Kenya to open borders to tax-free sugar imports from March 2016

Foreign Affairs CS Amina Mohamed and PS Karanja Kibicho at a past press conference. (Photo: File)

The Kenyan sugar sector could be headed for a complete shutdown in February next year after the State said there would be no additional caps on duty-free importation.

Trade Permanent Secretary Karanja Kibicho said the country could not be granted any further safeguards on sugar importation from the 19-member Common Markets for Eastern and Southern Africa (Comesa).

That proposition could push the current debate on the sugar import deal with Uganda to the back burner.

“All members of Comesa who have the capacity to have a surplus of any product, in this case sugar, are free to export to this country if there is a deficit,” Mr Kibicho said at a media briefing Wednesday.

Major relief

An estimated six million Kenyans depend on the sugar supply chain, with a majority being cane farmers, who will inadvertently be the most exposed in this latest development.

On the flip side, however, allowing unlimited imports could provide a major relief for consumers through cheaper sugar.

Kenya had exhausted all allowable protectionist periods under international trade guidelines, Kibicho said, and Comesa could not even consider another request.

He was responding to questions raised by the Opposition on an alleged sugar importation deal said to have been signed last week during President Uhuru Kenyatta’s State visit to Uganda.

Foreign Affairs and Trade Cabinet Secretary Amina Mohamed has twice denied that such a deal was entered into, even though some top Government officials have said some form of agreement was signed.

Amid the continued debate on the particulars of the pact with Uganda, Kibicho fears the country will not be granted another safeguard, even if it wanted one. This could sound the death knell for sugarcane farmers and millers, who are already struggling and heaping the blame on cheap imports, some being smuggled in from neighbouring countries.

Kenya’s sugar production costs are nearly four times higher than those in Malawi, raising concerns about how imports from such countries could compete with local produce in an open-access market.

A tonne of sugar costs Malawian factories an average of $300 (Sh31,000) to produce, and $450 (Sh46,000) in Sudan, according to the findings of the Parliamentary Committee on Agriculture.

After factoring in financing costs, local millers produce a tonne of the sweetener at $870 (Sh88,000), or about Sh88 per kilogramme.

Kibicho said that under Comesa trading rules, restricting sugar imports would automatically stir diplomatic rows that could eventually lead to the blocking of Kenya’s exports. Uganda, which has been at the centre of the current storm over sugar imports, is Kenya’s single-largest export market with a trade deficit in favour of Kenya estimated at Sh55 billion a year.

Protectionist measures taken to cushion Kenya’s sugar sector were first sought in 2002 for a 12-month period, during which it was hoped the State would initiate privatisation of sugar mills. Kenya was also anticipating to have developed sugarcane varieties with higher yields and faster maturities. None of the premises on which the extensions were sought have been met fully.

A small window exists through which smaller protectionist measures could be granted by making a case for infant industries. But even that has no guarantees, Kibicho said, deflating any real hopes of the continued survival of existing millers.