Kenya’s stagnant sugar industry has received another reprieve. This is after the Common Market for Eastern and Southern Africa(COMESA) regional trading block granted it a two-year extension of the sugar import safeguards, beginning March 2021 to February 2023.
The current safeguard was due to be lifted in February next year. Kenya’s sugar industry was first granted protection against imports from the 19-member COMESA block in March 2002.
While Kenya has been seeking extensions of the safeguards, little progress has been made to revitalize the sugar industry, still riddled with huge debts, old technology and poor management practices.
At its 41st virtual meeting, the COMESA Council of Ministers urged Kenya to share details of its sugar deficit with other member states by November 30th, 2020.
Kenya appealed to the COMESA technical committees and requested for a two years extension after the current one lapses.
In its decision, the Council told Kenya to give preference to sugar originating from COMESA when seeking to plug its deficit. This, the council said, would provide Kenya with some flexibility on the allocated quota while importing from COMESA.
Kenya told the Council that all its sugar mills are running and thus it expected domestic production levels to go up. Kenya was also required to give a detailed report on how its sugar mills will increase their competitive edge while making sure sugar importation process is transparent, fast and efficient.
The COMESA Safeguards allows Kenya to maintain a 350,000-tonne ceiling on duty-free sugar imports from this 19-member trading bloc.
But while Kenya has sought protection for its sugar sector, the process of privatising its state-owned sugar mills appears to have slowed to a halt. This is as the state shifts gears in favour of the leasing option.
Listed Mumias Sugar Company, the most suspended miller, remains suspended from the Nairobi Securities Exchange( NSE) as it struggles to clear debts with banks.
In July, the Government began the process of leasing Chemelil, Miwani, Muhoroni, Nzoia and South Nyanza Sugar Companies, to private investors.
The sugar industry in Kenya has grown over the years, currently with 15 white sugar mills being opened and several jaggeries.
Rosemary Owino, Head of the Sugar Directorate in Kenya’s Ministry of Trade, says Kenya’s area under cane cultivation increased by 24% from 159,288 hectares in 2010 to 197,438 hectares in 2019.
Figures indicate that Kenya produced 244,826 tonnes in 2019, an increase of 22% from the previous year. An estimated 237,581 tonnes of sugar was imported.
Last year, sugar production stood at 440,935 tonnes against consumption levels of 1,038,717 tonnes, resulting in a deficit of 58%.
Ms Owino told COMESA in a July 2020 meeting that Kenya’s sugar production costs are currently at about US$700 per metric tonne.
Kenya’s high production costs are attributed to inefficient state-owned firms, pushing the country’s costs for producing sugar at about 36% higher than import prices from the COMESA exporters.
Sugar exporting Member States of COMESA include Burundi, DR Congo, Egypt, Eswatini, Malawi, Mauritius, Rwanda, Uganda and Zambia, Zimbabwe. Kenya is the only member with a sugar import safeguard within COMESA.