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Consumers to be hit with another levy should proposed law on sugar pass

By Dominic Omondi | November 2nd 2019
By Dominic Omondi | November 2nd 2019
Sugar stocked at a supermarket in Kisumu in a picture taken on August 18,2018. [Denish Ochieng, Standard]

A proposed law seeks to re-introduce a levy on all imported and locally milled sugar in what is likely to raise the cost of the sweetener.

Sponsored by Kanduyi MP Wafula Wamunyinyi, the Sugar Bill, 2019 empowers the Cabinet Secretary in charge of Agriculture, in consultation with a newly created sugar board, to impose Sugar Development Levy on domestic and imported sugar to be used for development and promotion of the industry.

While the Bill might go a long way in resuscitating the ailing sugar industry whose troubles reached a climax after Mumias Sugar was placed under receivership, the new levy will be passed on to the consumers, which means increased cost of living.  

Suspended National Treasury Cabinet Secretary Henry Rotich had scrapped the levy during 2016/17 financial year, kicking off an uproar among cane farmers in the sugar belt region who said that earnings from the levy had been critical in propping up the struggling industry.

The levy was charged at four per cent of the ex-factory price and imports shall be charged on all sugar sales and was collected by the Kenya Revenue Authority on behalf of the Authority.

But Wamunyinyi wants the charge re-instated as a means to revamp the fledgling sugar industry. Also introduced in the Bill is the Sugar Levy Fund.  

The Kenya Sugar Board was lost after the repeal of the Crops Act, and replaced by a directorate at the Agriculture, Fisheries, and Food Authority (AFFA).

“The principal object of this Bill is to reinstate the Sugar Act which was repealed through the enactment of the Crops Act, 2013. Enactment of the Bill shall restore the roles of the Kenya Sugar Board currently granted to the Sugar Directorate of the Agriculture and Food Authority established under the Agriculture and Food Authority Act, 2013,” said Wamunyinyi in his memorandum.

The MP noted that since 2013, the industry has been riddled with a myriad of challenges including non-payment of farmers by public sugar companies; increased costs of sugar production; declining land acreage under sugar and lack of markets for sugar.

State protection

The Bill will also seek to entrench into law an agreement that had been reached between sugar stakeholders and the Privatisation Commission that sugar growers be handed 51 per cent stake of all privatised sugar companies and directorship of milling companies.

Some of the sugar millers that have since been lined up for privatization include Nzoia, Miwani, Muhoroni, Chemelil and Sony.

A report by three Bretton Woods institutions noted that the state protection enjoyed by the sugar industry was only benefiting cartels and monopolies.

The International Monetary Fund, the World Bank and World Trade Organisation have said lack of competition in the market due to State protection of moribund sugar millers had seen consumers pay high prices for the sweetener, even as farmers received peanuts for produce.

In the report, Reinvigorating Trade and Inclusive Growth, the institutions said opening up the industry to competition would lift about 40,000 families from poverty.  

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