State bets on local sugar supply as imports dry up

The government is banking on improved local production to satisfy consumer demand as sugar supplies from the Common Market for Eastern and Southern Africa (Comesa) comes under increased pressure, nearly five months after traders were handed rights to import the commodity from the market.

“Prices are coming down on the effects of the improved weather locally, but shipments from the Comesa have been very disappointing,” Agriculture permanent secretary Romano Kiome said.

Kenya was expected to ship in 260,000 tonnes of duty-free sugar from Comesa in the current window ending March.

Egypt, another member of Comesa, is also undergoing a similar nightmare with its Cabinet being forced to extend the exemption of raw and white sugar imports from duties until June 30 next year in a bid to ensure sufficient stocks for consumers against a backdrop of soaring global prices of the commodity.

Reports by Reuters said that Egypt had exempted sugar imports from duties starting August 15 last year, until the end of December, to control prices in the domestic market.

Egypt traditionally charges a two per cent duty on raw sugar and a 10 per cent duty on refined sugar and consumes about 2.2 million tonnes of sugar a year, including about 1.4 million tonnes produced domestically. The deficit is plugged using imports from main markets such as Comesa as well as other international outlets.

“We are in consultations with the Trade ministry to look into the disappointing import volumes from Comesa and see what can be done.

“Though people were licensed to bring in sugar, the size of the shipments remain wanting,” Dr Kiome told Business Daily in an interview but ruled out the option of any duty-free imports outside the existing Comesa window.

Analysts attribute the agony of sugar importers such as Kenya and Egypt to an unprecedented rally in global prices of the commodity last year.

Sugar prices rose to a 28-year peak four months ago on the back of weather-related interruptions in production in Brazil, the world’s largest exporter.

Though Kenya has no direct links to global sugar markets, it has had to suffer the after- shocks of supply shortage and the resulting high prices as its Comesa suppliers diverted their stocks to better paying European, American and Asian markets.

Good reason

Records show that ordinary shipments of sugar into Kenya are priced at about Sh30,000 per tonne compared to the global average of Sh45,000 per tonne — a good reason for producers to divert supplies.

The fears of diversions are reinforced by the fact that sugar production both in Comesa and the rest of Africa has been on a climb since 2006, with projections by the Food and Agriculture Organisation (FAO) showing that the continent’s output is expected to rise by 400,000 tonnes or 3.5 per cent to 11.2 million tonnes helped by expansion of land under sugarcane and enhanced processing capacity.

Domestic consumption