TRADE-KENYA: A Sugar Sector in Search of Muscle

By IPS Correspondents Reprint | | Print |

Joyce Mulama

NAIROBI, May 27 2007 (IPS) - Kenya is in talks with the Common Market for Eastern and Southern Africa (COMESA) about extending a period of preferential treatment given to the country’s sugar sector four years ago. This is in response to fears that local producers will not be able to survive open competition from their counterparts in the trade bloc when the period ends in March 2008.

Preferential treatment was granted so that Kenya could carry out reforms in its sugar industry to make the locally produced commodity competitive – notably with sugar from Malawi, Mauritius and Sudan. (COMESA also includes Burundi, the Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Rwanda, the Seychelles, Swaziland, Uganda, Zambia and Zimbabwe.)

Under the terms of the agreement, Kenya is allowed to restrict sugar imports from other COMESA members to a quota of 200,000 tonnes annually – the shortfall between average domestic production and consumption.

Trade and Industry Minister Mukhisa Kituyi told IPS that the promised reforms are underway. They include improving the efficiency of the sugar extraction process in factories.

“But…we will not be able to compete by the end of February next year,” he added.

These views are echoed by Josephat Akoyo, secretary of the Kenya Sugar Manufacturers’ Association. “We still have a long way to go,” he told IPS. “The sugar sector still requires some time to be able to be competitive…Opening up the market – with the current state the sugar sector is in – may cause it to suffer.”

He said that it costs between 450 and 600 dollars to produce a tonne of sugar in Kenya, but only 250 dollars per tonne in other COMESA countries.

A COMESA trade committee is expected in Kenya by end of this year to assess the effectiveness of its reform programme, and whether an extension of preferential treatment is warranted.

Kenyan farmers are demanding that their views also be sought on this matter.

“The problems ailing sugar production in this country are many and must be sorted out. Farmers are the ones who are worst affected,” Peter Kadima, a sugarcane farmer in Mumias, western Kenya, said in an interview with IPS.

One of the farmers’ complaints centres on the high cost of fertilizers.

Sugar companies currently provide farmers with fertilizers on credit, recovering what is owed them from the proceeds of sugarcane sales. But, many farmers complain that they are being overcharged for these fertilizers, and that they receive little for their crops after making repayments.

Late payment – or even non-payment – for sugarcane delivered to factories is also of concern.

According to a 2005 study on the Kenyan sugar sector conducted by the local branch of ActionAid International, ‘Impact of Sugar Import Surges on Kenya’, millers had “consistently not paid for cane delivered from 1998”. By June 2004, the study added, the money owed to farmers stood at over 20 million dollars.

In the face of these challenges, many have abandoned sugarcane farming, undermining Kenya’s ability to meet its sugar needs.

The ActionAid report says that addressing the problems facing Kenya’s sugar farmers is key to improvement of the sector, which supports close to six million people directly and indirectly: “The first approach is with regards to the issues of cane farmers. The government must endeavor to guarantee cane farmers…loans at affordable interest rates and wherever necessary write off their debts.”

These matters came under discussion last week, during a COMESA heads of state gathering held in the Kenyan capital of Nairobi.

The meeting reviewed, amongst others, progress towards regional integration and the opening up of borders for trade.