Comesa grants Kenya extension on sugar imports

Saturday March 28 2015

Workers load imported sugar on to a lorry at the port of Mombasa. Kenya imported 63,475.25 tonnes of sugar this quarter. PHOTO | FILE

Kenya’s sugar industry will continue to enjoy protection from imports from the Common Market for Eastern and Southern Africa (Comesa) for one more year following an extension of the safeguard.

The news should put a smile on the faces of thousands of farmers who have taken a beating from production inefficiencies and mismanagement of milling companies.

However, new information indicating that the country trebled its sugar imports in the past three months will dampen the excitement over the Comesa extension.

Agriculture, Fisheries and Food Authority (Affa) officials told The EastAfrican that Kenya had imported 63,475.25 tonnes of sugar in the third quarter of the fiscal year ending this month, more than three times the 19,174.75 tonnes imported in the same period last year.

Kenya produces 600,000 tonnes of sugar annually, against a demand of 800,000 tonnes. Experts are calling for a complete overhaul of the local industry to enable it sustain demand.

According to the Kenya Sugar Directorate, Kenya produced 591,658 tonnes of sugar in 2014 (year ending June) a 1.4 per cent drop from a record harvest of 600,179 tonnes in 2013, blamed on low cane supply and companies’ inefficiencies.


“The privatisation of the sugar millers is long overdue, there should be a complete refurbishment of the companies if they are to win investors’ confidence. It will not be easy to convince investors to buy a stake in the already ailing mills,” said Vimal Shah, Kenya Private Sector Alliance (Kepsa).

He added that Mumias Sugar Company, the leading miller in the country, requires a complete turnaround to lower the cost of production while enhancing quality.

Privatisation of the sugar milling companies is among the conditions Comesa has put in place for Kenya since 2007. This was cemented on Thursday by the Comesa Council of Ministers during its two-day sitting in Addis Ababa.

“The extension will, however, operate on the basis of the terms and conditions set out in Directive No. 1 of 2007,” reads the release by Comesa.

These included privatising state-owned millers, doing research into new early maturing and high sucrose content sugarcane varieties and adopting them, paying farmers on the basis of sucrose content instead of cane weight, maintaining the safeguard as a tariff rate quota with the quota increasing while the above quota tariff falls until it reaches 0 per cent and maintaining and providing infrastructure including roads and bridges in the sugar growing areas.

The issue of the cost of production of sugar remains a hindrance to the country’s competitiveness even with the Comesa terms in place, implying there will always be need to import cheaper sugar.

Saulo Busolo, a former director at Kenya Sugar Board (now Agriculture, Fisheries and Food Authority), said the cost of producing sugar in Kenya was significantly higher than Uganda and Rwanda, meaning local farmers and millers could be priced off the shelves by their neighbours due to free trade in the bloc, despite safeguards against Comesa sugar.

“Without government interventions to lower the cost of production and keep illegal sugar away, more imports will always find a way into the country, piling pressure on locally produced sugar, Comesa should have a clause considering production,” he said.

READ: Uganda protests Kenya’s move to curb sugar imports

Uganda and Tanzania have been the major beneficiaries of the East African Single Customs Territory that allows free trade of sugar within the region.

It costs $950 to produce a tonne of sugar in Kenya compared with $750 in Uganda. Although the Kenyan parliament had approved privatisation of the five public sugar companies, allowing 51 per cent to be sold to private investors, 30 per cent to the farmers and 19 per cent through initial public offer once they become profitable, the country has dragged its feet.

State-owned sugar companies — Chemelil Sugar Company, Nzoia Sugar Company Ltd, South Nyanza Sugar Company Ltd, Muhoroni Sugar Company Ltd and Miwani Sugar Company — are yet to be privatised to enhance efficiency of the sugar sector.

“The privatisation models are still under consideration and as soon as a suitable model is adopted, the privatisation process will be rolled out, “said Alfred Busolo, Agriculture, Fisheries and Food Authority (Affa).

News of the extension of Comesa safeguards come as Mumias, the leading sugar producer in the country, struggles to get back on its feet amidst calls of a complete overhaul in the company to enhance efficiency, casting a doubt on the nation’s capability to meet its sugar demand even with the safeguards in place.

READ: Regional group seeks to raise $6b to invest in ailing sugar sector