The Sugar Industry
Kenya is member state of COMESA FTA. In 2003, Kenya sought COMESA intervention of safeguard mechanism to protect its sugar industry from threats by imported sugar thus limiting imports from COMESA to 350,000 tons per year.
Kenya has been granted an extension on the Safeguards for another two years which is expected to expire in February, 2019 giving room for unlimited export of sugar from COMESA countries to Kenya.
Kenya’s current sugar situation
Production capacity - 520,000
Consumption - 740,000
Deficit - 220,000
Kenyan sugar industry is high cost because of;
- Reliance on small holder’s thus greater variability in input use and field preparation
- Less timely and consistent crop care.
- Higher harvesting and transport costs.
- Taxation regimes in Kenya
- Longer growing cycles in Kenya (15-20) compared to 10-12 in other countries attributed by higher altitude.
- Schemes in Kenya 100% rain fed thus vulnerable to drought and reduced yields thus raising average cost of production compared to other countries who depend on irrigation.
- Most COMESA countries heavily subsidized
- Danger of dumping by countries.
- Unfair competition from under invoiced sugar
- Cost of cane in Kenya two times more than other COMESA countries
Protection of sugar industries in other countries is done by: Most regimes including US, EU, Pakistan, Brazil, Thailand, China, Australia, Malawi, Mauritius, Swaziland, Zambia South Africa provide government protection through;
- Favourable policies
- Straight government subsidies
- Tax rebates on inputs
- Zero taxation on the sugar
- Tax breaks/holidays on investments.
- Governments fully responsible for infrastructure.
- Government support for ethanol and cogeneration policies
The Government policy needs to be reviewed with focus on regulatory structures and comparative analysis of policies affecting sugar, coffee, tea, dairy and livestock with a view to establishing political goodwill and consistency in policy implementation.
MSC has ensured its capacity to survive the post COMESA period by the product diversification. The company has invested in power and ethanol in order to adopt alternative income generating processes.