Illicit sugar is retailing at Sh90 a kilogramme while the local product goes for Sh110. Photo/FILE
What you need to know:
Duty-free industrial sugar, which is meant for the food sector, and untaxed sweeteners from low cost-producer nations have flooded the market, prompting the sharp drop in prices.
The illicit sugar is retailing at Sh90 a kilogramme in what has prompted millers to cut their wholesale price to defend and grow their market share.
But the local commodity is retailing at Sh110 a kilogramme in retail stores like Tuskys and Uchumi Supermarket.
The factory price of sugar has dropped to Sh60 per kilogramme on increased circulation of industrial and untaxed sweeteners in changes that have not reflected at the shop shelves.
Millers have since last week been selling a 50 hit millers kilogramme bag of sugar at Sh3,000, from Sh3,600 in February and Sh7,750 early last year, according to the Ministry of Agriculture.
Duty-free industrial sugar, which is meant for the food sector, and untaxed sweeteners from low cost-producer nations have flooded the market, prompting the sharp drop in prices.
The illicit sugar is retailing at Sh90 a kilogramme in what has prompted millers to cut their wholesale price to defend and grow their market share.
But the local commodity is retailing at Sh110 a kilogramme in retail stores like Tuskys and Uchumi Supermarket — a pointer that middlemen are making outsized profits.
“We have noted this with serious concerns that a number of industrial sugar importers duly licensed to import sugar within the duty remission scheme are allowing such sugar to be re-packaged and retailed on the market in competition with direct consumption sugar,” said Agriculture PS Sicily Kariuki.
Ms Kariuki said that the government would tighten oversight over importers of industrial sugar to curb dumping in the local market.
A permanent inter-agency enforcement unit will be established to deal with illegal sugar importation that local millers say is behind their near collapse.
Formation of the agency will increase scrutiny on cross-border trade by stepping up patrols to eradicate sugar smuggling.
As at February, a total of 2.5 tonnes of sugar worth Sh201,160,800 had been impounded. Fifteen people have been taken to court over the issue.
Industry regulator Kenya Sugar Board (KSB) estimates the cost of producing a tonne of sugar at about $570 (Sh49,300) in western Kenya.
The cost is $240 (Sh20,760) to $290 (Sh25,000) in producers such as Egypt. Kenya has been granted a one-year extension to limits on duty-free sugar imports from regional trade bloc Comesa.
The tariffs were scheduled to fall to zero in March, but Kenya sought an extension until 2015. The influx of cheap sugar has led to a cut in cane prices and delayed payment to the 300,000 small holder farmers who are the backbone of the sugar industry.
Millers are buying a tonne of sugar at Sh3,200 from Sh3,800 late last year and over Sh4,000 18 months ago.
Eliminating distributors
“Small holder farmers contribute over 85 per cent of the raw material that feeds our 11 factories, making them critical contributors to the value chain and any delay in payment or depressed prices will impact negatively on supply,” said Ms Rosemary M’kok, the KSB chief executive, in an earlier interview.
The regulator is also mulling over eliminating distributors and middlemen in order to keep the cost of the commodity in line with factory prices.
“The only way to make consumer prices realistic in the sugar sector is by eliminating middlemen and allowing chain stores and wholesalers to acquire the commodity directly from factories,” said Ms M’kok.
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