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Supermarkets face Kebs penalties for own-branded sugar

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A shopper buying sugar at a supermarket. PHOTO | FILE

Kenyan supermarkets have defied the Kenya Bureau of Standards’ (Kebs) directive prohibiting them from repackaging and branding sugar in their own names, setting them up for a bruising battle with the regulator.

Kebs, the quality assurance and standards regulator, issued the directive as part of a renewed effort to curb the sale of contraband sugar in the local market and its impact on locally manufactured stocks. 

Kebs managing director Charles Ongwae said a number of retailers have defied the order, exposing them to heavy penalties as provided for in the law.

“It is a requirement that supermarkets comply with the set standards when it comes to packaging of sugar to enable us trace the origin of any commodities on sale,” Mr Ongwae said.

Kebs has named Nakumatt, Ukwala and Naivas as some of the supermarkets that are still repackaging the sugar in their own names. An attendant at Tuskys Supermarket, however, said the retail chain had stopped packaging the commodity in response to the directive from the regulator.

Kebs is beginning Monday expected to send its market surveillance officers to the supermarkets to ensure compliance.

Mr Ongwae said the range of punitive actions faced by non-compliant retailers includes pulling the stocks from the shelves and prosecution of supermarket owners.

Kebs’ move is in response to rising complaints by sugar millers that the branding by the commodity in Supermarkets has slowed down movement of their stocks and is encouraging the smuggling of sugar into the country.

Kenya Sugar Millers Association (KSMA) has filed a formal complaint with Kebs.

The association’s chairman, Jaswant Rai, said increased dumping of the sweetener has depressed factory prices and if not checked would make their business unprofitable in the near term.

Millers say they need to sell a 50kg bag of sugar at a price of Sh5,000 to make a profit but prices have since dropped to between Sh3,800 and Sh4,000.

Jane Odhiambo,the managing director of Sony Sugar Company, said low pricing of supermarket branded sugar has slowed down movement of the locally produced stocks putting profitability of local manufacturers at risk. 

Ms Odhiambo, a KSMA member, urged Kebs to move with speed and deal with the issue of contraband sugar, adding that enforcement of packaging rules would help solve the problem.

Ms Odhiambo claimed that most supermarkets were mixing imported sugar with the locally manufactured ones, making it cheaper than those branded in the names of the manufacturers. A 2kg packet of sugar branded in the names of millers such as Sony is currently retailing at about Sh250 compared to Sh200 for those branded by the supermarkets.

The millers’ complaints have prompted the Sugar Directorate to seek an amendment to the Sugar Act that would require supermarkets to apply for permission from the regulator before repackaging and branding the commodity in their own names.

“The proposed amendment is currently with the Ministry of Agriculture for gazettement. Once it has been finalised, supermarkets would be required to consult with us before repackaging the commodity,” said Andrew Osodo, the head of the directorate.   

Retail Trade Association of Kenya chief executive Wambui Mbarire said members had received the Kebs directive and were working to comply.

Sugar smuggling is a lucrative business in Kenya that benefits from the protection of the local market from imports as part of an agreement with the Common Market for Eastern and Southern African (Comesa) partners.

The protection has been blamed for the high pricing of sugar in Kenya compared to global markets.

Kenya has more recently taken deliberate steps to stop trafficking of sugar from the Somalia port of Kismayu and has set up a special unit in the National Security Intelligence Service to dismantle sugar cartels.

Comesa last year granted Kenya another extension of sugar import limits, sparing local millers tougher competition that would have come from the more efficient producers in member countries such as Zambia.

The decision to grant Kenya a sixth extension to February 2017 was reached during the 35th Comesa Council of Ministers meeting in Zambia.

Sugar import tariffs were scheduled to fall to zero in February and to open up the Kenyan market to competition from across the Comesa region.

The extension is meant to give Kenyan millers more time to improve infrastructure and execute other reform measures such as the sale of government-owned loss-making millers, the introduction of new cane varieties and roads upgrade in sugar-growing zones.

Kenya invoked the infantry clause — Article 61 of the Comesa Treaty — that calls for the protection of emerging factories by limiting competition from other states until such a time when they have matured for competition.

The safeguards allow Kenya to limit the entry of sugar imports to 350,000 tonnes to plug the annual production deficit.