Sugar shortage causes retail chain trouble with regulators

An acute sugar shortage in the domestic market and the resulting surge in retail prices have put Nakumatt Supermarkets in the eye of regulators who have launched investigations into the retail chain’s dealings in the sweetener.

The Sugar Directorate, yesterday fired a letter to Nakumatt, accusing it of hoarding and rationing sugar to create an artificial shortage in order to increase prices.

The agency, which is the sector regulator, says in a letter to Nakumatt that the retailer is using its dominant position in the market to earn ‘‘unjustified abnormal profits’’ from sugar.

“It has come to our attention that Nakumatt supermarket through its retail outlets is engaging in unfair trade practices by way of hoarding and rationing distribution of sugar,” the letter says.

“The supermarket is exposing consumers to unjustifiable cost of acquiring sugar, limiting the distribution of the commodity and negating the spirit of effective competition in the market.” 

A kilogramme of sugar is now retailing at Sh145 at Nakumatt, up from Sh125 two months ago on account of an acute shortage that the regulators now say does not exist.

At Sh145 per kilo, Nakumatt is the most expensive supermarket to buy sugar from compared to competitors such as Tuskys and Naivas, which are selling the same commodity at Sh135 per kilo.

The Competition Authority of Kenya (CAK) entered the fray with the launch of investigations into the alleged uncompetitive market behaviour.

The Sugar Directorate had requested the competition watchdog to investigate the retail chain for anti-competitive behaviour.

CAK director- general Kariuki Wang’ombe said that there were elements of market distortion in the sugar affair and on which action will be taken once investigations are complete.

“We have received complaints from the regulator. We are carrying out investigations in the next three days before offering a verdict. The allegations referred to by the directorate amount to market distortion,” said Mr Wang’ombe.

A consumer lobby group accused the supermarket of using the artificial sugar shortage it has created to cause panic buying whose impact is to drive up retail prices.

“I am not certain on the amount of stocks in the country, but if the regulator says we have enough, then the only conclusion we can reach is that some hoarding has taken place to create panic buying, leading to even higher prices,” said Stephen Mutoro, the secretary- general of Consumer Federation of Kenya.

Mr Mutoro said it was unfair for Nakumatt to ration sugar and force their loyal customers to buy the commodity at exorbitant prices.

Nakumatt has been rationing sugar in its shops, restricting customers to a maximum one two- kilogramme packet.

The retailer's management last week issued a circular to all its outlets asking them to limit the amount of sugar each customer can buy.

“Following the prevailing shortage of sugar, please note that prices for this commodity continue to fluctuate every day. We would like to strongly recommend that there should be no bulk purchases of this product, therefore, have the customers understand that we are only doing a maximum of one per shopper,” the retail chain said.

The supermarket’s managing director, Atul Shah, declined to comment on the issue insisting he was still studying the Sugar Directorate’s letter.

“I will not comment on the matter right now. We are still studying the details of the letter,” said Mr Shah.

Local stocks of sugar have been declining in the last couple of months, on the account of low output by millers, forcing the Sugar Directorate to increase imports by 67 per cent to cover the fall in domestic production.

As of last week, the directorate said it had allowed importation of 15,000 tonnes of sugar, up from 9,000 tonnes last month, but the impact of the increment is yet to be felt on the retail market.

The agency’s latest report indicates that the stocks had grown to 9,000 tonnes as of Monday, which is the minimum quantity required at any given time to contain a possible rise in prices.

“There has been significant improvement in output from local millers in the past few days with stocks rising to 8,927 as at Monday,” said Mr Busolo, the director-general of Agriculture and Food Authority, adding that the agency was closely monitoring factory output and would allow additional importation to curb dumping of sugar.

The directorate issues import permits to traders that remain active for 45 days.

Kenya imports its sugar from the Common Market for Eastern and Southern Africa (Comesa) and East African Community member states.

The imports are currently being trucked from Uganda or brought in as shiploads from Madagascar, Malawi and Zambia.