Fears of sugar mills collapse as Kenya opens import doors

Tractors deliver cane to a crusher at Butali Sugar Mills, Kakamega. PHOTO | ISAAC WALE | NMG
Tractors deliver cane to a crusher at Butali Sugar Mills, Kakamega. PHOTO | ISAAC WALE | NMG 

The recent opening of the duty free sugar import window could be the final nail in the coffin of local millers.

The May 2017 gazette that permitted cheaper imports without restrictions on the quantity or on specific importers has now sent shockwaves to local industries as it emerges that several sugar shiploads are headed to Mombasa port this month alone.

Next month, the quota management for European Union sugar production will end, leaving Kenya — which now accepts imports from outside the Common Market for East and Central Africa (Comesa) markets — further exposed to more cheap sugar. 

Millers that are old, inefficient, debt-ridden and facing sugarcane shortage have been depending on handouts doled out occasionally by the government to sustain their operations as they await privatisation, which has been pending since 2014.

The government has maintained a double face, giving subsidies to local millers while allowing imports.

Although Agriculture Cabinet Secretary Willy Bett and his Treasury counterpart Henry Rotich did not comment on the matter when reached, managers of State-run millers, employees and farmers who spoke to Sunday Nation expressed fears that the mills might grind to a halt.

“We have been surviving on Comesa safeguards for more than a decade now and we have not had much reforms yet. With the coming of these cheap imports, I don’t think we will survive,” a top manager at a State-run miller in Kisumu county said. He requested anonymity owing to the sensitivity of the matter.

Kenya, which sought a safeguard mechanism from Comesa in 2003 to protect its local industry from threats posed by imported sugar, has been seeking extensions since then. The current one granted in October 2016 will expire next year.

As a condition for the safeguards, the country was supposed to privatise its State-owned millers. But there have often been fears that the country is running out of time to fully meet the conditions set by Comesa in 2007.

The privatisation was to have been done by 2014, including a switch to a sucrose-based sugarcane pricing formula.

A case on privatisation of sugar mills is still stuck in court amid concerns that the factories are fast deteriorating and will eventually be sold for a song, wasting billions of taxpayers’ money.

Privatisation Commission executive director Solomon Kitungu said efforts were underway to have the matter settled out of court, adding that delays in starting the planned reforms before privatisation of the sector have had dire consequences.

“The main issue remains lost opportunities — the efficiencies that have not been achieved and the incomes that have not been earned due to the delays. One of the objectives of the privatisation programme is to secure, preserve and enhance value by rejuvenating State firms,” Mr Kitungu said.

In a May 11 gazette notice, Mr Rotich stated that due to the drought being experienced in Kenya then, sugar imported by “any person” until August 31 would not attract duty.

While the same notice specified that 9,000 tonnes of milk powder would also be imported duty free by processors, with the authority of the Kenya Dairy Board, sugar imports were not specified — both on who the importers would be and how much.

Sources privy to shipping data confirmed that close to 200,000 tonnes of the sweetener was headed to Mombasa port as importers rush to beat the August deadline.

The Kenya National Federation of Sugarcane Farmers, Muhoroni branch secretary, Mr Noah  Opiyo, said farmers in the region were worried over an impending collapse of the industry in the wake of large imports.

“Being a political season, none of our leaders seem to be focused on the fate of local industries. Farmers are owed millions and our greatest fear is that we will not be paid. Promises of bailouts have not been coming through,” Mr Opiyo said.

Kenya’s annual sugar consumption averages 900,000 tonnes, usually allowing a maximum of 350,000 tonnes of imports from the regional market, including East Africa and Egypt.

Kenya has for years battled cartels smuggling the sweetener.

With Europe lifting the lid on its production quotas, the continent’s 19-member states will have millions of tonnes to ship abroad to destinations such as Kenya.