Sugaronline Editorial - The upside down of the in and outs of Kenyan sugar trade By Jane Thirikali
Published: 06/19/2017, 12:29:00 AM
God forbid Kenya have US$1.50 sugar ahead of an election.
Any person involved in international trade will tell of the frustrations faced when trying to export or import goods from one country to another.
In Kenya, these frustrations are a thing of the past; or at least for the next three months for sugar and maize. Under normal circumstances, sugar imports can attract more than 150% of the CIF Mombasa value as duty, taxes and levies at the port. But for this limited period, up to 300,000 metric tonnes can be imported from any COMESA states duty-free compared to the usual 130,000 tonne COMESA quota for industrial use that is imported with a 10% import tax.
Kenya is a sugar deficit country to the tune of some 300,000-odd tonnes per annum, making it a country very attractive for investment in sugar cane production, milling and refining. The country is currently in the middle of the natural progression from state owned and run sugar production facilities, through the current stage where mills that have not invested in sugar cane development are reaping where they have not sown.
The greatest beneficiaries will be those organizations who can stick around for the final stage to develop new sugar cane growing contracts with farmers and undertake sugar production as the serious business it is - but this is the future, back to the current reality.
But for now, the deficit remains. During June, July and August 2017, any organization with US$1,000 to spare can register as a sugar importer. There is no limit to what can be imported but the quality is restricted to brown sugar fit for direct human consumption. The Government of Kenya has determined that this free movement is the short-term solution to the current situation, an untenable one because it is an election year. The Government just cannot have sugar retailing in major supermarkets at upwards of US$1.50 per kg—and even worse—more often than not, even when you are willing to pay this steep price, the sweetener is not available to buy.
The second week of June saw a somber meeting between major importers and active sugar millers at the Farm Minister’s boardroom. The meeting had only two agenda items. First was to determine that not any of the invited parties was hoarding sugar, confirming every one’s fear that this is not an artificial shortage. Because this is a genuine shortage, no one would therefore be aggrieved if duty-free COMESA imports were permitted. After all, the sensitive Kenyan sugar industry requires protection through tariff and non-tariff barriers to its trade.
Second, a formula was agreed that would ensure that after the hustle and bustle of importing, clearing, forwarding and transportation, the retail price settled at a fair value for both retailers and consumers. All agreed that time is of the essence; elections were less than 60 days away.
As a result, import permits in excess of 180,000 tonnes of sugar equivalent were issued as of June 17. What remains to be seen is if all this sugar will be imported within the three-month window, and if they will result in retail sugar prices falling to the Government’s target of US$0.54 per kg.
Jane Thirikali is the Supply Chain Director at JaNe Kenya, Ltd.