The country may soon experience a sugar glut occasioned by increased importations that threaten the collapse of the local industry, Agriculture Cabinet Secretary Peter Munya has warned.
Munya said the developments are a disincentive to farmers and investors and hence the reason why the government undertook remedial measures through comprehensive reforms.
Speaking on Thursday during a press briefing at Kilimo House on the importation of raw cane and processed sugar, Munya suspended with immediate effect imports of all brown sugar into the Country and also suspended pre-shipment approvals and extensions of all sugar import permits immediately, until further notice.
“We are further prohibiting the importation of raw cane with immediate effect and all applications for brown sugar imports shall also be subjected to the sugar imports/exports regulations that are soon to be gazette,” he said.
He explained that the uncoordinated importation of raw cane and brown sugar has rendered Kenyan sugar mills uncompetitive.
“Ex-factory prices for the mills remain at Sh4,200 per 50-kg bag. The price per tonne is Sh85, 260 compared to the Cost Insurance Freight (CIF) for imported sugar, which stands at Sh60, 117. This scenario clearly explains why Kenyan sugar is struggling to compete with imported sugar in the local market,” Munya said.
He further added that an influx of illegal importation of brown sugar from Uganda through the Busia border with indications of unscrupulous businessmen and traders taking advantage of the Covid-19 curfew hours to sneak unlawful imports into the country at night.
Additionally, he said that some millers who had obtained temporary permits to import raw cane from Uganda for a limited period of three months (September to December 2019) have illegally continued to import raw cane and warned this trend could affect livelihoods of Kenyan farmers along the sugar belt whose crop is ready for harvest.
“I have directed the Sugar Directorate of Agriculture and Food Authority (AFA) to ensure that the new sugar importation guidelines give no provision for the extension for existing brown sugar import permits,” he said.
Munya said that through reforms, the government is determined to facilitate a multipurpose sugar cane industry that is efficient, diversified and globally competitive through enhanced industry competitiveness, cost reduction strategies and a strengthened regulatory framework.
“The continuing gap between production and consumption of sugar in Kenya is not a desirable situation and the government now is taking a deliberate effort to revive the sugar industry to make the country competitive in the sugar value chain,” he said.
In view of this, the CS said that the Cabinet has approved a debt write off owed to Government and the former Kenya Sugar Board commodities fund as well as growers’ debts as at 31st December last year.
“All tax penalties and related interests accrued as at 30th June 2009 and any additional interests and penalties that have accrued since then has also been written off,” Munya said.
The total sugar debts government will waive stand at Sh62.5 billion categorized as Sh58 billion loans and Sh4 billion in interest accrued as at June 30, 2009
In order to increase value addition, increase farmers’ incomes and improve competitiveness and service delivery in the sugar sector, the CS noted that Cabinet has also approved to the lease of five state-owned sugar factories.
“The factories will be leased through long term leases of at least 20 years under Right of Use(ROU)on a firm commitment that the lessee will re-develop and operate factory to meet the governments objective of higher farmers income and increased profitability through the production of ethanol and generation of power,” Munya said.
The five factories slated for leasing are Chemelil Sugar, Miwani Sugar Company which is under receivership, Muhoroni Sugar also under receivership, Nzoia Sugar Company and South Nyanza Sugar Company.
Munya explained that the idea behind leasing is that government will invite investors with experience in the global sugar industry with a focus on sugar as the main product and co-production of ethanol, co-generation of power and value addition products such as industrial sugar, pharma sugar and sugar cubes.
He said that the ministry has completed the revision of the sugar import and export regulations which have already been forwarded to the AGs office for gazettement while the general sugar regulations 2020 have already been gazetted on the 27th of May 2020.
“The current position is that the Ministry has finalized draft documents and has forwarded these to the AG and upon his concurrence, we shall advertise for the leases on Monday next week”, CS Munya said.
Kenya’s sugar imports are mainly from COMESA following the 2002 sugar safeguard. This year Kenya has imported 157,529 metric tonnes of brown sugar from COMESA between January and March. AFA has additionally received requests to import 586, 000 metric tonnes which is yet to be approved.