The much-anticipated sale of Ugandan sugar in the country has flopped due to lack of sugar surpluses in the neighbouring state forcing Kenyan authorities to withdraw import licences.
Ugandan sugar millers have been hit by a shortage that has seen leading factory Kakira Sugar Works produce less than 100,000 tonnes out of the projected 180,000 tonnes.
Kenya’s Sugar Directorate said it has cancelled a number of permits issued to some traders after they failed to secure sugar from Uganda within the stipulated time.
The permit normally allows traders to import sugar within 45 days, failure to which it is revoked. However, a trader can seek a few days extension if they provide valid reasons.
“It is true that there is a shortage of sugar in Uganda and at the moment traders are not bringing in any stocks from the country,” said head of the directorate Andrew Osodo.
Mr Osodo said Kenya has not received any Ugandan stocks in the past two months for the permits issued in November.
But the move is unlikely to have an immediate effect on the local market given that local sugar production has improved in the last few months.
President Uhuru Kenyatta and his Ugandan counterpart Yoweri Museveni struck a deal in August last year under which surplus Ugandan sugar would be exported to Kenya to help bridge the annual shortage.
The agreement triggered a storm with Members of Parliament saying such imports could depress local producer prices making it impossible to revive struggling millers such as Mumias Sugar Company.
Uganda had been locked in a trade dispute with Kenya since 2011 when claims emerged that traders from the landlocked State were simply re-packaging cheap sugar from the regional trading bloc, Common Market for Eastern and Southern Africa (Comesa) for resale in other East African markets.
The feud saw Kenya slap a ban on Uganda sugar imports in October 2012, later replaced by stringent vetting of consignments that took up to three months before shipment permits were issued.
The two states reviewed the processes and procedures of issuing licences for Uganda sugar imports to a maximum 14 days two years ago.
Uganda has been selling sugar to Kenya under the Comesa and the East African Community (EAC) Customs Union rules. Kenya depends on regional states to bridge the shortage by allowing importation of 200,000 metric tonnes to meet the difference.
Kenya produces about 600,000 tonnes annually against a requirement of 800,000 tonnes.
Comesa has handed Kenya a one-year extension of a restriction on regional duty-free sugar imports, which limit the entry of the sweetener into the country to 300,000 tonnes.
The safeguard was first put in place 2000 and expires in March next year.
Conditions for the Comesa safeguards include privatising State-owned mills, researching on new early-maturing and high sucrose content sugarcane varieties and adopting them, and paying farmers on the basis of sucrose content instead of weight.
Other Comesa member states outside the East Africa Community where Kenya acquires sugar are Egypt, Zimbabwe and Swaziland.