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Kenya: Minister Slaps Ban On Sugar Export in War Against Cartels
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Business Daily (Nairobi)
14 May 2008
Posted to the web 15 May 2008
Allan Odhiambo
Nairobi
The Government yesterday revoked 16 export trade licences as it began a radical purge of suspected cartels in the sugar industry, raising hopes that the pressure on consumer prices could ease.
Agriculture minister William Ruto said high pricing of the commodity had defied the basic fundamentals of demand and supply owing to cartels that had infiltrated the market, leaving consumers with huge expenditure bills.
Though Kenya had convenient arrangements with several partner Comesa States to offset her annual production deficit of 220,000 tonnes of sugar, consumers were faced with endless price surges - thanks to manipulations by groups seeking to maximise on profitability.
"For instance why should we have people exporting sugar from Kenya yet we know we are a deficit nation...there is no logic to export when you produce less," said the minister.
Kenya produces about 520,000 tonnes of sugar each year against a consumption demand of 740,000 tonnes with the deficit being filled through imports from Comesa states.
Mr Ruto accused the cartels of taking advantage of special export licences to evade taxes and divert the sugar into the local market.
"It has emerged that some of the 16 licensed exporters of raw and mill white sugar who enjoy 16 per cent Value Added Tax (VAT) and four per cent Sugar Development Levy (SDL) tax rebates do not export the sugar. Instead it finds its way back into the local market at a much lower cost than that of local sugar, giving undue advantage to the exporters against local traders," he said.
The allure of "super profits" in emerging markets in South Sudan and Ethiopia was adding to the misery of Kenyan consumers as unscrupulous dealers diverted huge volumes of sugar into these prime markets, the minister said, adding: "Kenya recognises the benefits accruing from emerging markets like Ethiopia and South Sudan, however our national interest with respect to satisfying national demands far out weighs the benefits from trading in those markets."
All export licenses in sugar and related products would remain cancelled except those held by Mumias Sugar Company and Lubao Jaggery Factory, Mr Ruto said, explaining that the exemption was because Kenya is a signatory to the African Caribbean Pacific (ACP)-EU trade protocol that allows it to export 17,000 tonnes of sugar into the EU market every year.
Lubao was exempted because it deals in jaggery, a sugar by-product and was therefore not involved in direct export.
"This is pursuant to the provisions of the Sugar Act 2001 Section 27 (2) which empowers the government to introduce other safeguard measures as may be necessary to protect the industry from unfair trade practices, and Section 33(a) which empowers me to regulate and control production, manufacturing, marketing, importation or exportation of sugar and its by products," said the minister.
Statistics from the Kenya Sugar Board ( KSB) showed that between January and March this year, some 21,000 tonnes of sugar had been shipped out of the country by some of the registered exporters despite shortages in the country.
The exports in the first three months of 2008 are slightly short of the five-year high figures realised over the entire 2005 period when 21,760 tonnes of sugar were shipped out of the country-raising eye brows over the sudden interest in exports.
Mr Ruto, however, said despite the indications of exports most of the consignments were actually diverted back into the market hence the need to freeze the export trade.
"I am confident that this move shall eliminate market distortion and streamline the marketing of local and legally imported sugar for the benefit of consumers and the Kenyan economy," he said.
The order came barely two months after local sugar millers sounded the alarm, saying illegal imports into the country hand had left them unable to sell some 55,000 bags in their warehouses.
"There is an avalanche of consignments entering the local market, most of it being on transit diverted into the local market or sneaked in through porous border points such as Wajir and Liboi," Mumias Sugar Company chief executive, Evans Kidero, said in March.
He claimed that 60,000 bags of illegal sugar are sold in the local market every month and another 80,000 transit bags diverted into the market over the same period.
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Analysts however said the latest move by the State to freeze the export licences was in contravention of the structural adjusted programmes (SAPs) effected in the industry more than a decade ago to liberalise operations.
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