Smuggling sours market for Africa sugar producers

Sugarcane farmers in Western Kenya. The country has experienced a sharp decline in sugar prices. Photo/FILE 

By Reuters

In Summary

• Large amounts of illegal imports had led to stockpiles and was pushing down sugar prices in Africa, with illegal imports being re-packaged into local bags to conceal their identity and evade the surveillance network.
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Africa’s sugar producers want governments to tighten border controls across the continent and tackle sugar smuggling, a problem they said was helping drive down local sugar prices.

Rosemary Mkok, chief executive of the Kenya Sugar Board, told a conference of sugar producers on Wednesday that smuggling was a big problem in east Africa’s biggest economy.

Large amounts of illegal imports had led to stockpiles and was pushing down sugar prices in Africa, with illegal imports being re-packaged into local bags to conceal their identity and evade the surveillance network.

“In the period between January 2014 to date, the market (in Kenya) has experienced a decline in sugar prices to a low of $36 (Sh3,128) for a 50 kilogramme bag, against an average industry break-even of $43...,” Ms Mkok told the conference of African Sugar Producers in Mombasa.

She said stocks in Kenya had hit a record high of 40,000 metric tonnes against an optimum level of 9,000 metric tonnes.

Sugar prices are already under pressure due to excess global production.

READ: Sugar brokers gain as prices drop to Sh60

Prices on the global market, especially in the European Union—Africa’s biggest external market—have fallen sharply over the last few years due to oversupply, and African producers are seeking new markets to cushion themselves.

African sugar producers at the conference have been discussing ways to increase trade of the commodity within Africa to survive falling world prices and the end of duty-free access to the European Union.

READ: Sugarcane farmers issue bitter ultimatum

Jose Orive, Chief Executive of the International Sugar Organisation (ISO), said it was time Africa dealt with bottlenecks like smuggling and foster more trade within Africa to make it less reliant on the unstable global market.

“We have sensed that it (smuggling) is a serious problem. Every African sugar producer is very concerned,” Orive told Reuters on the sidelines of the conference.

“Part of the options that countries and governments have to contemplate when they negotiate continental trade agreements is measures at the borders to control the flows of sugar,” he said.

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“At the international level, if any country is selling below the market price, then you have the anti-dumping option at the World Trade Organisation,” he added.