Kenya Sugar Millers Smile as COMESA Extends Import Limits

Local sugar millers can breathe a sigh of relief after Kenya was granted another year-long extension of sugar import limits from COMESA, the regional trading bloc. This has saved the local millers from the competition of cheaply imported sugar that has always been blamed on the ailing sugar industry in Kenya.

This decision to extend Kenya’s import limits for the sixth time to February 2017 was arrived at during the 35^th Common Market for Eastern and Southern Africa, COMESA, Council of Ministers meeting that was held in Zambia. Sugar tariffs in Kenya had been scheduled to fall to zero in the month of February. This import limits extension gives the Kenya sugar industry a more time to improve the infrastructure as well as carrying out other much needed reforms like that of the sale of companies that have been making losses, introducing new varieties of sugarcane as well as improving the status of roads in areas where sugarcane is grown.

Kenyan sugar farmers for over a decade have not managed to cope up with the high sugar tariffs in the continental sugar industry and COMESA has allowed them to be shielded from this for the past ten years. Kenya will now be able to limit the sugar that is imported into the country to 350 thousand tones and this will help in plugging the annual sugar deficit.

According to Kenya Sugar Directorate, the cost of producing a tone of sugar in Western Kenya is at 57,000 shillings. This cost is higher compared to that one in Egypt which ranges between 24,000 shillings and 29,000 shillings. The cost of producing sugar in Kenya, therefore, is higher than in other countries that export sugar to Kenya. Imported sugar is therefore always cheaper compared to the locally produced sugar and this has greatly affected the sugar industry in Kenya.

The high production cost of sugar in Kenya has often been blamed on the high energy costs, poor funding from the government owned factories, massive corruption like what was witnessed in the once gigantic sugar producer in Kenya, Mumias Sugar Company, poor infrastructure especially the roads in the sugar growing zones as well as the presence of old antiquated machinery that often break down from time to time.

In the past ten years, Kenya had pledged to sell off a total of 51 percent of stake in five millers to some of the strategic millers as a way of reforming the sugar sector into the country. This pledge has come into initiation as from last week and investors are now keen and interested in getting hold of majority stakes. These five millers are Sony, Chemilil, Nzoia, Muhoroni and Miwani where the government was to reserve 30 percent for farmers and then sell the remaining 19 percent in an initial public offering as soon as the factories start making some profits. This is because at the moment, the debt of the five millers combined totals to 100 billion shillings.