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Sugar shortage looms as cheap imports row rages
Kenya’s stocks of sugar have fallen below normal levels, causing a creeping shortage in the market, the sugar sector regulator said yesterday, adding a new dimension to the raging public debate over sugar imports.
The volume of sugar stocks in all the 11 factories stood at 3,678 tonnes last Friday, way below the 9,000 tonnes that the millers are expected to hold at any given time, the Agriculture Fisheries and Food Authority (AFFA) said.
“The steep drop in sugar stocks below the required levels is mainly because of inefficiencies in most of the factories,” AFFA director-general Alfred Busolo said.
At current levels, the national sugar stocks are below the required daily output of 4,000 tonnes, representing a steep decline that the regulator has attributed to factory inefficiencies.
The AFFA said nearly all millers were operating below their daily capacities, causing a lot of sucrose to go to waste.
Mr Busolo said there was sufficient raw material to sustain optimal production but which has not been possible because most of the sugar millers are grossly inefficient.
Ramamurthy Thiagarajan, the operations director at Nakumatt Supermarket, said the retailer had not been able to buy enough stocks for its stores because of the dwindling supplies from local millers.
“We are hardly getting enough stocks these days because of shrinking supplies from the manufacturers,” said Mr Thiagarajan, adding that the shortage has partly been caused by the absence of Mumias Sugar Company from the market.
Nakumatt said most of its supplies are currently coming from two millers – Sony and West Kenya – whose stocks could not fully supply the prevailing demand.
Data from the Kenya National Bureau of statistics indicate that the consumer price of sugar has gone up by Sh5 per kilogramme in the last four months, from Sh104 in April to Sh109 last month.
The ex-factory price rose to Sh4,000 per 50 kilogramme bag from Sh3,600 in June. The AFFA is currently drafting regulations that would require all parties dealing with sugar to declare the stocks that they are holding every day in order to ascertain the volume of the commodity that is in the country to help for planning purposes in terms of sugar imports.
The troubled Mumias closed for maintenance last month and is expected to resume operations next week.
Mumias, which has been Kenya’s largest producer of sugar, has lately been weighed down by rising inefficiencies in its factory operations and huge losses of funds that have been blamed on mismanagement and theft of the company’s resources by past management.
Mr Busolo said the AFFA had convened a meeting with the millers this morning to discuss the inefficiencies that are threatening to create a severe shortage in the country.
The AFFA wants every miller to explain how it plans to improve the efficiency of its factories to avert a looming sugar crisis.
“Managing directors have to improve the operational efficiencies of their companies to meet their daily installed capacities,” he said.
Sony sugar managing director Jane Odhiambo said her stocks are below the normal operating levels because the factory only reopened in July after months of maintenance closure.
“It takes a while before the factory attains optimal daily capacity,” said Ms Odhiambo.
Sony had zero stocks by Friday last week, having produced 234 tonnes of sugar, against the daily installed capacity of 300 tonnes, according to the Sugar Directorate. The entire stock was sold at the weekend.
Nzoia Sugar acting managing director Godfrey Wanyonyi said obsolete machinery had left the factory with high levels of inefficiencies, making it difficult for the firm to meets its daily output obligations.
“We are unable to meet our daily capacity because of the obsolete technology we are using,” Mr Wanyonyi said, adding that he expects an improvement upon completion of ongoing replacement of the old machines and expansion of installed capacity.
The looming sugar shortage comes despite recent capacity expansion at Kisumu’s Kibos and Kakamega’s Butali Sugar, the two companies which have doubled their daily capacity from 1,500 tonnes to 3,000 tonnes of cane each.
The Kenya Union of Sugar Plantation Workers (KUSPW) has urged the Sugar Directorate to ensure that any sugar imports to meet the supply shortages are regulated to avoid flooding the market before Mumias resumes operation.
“We understand that there is a deficit of sugar at the moment but we want the imports to be well regulated to avoid causing a market glut,” said Mr Francis Wangara, the KUSP secretary-general.
Mr Wangara said the union had no problem with importation of sugar from Uganda but wanted full disclosure of the measures that have been put in place to ensure unscrupulous businessmen do not use the opportunity to ship in excessive amounts.
“We are not opposed to importation of sugar from Uganda. All we want to see is a proper plan that will ensure the sugar barons do not use the window to flood our markets with cheap imports,” the union said.
President Uhuru Kenyatta’s visit to Uganda two weeks ago during which he struck a deal with his Ugandan counterpart to allow sugar imports from the neighbouring country has sparked intense political debate that has seen Members of Parliament from sugar-growing regions accuse his Jubilee coalition of economic sabotage.
The union said privatisation was the only way to improve efficiency in the government-owned millers that are operating way below capacity.
The Privatisation Commission has so far approved the sale of the five State-owned sugar millers, bringing to a close a process that started nearly a decade ago.
The commission had proposed a detailed structure for the privatisation of the loss-making millers, setting the stage for injection of private funds and modern technology into the millers.
Kenya’s sugar industry has been reeling under the weight of high production costs and competition from cheap imports, most of which get in untaxed.
The commission has proposed that a strategic investor hold 51 per cent stake in the firms, out-growers (contract farmers) 24 per cent and the government 25 per cent.
The sugar companies lined up for sale are Nzoia, Chemelil, South Nyanza, Muhoroni and Miwani.
Kenya is a sugar-deficient country that depends on imports to bridge the supply shortage. East Africa’s largest economy imports 200,000 metric tonnes of sugar annually to plug the deficit. Kenya produces 600,000 tonnes of sugar against an annual requirement of 800,000 tonnes.
The Common Market for Eastern and Southern Africa (Comesa) gave Kenya a one-year extension of the sugar safeguards, continuing the decade-old limitation of sugar imports.
The safeguards are operating under the terms and conditions that Comesa gave Kenya in 2007 as a prerequisite for the extension.
The conditions include privatisation of State-owned mills, introduction of new early maturing and high sucrose content sugarcane varieties and paying farmers on the basis of sucrose content instead of weight.
