Millers threaten to shut down over court order to increase cane prices

Farmers line up to sell their sugarcane at the Ekerorano market in Kisii County. [Sammy Omingo, Standard]

Sugar millers have threatened to shut down following a court order to increase sugarcane buying prices.

The court on April 24, 2014, ordered millers to revert to the previous rate of Sh5,900 per tonne up from the current rate of Sh5,100 per tonne.

Kenya Sugar Manufacturers Association (KSMA) said the order that was made ex-parte would jeopardize the economic survival and sustainability of sugar factories and related businesses.

“To force millers to revert to pay farmers at the old price of Sh5,900 (instead of Sh5,100) is a direct violation of our rights and basic trade fundamentals and an outright and ill-informed attempt to cripple our operations and consequently the livelihood of the very farmers and other industry dependents,” said the Association’s Secretary Joyce Opondo in a statement dated April 24, 2024.

“Whereas millers were not party to the suit, the orders have far-reaching consequences to our operations being the directly affected parties who trade in the purchase of sugarcane from farmers either through contractual arrangements or willing buyer — willing seller basis for purposes of milling.”

Consequently, the millers announced intention to halt operations starting May 10, 2024 until the matter is resolved in court.

They asked the government to intervene, saying shutdown may result in loss of over 30,000 jobs, suspension of sugar production and trading, substantial revenue loss to the National Treasury and county governments, and crop loss due to lack of market demand for mature sugarcane.

The millers are particularly questioning the functioning of the Sugarcane Pricing Committee (SPC), comprising representatives from farmers, millers, county governments, and industry regulators.

The committee is tasked with monthly reviews of sugarcane prices based on prevailing market conditions. However, the recent influx of government-sanctioned cheap sugar imports has led to a sharp decline in local sugar prices, prompting the committee to adjust the cane rate to Sh5,100 per tonne.

The millers argued that the court order to revert to the higher price is a violation of established trade principles and contractual agreements between them (millers) and farmers.

The orders stemmed from a case filed by Charles Atyang Atiang, a sugar cane farmer and Chair of the Kenya Association of Sugar and Allied Products, under certificate of urgency challenging the controversial decision by the state.

Atiang, a farmer from Muhoroni sub-county, Kisumu, filed the case citing grievances over the reduction in the price per tonne of sugarcane as stipulated in the circular issued by the interim SPC.

According to the circular, the price was reduced from Sh6,020 to Sh5,100 per tonne, effective April 8, 2024.

In his affidavit, Atiang argued that the committee's decision did not adequately consider factors such as inflation, importation of duty-free sugar affecting local prices and rising production costs.

He said the decision failed to protect the interests of cane farmers and jeopardised the stability of the local sugar industry.

“The circular reducing the price did not take into account the current inflationary trends in the country and the fact that the local market has been swamped with imported duty-free sugar which has contributed to reduced sugar shelf prices,” he said in court papers.

“The committee also failed to take into account that the farmers' production costs have been on the rise.”

Atiang contested the gazette notice issued by the Treasury Cabinet Secretary Njuguna Ndung'u, which granted an extension of a waiver of import for 250,000 metric tonnes of non-Comesa duty-free sugar.

He argued that the extension exceeded the authority granted by relevant legislation, as it was not intended for emergency relief but for trade in the local market.

“On April 9, 2024, I saw a gazette notice issued by Treasury CS Ndung’u which purported to grant an extension of the waiver of import duty of an earlier gazette notice allowing for the importation of 250,000 metric tonnes of non-COMESA duty-free sugar. The notice was issued purportedly under section 114(2) of the East African Community Customs Act,” he said in his affidavit.

“Upon perusal of the said Act, I noticed that the CS can only exercise power to waive import duty if the items being imported are for relief goods imported for emergency use in specific areas where natural disaster or calamity has occurred in a member state.”

Atiang said that the Act did not grant the CS such powers if the goods in question were intended for trade in the local market like sugar that was to be brought in the country.

He further highlighted discrepancies in the reasons provided for the extension of the waiver, as outlined in a letter from the Agriculture CS Mithika Linturi.

Atiang noted that Linturi recommended the importation of 192,000 metric tonnes against the Treasury-gazetted importation of 250,000 metric tonnes.

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