Africa

As Sugar Business Goes Sour In Kenya, 21 Countries Face Bitter Times


July 5, 2020

The ailing sugar sector in Kenya got a reprieve after importers were locked out of the market. The government came up with a raft of measures chiefly aimed at protecting the local manufacturers.

The agriculture ministry has suspended trade licenses for brown sugar brokers. Unscrupulous traders have been largely blamed for committing illegalities including smuggling.

Both the public and private-owned entities are on the brink of collapse due to unfavorable competition. State-managed firms are; Mumias Sugar Company, Nzoia Sugar, South Nyanza Factory, Muhoroni, and Chemil.

West Kenya Sugar Company, Kibos Sugar, Butali, and Sukari Industries Limited are among the individual run millers. Others are Transmara Industry, Kwale International Sugar Company, and Kisii sugar factory.

The authorities have taken issue with some of the Common Market for Eastern and Southern Africa (COMESA) subscribers for abusing the Rules of Origin to import Sugar from Brazil then proceed to export to Kenya.

In 2018, contraband sugar was confiscated by the standards officials. It was later revealed that its samples contained traces of nearly 21 milligrams (mg) of copper, more than 10 times the recommended safe level.

The industry’s woes are traced back to 1981 after the formation of the Preferential Trade Area (PTA) of Eastern and Southern Africa. The treaty rooted for regional economic cooperation and integration.

Intra-African trade was expanded and market barriers were relaxed. This led to the influx of cheap sugar products. Porous borders and high levels of kickbacks have been argued as the main catalysts of these trends.

PTA became an attractive business avenue in 1994 when it transformed into COMESA. All its 21 member countries are casualties of the ban.

COMESA bloc accounts for 60 percent of sugar production in Africa. The Kingdom of Eswatini, Egypt, and Zambia are leading the pack with an average production capacity of 650,000 metric tonnes (MT), 595,000 MT, and 450,000 MT respectively.

Ethiopia stands at 450,000 MT, Zimbabwe 391,000 MT whereas Kenya has milling potential of 376,000 MT. Malawi is at the tail end with 239,000 MT trailing Mauritius which stands at 355,000.

Southern African Development Community (SADC) members, Russia and Israel are key drivers of raw sugar importation.

The economic caucus is also a net exporter at the same time being an African sugar consumption hub. Most of the raw products are normally exported to the European Union, the United States of America (USA), and China.

Table sugar importation amongst the members is under a duty-free, quota-free basis. However, non-members have taxed 100 percent import duty.

The report released by Alliance for Commodity Trade in Eastern and Southern Africa (ACTESA), indicates that African consumption has grown more than 70 percent over the past 15 years. Despite this growth, African per capita consumption of 17 kilograms (kg) remains well below that of the global average of 23 kg.

Featured Image Courtesy: Scooper

TheAfricanContext

A Weekly Newsletter That Is Making Waves Across Africa.

Read More
 image
 image

also read