Sugar sector faces anxious times as duty-free imports loom

By Winsley Masese

Kenya: Kenya’s sugar sector is walking on a tightrope as the Government seeks to meet the Common Market for Eastern and Southern Africa (Comesa) safeguards.

Extended to February 28 2015, the expiry will see cheap imports from Comesa flood the market and compete with the local produce, with a traditionally blunt competitive edge. Agriculture Principal Secretary Sicily Kariuki said with the window of the extension, the country is now less than 11 months to the deadline and needs to do things differently.

Speaking during a stakeholders meeting, organised by the Kenya Sugar Board in Nairobi, she also decried the drop in factory price of the sugar, describing it a cause for worry.

For example, the factory price of a 50kg bag of sugar shrunk from a high of Sh7,750 in 2013 to about Sh,3000, as at last week. With this development, local millers have for example been forced to store their stock due to lack of market. As a consequence, cane farmers have not been paid complicating any reforms aimed at improving efficiency.

The one-day meeting was tasked to come up with action plans on how to improve efficiency in the production of the local sugar.

Sugar barons

Nzoia Sugar Company Outgrowers Chairman Joash Wamang’oli noted: “Meeting the extension is like a miracle as the sugar barons will continue dumping cheap imports in the country.”

Wamang’oli and other stakeholders accused the Government of laxity to crack the whip on sugar barons, leading to the drop in price of the local sugar.

“Failure by the millers to pay farmers on time will not motivate them to embrace the new changes required as per the Comesa regulations,” he said.

Kariuki said though in any business transaction across the globe, about 15 per cent of the products sold is illegal, the local sugar sector has exceeded that limit, an indication that something is wrong.

“We will have joint surveillance with Kenya Sugar Board, Kenya Revenue Authority and Kenya Bureau of Standards to enforce our strategies and reduce the illegal importation of sugar,” she said.

Kenya is a member of the Comesa Free Trade Area. The FTA obliges the country to allow free access of products, including sugar from the other FTA member countries, into her market.

Acting Mumias Sugar Company Chief Executive Coutts Otolo said the competition among millers for sugar cane was partly to blame for the inefficiency in the sector.

“With the new system of government, we are overtaxed as we have to pay the sugar levy, pay tax to the national and county governments,” he said.