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The Kenya Sugar Board and the Ministry of Agriculture have been left embarrassed after the much-hyped auction of rights to import sugar under the Comesa rules was hijacked by brokers and briefcase companies, the Nation has established.

Now Kenyans are faced with increasing prices as the brokers make a killing with the permits.

Two of the companies allocated 50,000 metric tonnes of sugar were registered by the same lawyer and share the same directors. Their offices are located on Nairobi’s Tom Mboya Street.

The file for another company allocated 20,000 metric tonnes could not be traced at the Registrar of Companies during a search conducted on Friday.

Sources at the auction done 10 days ago said most of the 20 permits were auctioned to companies that have no capacity to import sugar.

The companies were given the import licenses on a 30-day basis, with the first import expected to land in Mombasa at the end of this month.

The chief executive of the Kenya Sugar Board (KSB), Ms Rosemary Mkok, said some of the 20 companies that bought the permits were briefcase operators who are busy trying to sell them to established importers.

“Some of the bidders are trying to sell to those who failed,” Ms Mkok said despite her earlier assertions that brokers would be kept out.

Kenya has an annual deficit of more than 200,000 tonnes of sugar, which is imported duty free from the Common Market for Eastern and Southern Africa (Comesa) region.

The move to auction the rights to import sugar is a departure from the past where KSB had adopted the first-come-first served system.

Agriculture minister William Ruto scrapped the old system last year when he was appointed to head the ministry.

Since the auction of the licenses to import the 260,000 metric tones of sugar from the Comesa region, the KSB management has been evasive on who got the rights.

Ms Mkok said they were keeping the list secret to stop those who won from selling them to the established importers.

But this contradicts the stringent rules the KSB had claimed to have put in place to lock out brokers and briefcase operators prior to the auction.

Among the stringent rules was barring of companies that won the permits from transferring them to third parties.

Ms Mkok said each importer would state the quantity they intend to import, bill of lading and the Import Declaration Form number.

Each importer would also state the specific quarter when they intend to bring in their cargo, which will not be transferred or varied.

While the board declined to release the list of 20 companies given the import rights, investigations by the Nation established that many reputable sugar importers were locked out.

Severe shortage

Instead, new entrants, some with no capacity to import their quotas, got the bulk of the permits.

One of the disappointed importers accused KSB of engaging in politics with sugar at a time when the country was facing a severe food shortage.

The importer, who cannot be named as it may jeopardise his future dealings with KSB and the Ministry of Agriculture, warned that some of the companies given the permits could not deliver.

“They have no capacity as sugar is a multi-million shilling business”, the importer said.

The requirements for one to be an importer or exporter of sugar are proof of registration, possession of a Value Added Tax (VAT) certificate, a physical address, warehouse location and capacity, and a statement of the quantity of sugar imported in the last 12 months along with dates of importation.

Failure to import sugar from Comesa has been blamed for the steep increase in sugar prices that are now as high as Sh120 for a kilogramme, up from Sh75.