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Daily Nation : February 11th 2014
DAILY NATION Tuesday February 11, 2014 agriculture Country is the second most attractive destination after the European Union due to inefficiencies in the industry BY RAMENYA GIBENDI firstname.lastname@example.org smart business 11 TRADE » INDUSTRY PLAYERS SAY PROTECTIONIST MEASURES BENEFIT ONLY UNSCRUPULOUS IMPORTERS Kenya still lucrative market for sugar barons H FILE | NATION igh production costs have turned Kenya into a lucrative sugar market. The World Bank last year classified the country as the second most attractive sugar market after the European Union as a result of inefficiencies in the industry which have seen Kenyans pay more for sugar than other consumers in the Comesa region. Even with safeguard measures that are supposed to ensure local millers sell their product easily, weak regulations and poor implementation of key policies have impeded the business, leading to slow movement of stock. Stakeholders now say the protectionist measures benefit unscrupulous sugar importers more than the industry itself. “Sugar barons are the overall beneficiaries because they have invested very little if THE BIGGEST ISSUE WITH COMESA IS EGYPT. IT IS A NET IMPORTER OF SUGAR YET IT EXPORTS SUGAR. MOST OF THE SUGAR IS REFINED BRAZILIAN PRODUCE WHICH DOESN’T FOLLOW THE 15PC VALUE ADDITION RULE” West Kenya boss Said Tajveer Rai anything and they do not pay taxes or sugar development levy, and we have to compete with them,” said West Kenya Sugar Company boss Said Tajveer Rai. The unscrupulous traders, he added, source the product from countries with low production costs, enjoying huge margins when they sell it in Kenya. He cited Egypt as a major source of contraband sugar despite the North African country being a net importer of the good. “The biggest issue with Comesa is Egypt. It is a net importer of sugar yet it exports sugar. Most of the sugar is refined Brazilian produce which does not follow the 15 per cent value addition rule,” he said. Factories have consistently complained Police officers and a sugar board official inspect a consignment that was recently confiscated in Mombasa. Kenya is said to be an attractive market for unscrupulous sugar dealers. that the imports make it hard for millers to sell sugar due to a glut in the market. Data from the industry regulator, the Kenya Sugar Board (KSB), shows millers were holding 19,992 tonnes of sugar in their warehouses as at August 2013. This prompted the Ministry of Agriculture to suspend all sugar imports. At the moment, the ex-factory price of a 50-kilogramme bag of sugar is between Sh3,400 and Sh3,200, down from Sh5,500 late last year, a pointer that the market is flooding. According to the sector regulator, the average sugar production cost in Kenya is $870 per tonne, way above other Comesa producers like Malawi, Zambia and Swazi- land which incur between $300 and $350. KSB boss Rosemary Mkok said: “Some manufacturers who import from the Comesa region are able to bring in more than they require, offloading excess sugar to retail outlets.” Due to loopholes in monitoring, indus- trial sugar enters retail outlets disguised as brown sugar, a pointer to how unscrupulous traders benefit from the Comesa safeguards. Kenya sought Comesa safeguards in 2003 to protect its sugar industry by limiting duty-free imports that could distort the market. The safeguards, which have been extended four times, are set to expire in March 1, this year, but the government is lobbying for another extension. According to Ms Mkok, poor co-ordina- tion among state agencies and the government has seen sugar barons call the shots, in effect crippling local millers. “There are gaps in the coordination of various agencies that are supposed to deal with different aspects of sugar importation — KSB, Kenya Revenue Authority, Kenya Bureau of Standards, Kenya Ports Authority and the police,” she noted. Amid all this, the commodity remains expensive in Kenya, attracting about $2 per kilo. In Tanzania, it sells at $1.25 and $1.5 in Uganda, making the country attractive even to sugar from the neighbours. Failure by Kenya to implement policies aimed at making the local sugar industry competitive for over 10 years puts to question the bid by the country for another extension of the safeguards.
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