It's time for reality check in sugar industry

A new regime that might ravage over a million livelihoods, among them, one of Kenya’s most vulnerable citizens — hardworking farmers — sets in today.

Thanks to the inability of the State to take bold steps to tackle mismanagement in government-owned sugar milling factories, our neighbours and partners within the Common Markets for East and Southern Africa (COMESA) have said they have had enough of Kenya’s protectionism of its sugar sector.

And rightly so, considering Kenya’s request for time to sort out its sugar production inefficiencies at the expense of other COMESA partner states. After yesterday’s expiry of the extension, importers are now free to bring in the commodity from the region — without taxes and quantity limits.

Kenya has been granted four extensions since March 2002. The arguments for the extension have always been a prayer for more time to develop capacity among local millers whose sugar production costs are double when compared to other economies. As it appears, the state failed on its part and in all the extensions to improve the competitiveness of Kenya’s sugar.

Now the millions who draw their livelihoods from the sugar sector are on unfamiliar ground and tackling a totally new challenge — where to sell their cane. Local millers could also be forced to close down because imported sugar costs about half the current retail prices. While farmers could be disproportionately exposed, the measure could be a major reprieve for consumers.

Fault lines started showing several years ago when major millers could not pay for delivered cane, ostensibly because the sugar produced from their supplies was too expensive. Then, sugar importation was still limited to a specific quota and a 10 per cent duty applicable — that is the formal story.

More sugar, smuggled by powerful individuals entered the country through several border points, including tens of crossing points on the common border with Somalia. Never mind that Kenya’s war with Somalia insurgents was hoped to cripple illegal trade on commodities, including sugar, and cut funding for Al-Shabaab militants.

But corruption ensured sugar smuggling flourished. The two sources delivered sugar to the market at a fraction of the price Mumias Sugar Company and other local millers would.

In several instances, the millers themselves opted to sell imported sugar while inventories of their own produce piled.
Now, it is crunch time with the opening up of the market to external competition. Smugglers could find it cheaper to ditch the illegality and go right to Egypt for instance and ship in sugar, tax free.

There is nothing wrong with this, but considering the State knew pretty well about this eventuality decades ago, there is much that should have happened. First, dealing firmly with mismanagement in the various millers would have ensured none of them piled so much in accumulated losses and debts.

This would make a breeze of privatising them — the ideal ending point and everyone is happy. Although Parliament has passed a resolution on the write-off of excess debts owed to the State and the KSB by the public-owned sugar companies, it has taken too long to be effected.

But when managers are picked from among cronies and kin of top government officials, there is no accountability and losses will follow fast and thick. In this arrangement, a tiny fraction consisting the well-connected individuals are the only winners, and of course the smugglers.

The losers are millions of households who pay for the sins committed by the few through expensive sugar, and the farmers who can’t harvest their produce — even after tending the crop for years.

Now, the State can bury its head in the sand and claim no one needs the import safeguards — perhaps on sensing there would be no more extension, even when it’s obvious that in all the past extensions, State House made a passionate appeal to COMESA partners to have the protection extended.

Farmers may as well be on their own as the private millers step in to fill the shoes of sleeping giants. For consumers though, cheaper sugar would always be a welcome relief.