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Kenya seeks extension of sugar safeguards again

Musa Radoli @PeopleDailyKe

The government and sugar industry stakeholders are planning to convince the Common Market for Eastern and Southern Africa (Comesa) to give them yet another extension of safeguards from cheap sugar imports. This is because most of the critical plans the government and stakeholders had planned to execute in an effort to be at parity with the other Comesa sugar-producing states are still a mirage.

The Agriculture Food and Fisheries Authority head of the Sugar Directorate Solomon Odera claims the country has met three of the four conditions. “We presented what we have done so far and we undertook to meet all the conditions by 2019 when the safeguards come to an end,” he said in reference to a mandatory progress report filled with a technical committee of Comesa for review by its Council of ministers in November.

Two of the most critical issues include privatisation of partly government-owned sugar millers like Chemilil, Sony, Nzoia, Muhoroni and Miwani. According to the ministry of Agriculture, the privatisation of the five millers is one of the measures required to improve the competitiveness of Kenya’s sugar industry and end its perennial reliance on Comesa safeguards.

Secondly and perhaps the most vital is the lowering of the cost of production in comparison to other Comesa member states. For instance, the cost of producing sugar in Kenya is about $800 (Sh80,960) per tonne compared to Egypt’s $400 (Sh40,480).

Indeed, Kenya will be forced to seek another extension of the Comesa safeguard measures to protect its sugar industry after it emerged that its production would remain flat due to poor performance by state-owned sugar millers as well as other players.

Traders and brokers find it cheaper to smuggle and repackage sugar as a Kenyan product from other Comesa members states. Since 2004 Kenya has year after year fought for Comesa safeguards extensions to limit importation of duty free sugar.

Kenya has survived by invoking Article 61 of the Comesa treaty which provides protection of emerging sectors until they are considered mature for competition. “Considering the huge challenges the sugar industry is facing from within and without we will be forced to negotiate for another extension next year.

We have made progress on a number of the conditions that we were expected to fulfil but much more still needs to be done,” said outgoing Agriculture Cabinet secretary Willy Bett. Stakeholders are still struggling to fulfil key conditions required to deal with competition against duty-free sugar imports from the 19 Comesa member states who are eyeing the lucrative Kenyan market.

Expected changes in the sub-sector cannot be effected in the remaining timespan. These changes include privatisation of state-owned millers which cannot be done within the one year timeframe owing to recommended overhauls.

Trade principal secretary Chris Kiptoo argues that key milestones over the years have been achieved in the industry particularly since the introduction of the Comesa sugar safeguards in 2002. “However, full implementation of the directives has been curtailed by various challenges.

These challenges include privatisation of the five ailing sugar milling State corporations, Chemelil, Muhoroni, Miwani, Nzoia and Sony. The process has been hampered by court cases, low uptake of new cane varieties by farmers and implementation of a new method of cane payment based on sucrose content,” said Kiptoo.

The planned sale of the State-owned millers to strategic investors by the national government has also been hampered by a legal battle between the county governments and the Privatisation Commission with the former arguing that since agriculture is a devolved function, they should have a voice in the sale of these firms.

According to a report by the US Department of Agriculture, dated April 2017, sugar millers are burdened by obsolete milling technology and huge debts, leading to poor payment to farmers. The current extension, which started in February last year, will expire in February 2019.

Kenya will be required to give a scorecard on the status of the reforms in its sugar industry. Other critical issues are the ever increasing high farm inputs and transport costs involved in sugar production.

The situation has become so bad that, privately-owned milling companies have encroached into some of areas previously zoned off for the State-owned mills rendering the industry 47 square kilometre regulation per miller irrelevant.

During the 19th Comesa Heads of State and Government Summit in Antananarivo, Madagascar, in October 2016, the Council of Ministers agreed to extend Kenya’s safeguard measures and asked the government to accelerate the sale of its sugar factories.

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