Illegal imports a major threat to local sugar firms

Kenya’s sugar industry plays a pivotal role in the manufacturing sector. It improves livelihoods for more than eight million Kenyans.

It is a source of income for more than 400,000 small-scale farmers who supply more than 90 percent of the milled cane to the 14 sugar firms in Kenya.

According to Organisation for Economic Co-operation and Development (OECD) and Kenya Association of Manufacturers (Kam), Kenya has primarily played two roles: a direct (production) role where the government operates and invests in sugar millers and a regulatory role.

A stakeholders task force report of 2019 revealed Kenya was producing 401,239 metric tonnes against a demand of 299,514 in 1980.

In 2018, production was at 490,704MT against a consumption of 1,012,399MT, giving a shortfall of 521,695MT. The deficit is imported.

Food and Agriculture Organisation (Fao) says the area under cane is 191,215 hectares producing 4.75 million metric tonnes against a requirement of 263,959 hectares expected to produce 9.8 million metric tonnes translating to 1.09 million tonnes of sugar.

This would exceed the annual demand of table sugar.

A parliamentary report in 2015 linked the deficit to a scheme by sugar importers to ship in cargo.

The task force found that importation is marred by false declaration of the value and amount of imports, compromised consumer safety, flouting sugar import licensing, repackaging of contraband and smuggling among others.

Sugarcane production in Kenya has declined due to several challenges but majorly due to political interests.

Commodity Funds notes that Kenya is a deficit sugar producer, with consumption outstripping production by more than 300,000 metric tonnes.

Fao forecasts stagnant sugar production in 2019/2020 due to delays in the privatisation of State-owned mills, a move that was anticipated to spur the sector.

In the last two decades cane availability has inconsistently matched the factory capacity hence the mills have not been able to meet their cane requirements.

The ex-factory price paid by wholesalers incorporates the cost of the sugarcane, milling, processing, factory operations, packaging, retailer profits and government levies.

The average ex-factory price here is about US$800 per tonne, which compares poorly with world market price of US$280. This means Kenyan consumers pay more for sugar.

FIGHT CORRUPTION

Various studies say sugar industry attracts cartels of importers whose interests’ conflict with those of producers. These cartels influence key political leaders whom they finance during elections.

Kenya sugar industry faces collapse due to, among others, high cost of production, debt, cane shortage, low or declining yields, low value addition, inefficiencies, ageing equipment, and obsolete technology.

Therefore, unless and until corruption and mismanagement is tackled across all levels, the sugar industry in Kenya will continue to decline and eventually collapse.