For Online E-newspaper
The East African : Aug 22nd 2015
32 The EastAfrican BUSINESS AUGUST 22-28,2015 Kenya’s suga≥ secto≥ on auto pilot, and fa≥me≥s, citizens a≥e paying the p≥ice F or a decade and a half, Kenya’s sugar sector has been grappling with production and market- ing challenges, that have left it in a crisis. Problems in the sector started in the year 2000 when the cost of production of sugar rose to uncompetitive levels — about $600 per tonne while it cost Egypt $300 at the time. The Kenyan sugar could not stand competition from Comesa member states. In 2003, the government stepped in and sought protectionist measures from Comesa for one year. Although Comesa agreed, no effort was made to address the production and institutional challenges in the sector. At the expiry of the safeguard in 2004, the sector was still in the doldrums. The government requested, yet another extension of two years, which was granted, and once again, the situation was forgotten and it was business as usual. The government was expected to utilise the period to institute the necessary reforms to turn the industry around. The requests were then repeated year after year and beyond the maximum allowable period of 10 years as per the World Trade Organisation regulations. This is a clear indication of the lack of seriousness in addressing the challenges in the sugar sector. It is common knowledge that the sugar sector is ailing from haphazard imports that crowd out local produce. Although the country has to import at least 200,000 tonnes of sugar every year to meet the shortfall, the imports have never been co-ordinated. The so-called shortfall imports is let in anytime in the year even when local factories are at peak production. This distorts the market, factory processing and cane-harvesting capacity to deal with in order to cushion farmers and the six million Kenyans who directly and indirectly derive their livelihoods from the sugar industry. This is one sector the country cannot afford to abandon in favour of imports. Like other crops such as rice and maize, although costs of production are higher here in Kenya compared with Pakistan or the US for example, local production benefits outweigh those from imports. However, for the sugar sector, the level of operation has a bearing on the productivity and profitability of the crop. For the past 20 years, sugar zones have witnessed land fragmentation and partitioning that has reduced the average acreage of land under sugar to as low as five acres. This has inevitably denied the farmers any advantages of economies of scale. Although there is no fixed figure on optimal land size for sugar growing, costs incurred on a farm of less than 20 acres tend to be very significant. Farmers with smallholdings need to be advised to venture into other agricultural activities. To turn around this sector, A tractor loaded with sugarcane arrives at the Chemelil Sugar weighbridge in western Kenya. Picture: File COMMENTARY PAUL MBUNI “Importation of sugar is not the problem, the issue lies in importing the sugar without regard for our production parameters.” programmes, causing farmers to hold on to the cane on their farms for as long as 36 months, and stock-piling of processed sugar in godowns. This ultimately pushes the costs of production to levels far higher than our regional and international competitors. Unfortunately, the victims of these imports — the farmers have no say in these practices. Importation of sugar whether from Uganda, Brazil, Egypt or Malawi is not really the problem, the issue lies in importing the sugar without regard for our production parameters. Unfortunately, there is no indication that the trend is going to change any time soon. This practice has a devastating effect on farmers and those whose livelihoods are directly and indirectly dependent on sugar. Ideally, sugar companies and sugar outgrower associations are in a better position to import the shortfall as they are unlikely to jeopardise their own interests. This was suggested a few years ago but the idea seems to have been abandoned due to pressure from the sugar barons. The Ministry of Agriculture has powers to institute such a policy and ensure that sugar companies take charge of any sugar imported into the country rather than private individuals. Sugar is imported into the country purely to satisfy private commercial interests as opposed to a national need. For this reason, the situation is likely to be compounded by any bilateral arrangement of sugar imports from Uganda outside the Comesa framework, as that is more susceptible to misuse and misapplication Due to the prevailing chal- lenges in the sector, some stakeholders are dismissing sugar as unproductive and advising farmers to seek alternative crops. Sugarcane farming can be productive and profitable under the right environment. Our current policies, production systems, breeds, processing technologies (low conversion rates) and worse still marketing practices, are all wrong. In the mix of all these, we have the corruption factor. However, these are challenges that the government has the the government should move away from its fixation that privatisation is a panacea for all sugar sector problems. There is a compelling need for government support for sugar farmers through a comprehensive subsidy programme as happens in other countries. Haphazard imports should be stopped and sugar companies be empowered as sole sugar importers in the country. The sugar sector requires technical and financial assistance to withstand regional and global competition. There is also a need to restructure the Agriculture, Food and Fisheries Authority to play a role in managing related imports and exports. We cannot afford to surrender the sugar sector to auto pilot otherwise we shall all lose out in the long run. We must direct this sector. Something needs to be done urgently. Paul Mbuni is the national chai≥man of the Kenya Society fo≥ Ag≥icultu≥al P≥ofessionals Da≥ t≥ade≥s will need tax ce≥tificates to ≥enew licences By JASTON BINALA Special Correspondent BUSINESSES IN Tanzania will now need a tax clearance certificate from the Tanzania Revenue Authority for the annual renewal of their licences. The requirement, which had been repealed in 2004, comes after an amendment was made in the Tanzania Business Licensing Act (CAP 208) in June. But the Confederation of Tanzania Indus- tries director of policy and advocacy Hussein Kamote said the amendment to the law would increase bureaucracy and by extension, the cost of doing business. “What if TRA delays approving the audited books of accounts?” Kamote asked. “That would delay the licence. I think they should revert to the previous procedure.” The latest World Bank Ease of Doing Busi- ness Index places Tanzania at number 131 out of 181 nations across the globe. The tax clearance is issued by TRA while the licence is issued by the Trade Ministry. A source at the Dar es Salaam Merchants Chamber told The EastAfrican that some chamber members are forced to spend large sums of money on financial statement audits at the wrong time of the year to appease the TRA, a problem that forces some members to offer bribes. The head of the Business Licensing De- partment at the Ministry of Trade, Christopher Nasari, and TRA Deputy Commissioner for Internal Revenue Generous Bateyunga, said the procedure has been reintroduced to curb tax evasion. The tax clearance certificate is a condition for obtaining a business licence everywhere in East Africa, Mr Nasari said. It is, therefore, common practice that should be accept- Tanzania Revenue Authority in Dar es Salaam. Picture: File ed, he added. But the business licence application form TFN 211 contradicts the amended Business Licensing Act (CAP 208). TFN 211 stipulates that the Tanzania business license should not be linked to any other payments. Mr Nasari said the contradiction will be solved when new application forms are printed, adding that the form only involved procedural matters. Ms Bateyunga said that the tax clearance certificate’s link to the trading licence will serve as a control tool and not an impediment. The Tanzania Business Licensing Act (CAP 208) was amended in parliament in June and assented by the [president on June 28. Section 49 of Part XVI of the Tanzania Finance Act 2015 amends Section 13 of “The Principal Act” to make it mandatory for every business to obtain a tax clearance certificate from the TRA for annual renewal of their business licence.
Aug 16th 2015
Aug 29th 2015