA’s priorities of supporting South-South investments, and the World Bank Group’s Country Assistance Strategy in Kenya, which aims to reduce poverty in the poorest rural areas, strengthen communities, and support increased agricultural productivity and competitiveness.