A recent strategic plan for the sugar sector revealed that Kenya is a comparatively high-cost producer because of inefficiencies across the entire value chain. In 2018, local sugar mills produced 490,704 tonnes, accounting for a paltry 57% of the domestic requirements of table sugar. In 2019, only 440,935 tonnes were produced against the consumption of 1,038,717 tonnes, resulting in a 58% deficit. Current demand stands at 850,000 tonnes, a drop from 639,741 tonnes in 2016, representing a 23% decline.
The country cannot produce 160,000 tonnes of refined sugar, an annual requirement; thus, the deficit of both table and refined sugar is met through imports from the Common Market for Eastern and Southern Africa (COMESA) region and globally.
This renders the industry uncompetitive while making the country an attractive destination for imports – the imports from low-cost producers would lower sugar prices, creating financial constraints as the local mills cannot sell the locally produced sugar to the market at the required margin.
Mumias Sugar Company, as an example, would have just imported sugar from Brazil, repackaged it, and sold it to the shops and supermarkets just the same way some private sector players have been doing. Why would a company not want to make profits?
Before independence, sugar production was economically viable and mainly attracted private-sector players. However, after independence, the government started focusing on the industry as set out in the Sessional Paper No. 10 of 1965, which sought to accelerate socio-economic development, rectify regional economic imbalance, promote indigenous entrepreneurship, and promote foreign investment through joint ventures.
We must keep alive ongoing conversations on the inefficiencies of sugar milling companies and the challenges facing them. It can start by identifying common issues affecting the industry, such as cane shortage, uncontrolled and illegal sugar imports, and high cost of farm inputs. Developing potential solutions and ensuring a robust implementation and enforcement mechanism favors the local sugar millers and farmers. That way, the perennial heap of challenges in the Kenyan sugar value chain and milling companies will be a thing of the past.
