Kenya could be forced to seek another extension of the Comesa safeguard measures to protect its sugar industry after it emerged that its production would remain flat due to poor performance by state-owned sugar millers.
The EastAfrican has learnt that Nairobi is struggling to fulfil key conditions required to deal with competition against duty-free sugar imports from the 19-member Comesa.
“Key milestones have been achieved in the industry since the introduction of the Comesa sugar safeguard in 2002. However, full implementation of the directives has been curtailed by various challenges,” said Principal Secretary for Trade Chris Kiptoo.
These challenges include privatisation of the five ailing sugar millers — Chemelil, Muhoroni, Miwani, Nzoia and Sony — a process that has been hampered by court cases, low uptake of new cane varieties by farmers, implementation of a new method of cane payment based on sucrose content.
The current extension, which started in February this year, will expire in February 2019, upon which Kenya will be required to give a scorecard on the status of the reforms in its sugar industry.
During the 19th Comesa Heads of State and Government Summit in Antananarivo, Madagascar, in October 2016 the Comesa Council of Ministers agreed to extend Kenya’s sugar safeguard measures and asked the government to accelerate the sale of its sugar factories.
Privatisation of the five millers is one of the measures required to improve the competitiveness of Kenya’s sugar industry and end its perennial reliance on Comesa safeguards.
However, the planned sale of the sugar millers to strategic investors has been hampered by a legal battle between the county governments and the privatisation commission with the former arguing that since Agriculture is a devolved function, they should have a voice in the sale of these firms.
According to a report by the US Department of Agriculture, Kenya’s sugar production in the 2017/2018 fiscal year is expected to remain flat due to the continued poor performance of the state-owned sugar milling plants.
The report dated April 2017, the much anticipated privatisation of the sugar mills has not taken place and they continue to be burdened by obsolete milling technology and huge debts, leading to poor services to farmers.
As a result, privately-owned mills have encroached into some of areas that were previously zoned-off for the state-owned mills, thereby providing an alternative cane marketing outlet.
According to Kenya’s Sugar Directorate, locally produced sugar remains uncompetitive with the cost of production at about $600 per tonne, which is higher than anywhere else in the Comesa.
Kenya has since 2004 sought extensions of safeguards to limit importation of duty free sugar from the Comesa region by invoking Article 61 of the Comesa Treaty, which provides for the protection of emerging sectors until they are considered mature for competition.
Local sugar production is also hampered by poor crop husbandry practices, low access to inputs, poor transport infrastructure, and delayed payments to farmers.
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