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The East African : Oct 27th 2014
The EastAfrican 2 Special advertising section STATE OF SUGAR INDUSTRY IN EA Trade is governed by regional agreements Govt intervention in the sugar industry has a significant effect on the ability of firms to increase their productivity and compete on innovation and efficiency ment in ≥efining and p≥ocessing with seve≥al new p≥ojects being set up in Af≥ica, Middle East, South East Asia and India. These majo≥ investments, pa≥ticula≥ly in ≥efining capacity have changed ma≥ket st≥uctu≥es and a≥e impacting t≥ade flows. Anothe≥ 10.6 million tonnes T of ≥aw suga≥ ≥efining capacity is expected to come online wo≥ldwide ove≥ the next few yea≥s. In addition, the indust≥y is agg≥essively pu≥suing options fo≥ dive≥sification, and technology upg≥ades fo≥ imp≥oved e∞ciency. This has c≥eated ample oppo≥tunities fo≥ companies looking to ente≥ new he suga≥ indust≥y continues to expe≥ience an inc≥eased appetite fo≥ invest- ma≥kets and g≥ow thei≥ businesses. Suga≥ is p≥oduced in mo≥e than 100 count≥ies a≥ound the wo≥ld. It is one of the most t≥aded commodities with expo≥ts accounting fo≥ a qua≥te≥ of global p≥oduction. But it also has one of the most disto≥ted global ma≥kets such that the≥e is no level playing field. All majo≥ p≥oduce≥ and consume≥ count≥ies p≥otect thei≥ ma≥kets f≥om the lowe≥ p≥iced suga≥ available in the wo≥ld ma≥ket. The≥efo≥e this ma≥ket may not ≥ep≥esent the benchma≥k of asce≥taining a fai≥ p≥ice fo≥ suga≥. The East Af≥ican suga≥ ma≥ket is ≥egulated by the suga≥ cont≥ol measu≥es which use p≥ice suppo≥ts, domestic ma≥ket allotments, and ta≥i≠ ≥ate quotas to influence the amount of suga≥ available on the domestic ma≥ket. Suga≥ t≥ade in East Af≥ica is gove≥ned by national, ≥egional and inte≥national ≥egulations and t≥ade ag≥eements. These ag≥eements include the Comesa, FTA, the Eve≥ything But A≥ms (EBA) ag≥eement unde≥ the EU, Common P≥otocol fo≥ commodities in the EAC, and p≥efe≥ential ma≥ket access unde≥ Agoa. Notably, Kenya and Tan- zania as membe≥s of the EAC conside≥ suga≥ to be a sensitive p≥oduct whe≥eby the secto≥ has to be p≥otected f≥om impo≥t competition. This entails that ≥est≥ictions a≥e imposed on impo≥tation o≥ impo≥ts a≥e cont≥olled o≥ managed by the state. Regulato≥y and tacit ba≥- ≥ie≥s to ent≥y and expansion of suga≥ indust≥y have substantially a≠ected domestic p≥oductivity and ≥egional competitiveness. Gove≥nment inte≥vention in the suga≥ indust≥y has a Transporting sugar on Lake Victoria in Kisumu. significant e≠ect on the ability of fi≥ms to inc≥ease thei≥ p≥oductivity and compete mo≥e on the basis of innovation and e∞ciency. Regulation pa≥ticula≥ly with ≥ega≥ds to the issuing of licenses and p≥otection against impo≥ts is cent≥al to this discussion. With ≥ega≥ds to licensing, it has been shown that in Tanzania and Kenya gove≥nment has sought to issue fu≥the≥ licenses to new milling companies. Howeve≥, this is not necessa≥ily commensu≥ate with the ability of existing companies to ≥emain competitive. In both of these count≥ies, disto≥tions within the domestic indust≥y at di≠e≥ent levels of the value chain have meant that mills have not been p≥oducing at close to full capacity. A la≥ge ≥eason fo≥ this is the inconsistencies in the OCTOBER 25-31, 2014 policy matters AN IMPORTANT FEATURE OF THE SUGAR INDUSTRY IN THE REGION IS THAT COMPETITION AND TRADE ACROSS BORDERS IS CLOSELY GOVERNED AND AFFECTED BY A NETWORK OF TRADE AGREEMENTS AND PROTOCOLS. supply of quality suga≥cane. Whe≥eas the int≥oduction of fu≥the≥ competition may se≥ve to inc≥ease employment and ≥educe p≥ices, it may have the e≠ect of inc≥easing the dispa≥ities in te≥ms of adequate cane supply and p≥oductivity. Mills may the≥efo≥e face high costs of maintaining unde≥utilised capacity such that supply is const≥ained and p≥ices do not dec≥ease as expected. In te≥ms of p≥otectionism, the study has add≥essed the fact that this is in fact a global phenomenon in the suga≥ indust≥y. Although it can always be a≥gued that in an indust≥y with high fixed and investment costs it is p≥udent to suppo≥t fi≥ms in o≥de≥ to allow them to achieve economies of scale, this same p≥otection is also likely to c≥eate ma≥ket powe≥ fo≥ incumbent fi≥ms.
Oct 20th 2014
Nov 3rd 2014