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Prime Minister Raila Odinga has been asked to intervene in the sugar sector before it plunges into a crisis even as the Kenya Sugar Board (KSB) gets ready to repossess licenses it auctioned last month.
Prime Minister Raila Odinga has been asked to intervene in the sugar sector before it plunges into a crisis even as the Kenya Sugar Board (KSB) gets ready to repossess licenses it auctioned last month.

In a confidential brief to the prime minister’s office, an infrastructure sector specialist Silvester Kasuku further warns that importation of sugar outside the Common Market for Eastern and Southern Africa (Comesa) without paying duty will eventually hurt local farmers.

He said the move was also likely to antagonise Kenya with other Comesa members after it negotiated the safeguard measures that run until 2012.

Local sugar prices have been on the rise because of the cancellation of import licences by the Ministry of Agriculture last November and the recent introduction of the auction system.

Protect livelihoods

“This situation needs to be contained by ensuring that the quota for Comesa sugar is imported in a transparent and accountable manner to protect the livelihoods of sugar farming communities and households in the country,” he adds.

The country has been gripped by a sugar shortage for the last three months following the closure of local factories for their annual maintenance. This has seen the retail price of sugar rise from Sh75 to more than Sh150 for a kilogramme.

The scarcity is expected to bite further after the Ministry of Agriculture and the Kenya Sugar Board auctioned licences to import duty free sugar from Comesa only to realise that even some brokers and briefcase operators bought them.

Sources told the Sunday Nation that the 20 import licences that were given out on August 12, 2009 would be reviewed this week unless they had been paid for.

According to one importer, successful bidders were given 30 days to pay for the quantities allocated with effect from August 12, 2009. Failure to comply with the rule means withdrawal of the licence.

Cancellation of some of them will confirm that many of the traders were briefcase operators and brokers who were out to make a quick buck.

In the confidential brief to Mr Odinga, Mr Kasuku terms the proposal by the Minister for Agriculture William Ruto that sugar from other regions other than Comesa be allowed in the country without paying duty as “mischievous”.

He says that the ministry has deliberately made it impossible for importers to access Comesa sugar for the last six months. Mr Kasuku noted that the ministry had gone ahead and applied to its Finance counterpart to be granted permission to bring in duty free sugar outside the Comesa safeguard measures.

“This move is against Comesa rules considering that the country has not imported its quota to warrant such a move,” he says. Mr Kasuku warned that unless this was addressed, the sugar sector is likely to be plunged into malpractices that it faced in the 1990s and early 2000.

Last week, Mr Ruto toned down on his intent to have sugar imported outside the Comesa safeguard measures noting that traders will be given a structured import duty concession to protect local farmers. However, the minister did not disclose how this would be done.

Even as the Agriculture minister changed tune, it emerged that non-comesa sugar was already in Mombasa awaiting clearance to off-load without paying duty.

Mumias Sugar Company managing director Evans Kidero warned that allowing in non-comesa sugar without paying 100 per cent duty would flood the local market with cheap produce.

“We (local factories) shall not be able to sell our produce till the cheap imports are exhausted,” warned the MD. Mr Kidero is among those who are opposed to non-comesa sugar being imported without paying duty.

“If any sugar comes from non-comesa countries, it should attract full duties as required under the East African Community,” the Mumias boss said earlier this month. Mr Ruto and the chief executive of KSB Rosemary Mkok were not available for comment.

As the debate raged, it emerged that the sugar board may have involved itself in a futile exercise when it sold licences to import sugar from Comesa.

Knowledgeable sources told the Sunday Nation that the regulatory board did not verify the availability of sugar in Comesa to match the rights issue.

Net exporters of sugar in Comesa include Egypt, Sudan, South Africa, Mauritius and Swaziland. According to one of the sugar importers who cannot be named for fear of reprisals from KSB, anyone who wants to bring in sugar from Comesa countries should have signed contracts prior to last year’s ban on importation of sugar into Kenya.

“Egypt has an export ban while Sudan is an importer this year,” the source added noting that importers cannot get any commodity from South Africa because companies there were gearing for exports to the European Union from next month.

Global sugar supply data indicates that Comesa exporters of the commodity such as Malawi have shifted attention to European, American and Asian markets that are offering premium prices and have stopped exports to the regional market.

Ordinary shipments of sugar into Kenya cost about Sh30,000 per tonne compared to the global average of Sh45,000 per tonne. Sugar importation is one of the most sought after business because of its high returns leading to fierce competition among businessmen.

In the Kanu era, importation was confined to a few politically correct businessmen from Mombasa led by a former nominated MP Rashid Sajjad. The money raised from the sugar transactions was used to bankroll politicians and political parties during elections.