State facing cheaper sugar reality as sector suffers inefficiencies
Even after a decade of Kenya’s protectionism in the sugar industry, the country has still failed to address all the underlying issues to make the sector competitive.
In 2015, Kenya invoked the infantry clause of the Common Market for Eastern and Southern Africa (Comesa) laws to seek protection against blanket export of sugar to Kenya from member states, arguing that it wanted to protect new factories that had been just set up.
Comesa agreed with Kenya on those grounds and extended the safeguard by one year before adding two more years in 2016, expected to come to an end in February 2019.
In the ongoing Comesa meeting in Lusaka, Zambia, Kenya is at it again, seeking fresh extensions arguing that it has not met most of the requirements, hence conditions are not ideal for Comesa to liberalise the market.
Kenya also requested for more time to sell the State-owned factories, saying that by so doing, the industry would be competitive and thus allow for the lifting of the current safeguards that limit the volume to be exported to Kenya to 300,00 tonnes annually.
Although, State-owned millers have been the sole reason for extension of the safeguards, it is also emerging that private millers too are not 100 per cent ready to compete with the cheap sugar.
Private sugar millers have said the country is not ready for competition from cheap commodity, welcoming government’s move in seeking further extension for safeguards.
The private millers’ support for the extension of the safeguards casts doubt on whether the industry would ever be ready for outside competition. According to the millers, the cost of production remains high in the country and liberalisation of the sector would spell a death knell for them.
“It is a good thing that we get protection from cheap regional sugar because the current cost of production will not make local millers to compete favourably with the products coming in from outside the country,” said Raj Patel, Kibos Sugar Company chief executive.
His sentiments were echoed by the management of Kwale International Sugar Company, who said that the move to seek further extension was good for the industry.
“The extension is a thing that is good for all of us as a sugar industry in Kenya and as it is meant to protect the sector,” the firm’s official told the Sunday Nation.