Regulator blames cartels for inflated sugar prices

Agriculture, Fisheries and Food Authority (AFFA) Interim Director General Alfred Busolo and Athletics Kenya South Rift Chairman John Wachira (right) during the launch of kericho International Tea Marathon on April 8, in Nairobi.PHOTO/DENNIS OKEYO

The foods regulator says sugar prices are inflated by cartels and has invited the Competition Authority of Kenya (CAK) to unravel the pricing puzzle.

Acting director general of the Agriculture Fisheries and Foods Authority  (AFFA) Alfred Busolo observed that consumers have been exploited through exorbitant pricing on sugar with a 33 per cent mark-up over the factory-gate rates. “We feel like in terms of distributorship and retailers, there is reason for the Competition Authority to get involved,” said Mr Busolo in an interview with Weekend Business.

CAK’s role would involve tracking the distribution chain to determine whether the value addition in transporting sugar from the factory to the retail outlets was actually commensurate with the mark-up. Prevailing ex-factory prices of sugar range from between Sh3,900 and Sh4,000 per 50-kilo bag.

On average, millers pay a maximum price of Sh80 a kilo. However, buyers across the country, including the retailers nearest to the factories, sell branded sugar at average prices of between Sh120 a kilo and Sh107 for the unbranded commodity — typically bought in sacks and repackaged in polythene bags.

While sugar factories are comfortable with the prices they offload the produce to the market, the current situation means that the players in the distribution chain could be booking the largest gains at the expense of consumers and cane farmers.

Thomas Choge, a farmer’s representative, said on Thursday that cane growers were hardly making profits and often received ‘debit receipts’ from millers even after making deliveries. “It is common to get a farmer receiving a debit receipt after harvesting and delivering cane,” Mr Choge told the acting agriculture minister, Mr Adan Mohamed, and other top State officials at Harambee House.

A debit receipt would occur when a contracted farmer has delivered sugarcane to a miller but the value is not enough to cover the cost of inputs supplied. AFFA, Busolo said, was looking at slashing the barriers imposed on new players seeking entry into the distribution chain, including reducing the capital requirements.

Increasing the number of players who can access the produce directly from the millers would crush the monopolistic tendencies and hopefully allow the market to gauge what would be the fair price. “As much as we are a free economy, we much look out for how the consumers will benefit,” Busolo added.

Rights crusader

His agency would however not directly intervene in setting the retail prices. Consumer federation lobby Secretary General Stephen Mutoro feels the retail prices should be capped at Sh10 above the ex-factory prices. “What we are lacking is goodwill from the government to tackle the cartels in the sugar distribution chain, but really there is no justification for the price to be anything more than Sh90,” Mutoro said, adding “Whenever we ask, the cartels involved will come up with all manner of excuses to defend the ridiculous margins.”

It is common to find a sugar consignment changing ownership up to three times even before it leaves the factory, said the consumer rights crusader, citing an insider source at a State-owned sugar company.