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Economy

Shortage, costly sugar to persist as Kenya gets Comesa reprieve

Mr Henry Obwocha, Privatisation Commission chairman. FILE PHOTO | NMG
Mr Henry Obwocha, Privatisation Commission chairman. FILE PHOTO | NMG 

Saturday’s nod giving Kenya's sugar industry an extension of importation safeguards by the regional trading bloc for two more years has shifted the spotlight to stalled reforms in the sector, which have condemned farmers to abject poverty.

The Common Market for Eastern and Southern Africa (Comesa) allowed Kenya to continue enjoying protection against the influx of imports from the Comesa region after the bloc’s council of ministers passed a resolution accepting its bid to extend sugar safeguards for two more years up to February 2021 from the previous date of February 2019.

"It has been a tough battle to get this two-year extension,” said Foreign Affairs chief admnistrative secretary Ababu Namwamba who is part of Kenya’s delegation to the 38th Comesa Council of Ministers and Summit.

But in giving Kenya the 2021 lifeline, the spotlight has now turned on the floundering sugar sector reforms.

Kenya had argued that it had met all the conditions imposed after the previous extension, but for the conclusion of the privatisation of the five publicly owned sugar mills.

But the privatisation of government owned millers has been rocked by doubts after farmers and political leaders opposed the sale of three of the five factories.

Planters in Sony, Nzoia and Chemilil sugar zones have opposed the sale, demanding they get shares through respective county governments.

“So far, Kisumu County has agreed to the sale of Miwani but there has been opposition in Nzoia, Sony and Chemelil,” said Henry Obwocha, chairman of the Privatisation Commission recently.

The introduction of a sucrose-content-based cane payment system, which is yet to happen was subject of an earlier extension. The licensing of new millers has led to the emergence of extensive levels of cane poaching.

This has seen utilisation of mill capacity fall, with serious financial problems emerging for affected state millers.

According to a World Bank report, “the protection measures under Comesa have contributed to making Kenya a high-cost sugar producer”, with average costs of $950 per tonne, compared to $350 per tonne in countries such as Malawi.

Besides production inefficiency, massive revenue losses through suspected corruption in state millers have according to experts eroded the attractiveness of government mills for potential strategic partners.

The prevailing fears have been compounded by sugar smuggling.

Millers maintain that duty-free imports have left them with a growing stockpile of unsold sugar, as imports undercut local prices. This has led to calls for licences for Comesa duty-free imports to be suspended.

Comesa sugar safeguards have been in place since 2003, having been renewed in 2007 and 2011.

Under the Comesa treaty, safeguard measures can be applied to domestic industries to protect them against international competition until they become mature and competitive.

Kenya currently produces about 376,000 metric tonnes of sugar against a consumption of 1.3 million metric tonnes. This leaves a deficit of 989,000 metric tonnes that is bridged by imports.

Kenya is a member of the Comesa Free Trade Area (Comesa-FTA). The FTA obliges the country to allow duty and quota free access for products including sugar from the other FTA member countries into her market.

But it also provides for the imposition of safeguard measures in order to reduce the quantities of commodity imported for a stipulated period of time to allow a particular industry to recover.

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