Kasinthula Cane Growers Limited

KCGL is an “operative company” founded and governed by the Shire Valley Cane Growers Trust. The Trust leases 755 contiguous hectares of sugarcane land from the Malawian government, and KCGL manages the land on behalf of the Trust. In partnership with Illovo, one of Africa and the globe’s biggest sugar exporters, the Trust owns 95% of KCGL, while Illove owns the remaining 5%.

KCGL itself has an operating board of nine members, one- third of which are farmer representatives who report back to the Trust. A general manager runs the company’s daily operations. Various committees of farmers also contribute to management. Committee membership is determined by elections, which happen every three years, with special efforts made to engage women. From 1999 through 2007, KCGL used a local management company to run daily operations, but starting two years ago employees took control. Production follows a block farming system, with the Trust’s estate divided into two farms, each headed by farm managers and supported by an accountant and a human resources administrator.

There are currently 282 farmers who are members of the Trust, one-third of them women. As a benefit of membership, each farmer is guaranteed a plot of land (2.7 hectares on average), which is subleased from the Trust for 25 years. The cost of operating the Trust is shared by the farmers and deducted from their revenues. The farmers work their own plots, though some employ additional labor.

In the peak production season (April-November), KCGL employs nearly 900 people. The company operates with a commitment to transparency, regularly communicating to farmers how much sugarcane has been cut and how much more is needed, so farmers can balance supply and demand effectively. The company also assists farmers with a significant operating infrastructure, including irrigation systems, pumping stations, and reservoirs. Illovo processes the sugarcane into sugar and handles all the marketing and most of the sales.

KCGL distributes all its profits to the owner-members. This feature enabled KCGL to become, in 2002, the first non-organic sugar company to be certified fair trade by Fairtrade Labelling Organizations International (FLO). Illovo now sells 100% of KCGL’s sugar internationally under a variety of labels including Fair Trade Golden Granulated, Cooperative Fair Trade White Sugar in the United Kingdom, and Wholesome Sweeteners in the United States.

To get KCGL off the ground with the necessary capital, Illovo and the Malawian government secured two loans, in 1999 and 2000; one from the European Investment Bank for €3.5 million (US $3.76 million), and another from Illovo Group Holdings Ltd. for €3.5 million (US $3.76 million). The loans had a manageable repayment schedule that was worked into KCGL’s business plan. In the first year, KCGL farmers serviced their loans appropriately. But in 2000 the national currency collapsed and the loans, denominated in major foreign currencies, ballooned. Moreover, confusing language in various loan agreement documents suggested that farmers might be individually liable for repayment. The latest documents clearly specify KCGL as the responsible party.

Without the loan repayments, Brian says, “KCGL is profitable with total revenues of 410 million kwachas (US $2.9 million) in 2008. But include the loans and KCGL is technically bankrupt. And yet, the government cannot let the company collapse, because it will be suicidal to do so politically.”

While the government is party to the loans, the current outstanding balance is proving too difficult to service. So the Trust is currently seeking to expand its revenue and ease the payoff situation by recruiting new members. To this end, the government has set aside 550 additional hectares. The Malawi Ministry of Agriculture continues to work closely with the Trust and KCGL; besides involvement in the loan negotiations, the Ministry also has representation on the Trust Board. This additional land will be developed through a recent €2.5 million grant from the European Union.

In cooperation with Fairtrade Labelling Organizations International (FLO), KCGL has developed a larger plan to allocate fair trade premiums to building materials for farmers, infrastructure for the company, and investment in the community. In the third category, the company has thus far built wells for safe drinking water, allowing local families to avoid crocodile-infested rivers as their primary water source. It has also brought electricity to small villages, expanded a medical clinic at Kasinthula, made essential drugs available through the clinic to members of the community, provided HIV/AIDS education and treatments, and offered emergency aid during natural disasters. Communities hope to use their fair trade premiums to build a school and provide scholarships.

FLO also works with KCGL to help them minimize their environmental impact. The company is promoting waste reduction, and wants to undertake a massive tree-planting effort in the area. KCGL farmers have started to use more environmentally appropriate herbicides and fertilizers, and farmers are encouraged to use manure and other natural fertilizers. There are also plans to create land stewardship and sustainable farming training programs.

KCGL farmers recognize the benefit of fair trade and the direct impact it has had on their community. In a YouTube video from the field, one farmer says, “Before fair trade, we were just farming sugarcane. It was very hard before. There was no money. But this time, we get things [we need] easy..... This time, we are happy.” These efforts, directly related to fair trade certification, have strengthened the loyalty of the farmers to KCGL, and their willingness to share its operational costs.