Business Daily (Nairobi)
Betty Maina
7 July 2009
The decision by the Minister for Finance to exempt local gazetted manufacturers who use refined industrial sugar imported under the remission scheme from payment of Sugar Development Levy has been challenged in some quarters and has been the subject of misleading and alarming public statements by leaders and interest groups who surely must know better.
Since the Minister announced the decision in this year's budget speech, there have been persistent press statements suggesting that this exemption from SDL would collapse the industry and that unscrupulous traders would import table sugar and flood the market.
Kenya consumes about 750,000 metric tonnes of sugar annually against a production of approximately 520,000 metric tonnes, presenting a deficit of over 200,000 tonnes. This deficit in consumption is filled by imported sugar mostly from Comesa.
Of the sugar imports, between 80,000 to 100,000 tones is utilised as raw material in the manufacturing process of beverages, confectioneries, pharmaceuticals and other industrial products.
The exemption from SDL applies only to white refined sugar imported from non-Comesa origins under the existing Duty Remission Scheme and does not apply to other categories of imported sugar.
The Scheme which is governed and regulated by Treasury's and the Kenya Revenue Authority's Tax Remissions Offices, is a highly structured and policed regime.
Meet demandAlthough the logic behind the Sugar Development Levy is well intended - to develop Kenya's sugar sector to a level it can meet the country's domestic requirements for sugar, the sector has over the years failed to meet the country's demand for refined industrial sugar used by manufacturers in other sectors such as beverages and pharmaceutical companies.
Industries that use refined white sugar find it difficult to purchase and process sugar manufactured in Kenya for their own use.
This is because the local product does not meet the specifications required by industrial consumers of refined sugar, as acknowledged by the millers.
Manufacturers in these sectors have therefore continued to rely on imported refined sugar for which they have continued to pay a levy for the development of the country's sugar sector.
This has left such manufacturers with production costs yet we do not see any efforts to develop the sugar sector to a level where it can meet domestic requirements for the industry.
Maybe at some point the local sugar industry will be able to produce refined sugar used by the small group of manufacturers.
But until then, the solution does not lie in increasing costs to burdened users of the product.
These, among other reasons, is why the Finance Minister's decision to exempt manufacturers from paying the levy must be supported by all, if we are to grow the local food and beverages industry.
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