Kenyan government suspends brown sugar imports as it sets to lease five state owned sugar factories

KENYA – The government of Kenya has with immediate effect banned the importation of brown sugar into the Country and suspended sugar import permits and pre-shipment approvals until further notice, in a move to curb influx of the cheap sweetener in the domestic market, which has negatively impacted the local sector.

Agriculture Cabinet Secretary Peter Munya while issuing the directive said, “We are further prohibiting the importation of raw cane with immediate effect and all applications for brown sugar imports shall also be subjected to the sugar imports/exports regulations that are soon to be gazette.”

The minister stated that the move was necessitated by a looming sugar glut in the country due to uncontrolled importation of the commodity after most players in the local market failed to meet the domestic demand, reports Kenyan News Agency.

Kimunya regretted that the trend could further disenfranchise the already battered farmers whose fortunes continue to dwindle following closure of most sugar mills prompting the government to step in to reverse the situation.

He explained that the uncoordinated importation of raw cane and brown sugar had exposed local millers to unfair competition.

“Ex-factory prices for the mills remain at Ksh4,200 per 50kg bag. The price per tonne is Kshs 85,260 compared to the Cost Insurance Freight (CIF) for imported sugar which stands at Ksh60, 117. This scenario clearly explains why Kenyan sugar is struggling to compete with imported sugar in the local market”, the CS said.

He mentioned further an influx of illegal importation of brown sugar from Uganda through the Busia border with indications of unscrupulous businessmen and traders taking advantage of the COVID 19 curfew hours to sneak unlawful imports into the country at night.

Additionally, some millers who had obtained temporary permits to import raw cane from Uganda for a limited period of three months (September to December 2019) have illegally extended the duration at the expense of local farmers.

“I have directed the Sugar Directorate of Agriculture and Food Authority (AFA) to ensure that the new sugar Importation guidelines give no provision for the extension for existing brown sugar import permits”, he said

Through the reforms, the government is determined to facilitate a multipurpose sugar cane industry that is efficient, diversified and globally competitive through enhanced industry competitiveness, cost reduction strategies and a strengthened regulatory framework.

Sugar sector debts waived

In view of this, the CS said that the Cabinet has approved debt write off owed to Government and the former Kenya Sugar board commodities fund and well as growers’ debts as at 31st December last year.

All tax penalties and related interests accrued as at 30th June 2009 and any additional interests and penalties that have accrued since then has also been written off.

The total sugar debts government will waive stand at Ksh62.5 billion (US$586m) categorized as Ksh58 billion (US$544m) loans and Ksh 4 billion (US$37.5m) as interests accrued as at June 30, 2009.

Govt approves leasing of state owned sugar factories

In order to increase value addition, increase farmers’ incomes and improve competitiveness and service delivery in the sugar Sector, the CS noted that Cabinet has also approved to lease of five state owned sugar factories.

“The factories will be leased through long term leases of at least 20 years under Right of Use (ROU)on a firm commitment that the lessee will re-develop and operate factory to meet the governments objective of higher farmers income and increased profitability through prdocution of ethanol and generation of power,” Munya said.

The five factories slated for leasing are Chemelil sugar, Miwani Sugar Company which is under receivership, Muhoroni sugar also under receivership, Nzoia sugar company and South Nyanza sugar company.

The idea behind leasing is that government will invite investors with experience in the global sugar industry with a focus on sugar as the main product and co –production of ethanol, co-generation of power and value add products such as industrial sugar, pharma sugar and sugar cubes.

Munya said that the ministry has completed the revision of the sugar import and export regulations which have already been forwarded to the AGs office for gazettement while the general sugar regulations 2020 have already been gazetted on the 27th of May 2020.

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