Doubts linger on reforms as Kenya gets new sugar import safeguards

Trucks of sugar at the Mombasa port. Kenya is far from meeting some conditions set before opening the sub-sector to imports. FILE PHOTO | NMG 

In Summary

• Despite the numerous extensions, Kenya is far from meeting some of the conditions that have been set before opening the sub-sector to imports.
• The country has been granted a two-year extension after it made a request last week during the Comesa meeting held in Zambia.
• The new safeguards start in February next year once the current scheme ends.

By GERALD ANDAE
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A joint committee comprising officials from the Common Market for Eastern and Southern Africa (Comesa) will oversee implementation of the recent extension on sugar imports safeguards and determine at the end of two years whether to renew it.

This is a departure from the normal practice where Kenya, through the Ministry of Trade, had to negotiate for the safety nets that limit the quantity of sugar that member states are allowed to export to Kenya.

But despite the numerous extensions, Kenya is far from meeting some of the conditions that have been set before opening the sub-sector to imports.

The team tasked with disposing of State-owned millers is grappling with increasing hostility from sugar-producing zones, with some governors saying they want to be given the leashes to run the poorly performing entities.

Trade Principal Secretary Chris Kiptoo told the Sunday Nation that the committee will work with officials from the Sugar Directorate in implementing the conditions set by the regional bloc.

“There is a joint committee in place that will work towards implementing the conditions for safeguards, the team will oversee the process in the next two years,” said Mr Kiptoo.

Kenya has been granted a two-year extension after it made a request last week during the Comesa meeting held in Zambia. The new safeguards start in February next year once the current scheme ends.

Mr Kiptoo, however, said it is unlikely that the sugar sector will meet the conditions by the time the safeguards end, citing structural challenges and political influence that have hampered progress on reforms, especially in the State-owned millers.
“It is very unlikely that the sector will have implemented the conditions set by Comesa at the end of the two years, because of the structural problems facing sugar millers, which have hampered activities such as privatisation,” he said.

Some of the conditions that Kenya was supposed to meet before the sugar sector is liberalised include privatisation of State-owned millers, introducing an early maturing sugarcane variety, changing the payment formula from weight-based to sucrose-based and addressing the high cost of production that stands at about Sh9,000 per tonne against Sh4,000 for countries such as Mauritius.

Though Kenya has shielded its sugar sub-sector from foreign competition for 10 years, the country still failed to address underlying issues that make it uncompetitive.

In 2015, Nairobi invoked the infantry clause of Comesa laws to seek protection against blanket exports of sugar to Kenya from member states, arguing that it wanted to protect new factories that had just been set up.

And now the Council of Governors has rejected the proposed sale of these sugar factories, saying that will not solve the problems facing farmers and instead want the assets to be handed over to the counties.

The government plans to dispose of a 51 per cent stake in these companies to strategic investors and reserve another 24 per cent for farmers and employees.

The State will then sell the remaining 25 per cent in the millers through an initial public offer once the factories are profitable.

The Privatisation Commission was targeting August as the time by which the State will have sold all these firms to investors, but much has not been done, with just a few weeks to their self-imposed deadline.

Another condition issued by Comesa is the establishment of fast-maturing sugarcane. As much as this has been achieved, farmers and millers have been reluctant to embrace it, citing low productivity compared with the conventional one that takes about 20 months to mature.

READ: Relief for Kenya as Comesa team endorses sugar import safeguard

Sony Sugar Company Managing Director Bernard Otieno said farmers mainly get their profit from the second harvest, popularly referred to as a ratoon crop.

However, the ratoon crop from the new varieties is way below the conventional one.

“The crop from ratoon coming out of a new sugarcane variety is very low, meaning that farmers do not get enough out of it to keep them in business,” Mr Otieno said.

Economist Ansetze Were says there is no justification for the country to seek more safeguards at the expense of addressing underlying issues that have affected the sector for many years.

“The government is not dealing with the real issues here but it is busy protecting the industry that is not competitive at all,” she said.

Kenya produces about 600,000 tonnes of sugar a year against an annual consumption of 870,000 tonnes. The sugar deficit is usually covered by stringently controlled imports from the Comesa trade bloc, where Kenya has a quota of 300,000 tonnes annually.