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Economy

Sugar barons to pocket Sh1.3bn in days after import nod

A shopper buys a packet of sugar. The AFA approved import of 15,000 tonnes. PHOTO | FILE
A shopper buys a packet of sugar. The AFA approved import of 15,000 tonnes. PHOTO | FILE 

Sugar barons look set to pocket nearly Sh1.3 billion in under 10 days after the agriculture regulator approved the importation of the sweetener to ease shortage in the country.

Agriculture and Food Authority (AFA) director-general Alfred Busolo said 15,000 tonnes of sugar will arrive in the country next week to help stop a rise in consumer prices after millers raised their charges following the shortage.

The sugar import business is controlled by a small clique of merchants who are now in line to earn about Sh1.35 billion based on the prevailing wholesale price of Sh90,000 per tonne of the sweetener.

Based on Kenya’s annual estimate consumption of 800,000 tonnes of sugar, the 15,000 tonnes could be consumed in seven days—underlining the sweet returns of the import business as millers’ struggle to break-even and farmers in Western Kenya wallow in misery.

“We issued permits to allow importation of sugar as we anticipated that there would be a shortage resulting from underperformance of some of the factories and closure of three others for maintenance,” Mr Busolo said in an interview on Monday.

The volume of sugar at the factories has dropped to a low of 4,494 tonnes against the optimum 9, 000 tonnes, piling pressure on prices.

The cost of a 50-kilogramme bag at the factory rose Sh350 last week to Sh4,600 and millers anticipated the cost would continue to rise in the absence of imports, which tend to be cheaper than local produce.

The price rise has watered the market for merchants to reap hundreds of millions of shillings from the imports.

The tight clique of Kenyan merchants is said to be in nearly all segments of the sugar business, doubling as importers, distributors of local sugar, transporters, and owners of giant warehouses.

The imports are mainly from Uganda where they are trucked in and Madagascar, Malawi and Zambia where the imports come in shiploads.

Muhoroni and Kwale Sugar have been down on maintenance while Mumias has been performing poorly due to cane shortage.

Sony managing director Jane Odhiambo attributed the shortage to scarcity of sugarcane—the key raw material.

“The factory prices have been rising because there has been a decline in production that has led to high demand,” said Ms Odhiambo.

But consumer sugar prices have remained at Sh120 per kilogramme since 2015 following stable supply of the commodity in the country.

The import quota is currently between 500 and 1,000 tonnes of brown (table) sugar, which is largely used for domestic consumption.

Import permits remain active for 45 days. Kenya normally import its sugar from the Common Market for Eastern and Southern Africa and East African Community member states.

Kenya’s sugar consumption has increased by three per cent in the last one year pushed by population growth.

Statistics from sugar directorate indicate that consumption stood at 889,233 tonnes from 860,084 tonnes in 2014.

The statistics paint a picture of fast rising demand, far surpassing the 800,000 tonnes a year estimate. The directorate commissioned a survey to ascertain the current requirement in Kenya.

Production of sugar hit 632,000 tonnes last year from 592,000 tonnes in the previous year, making it the highest production in Kenya’s sugar history.

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