In the past week, there has been a lot of debate about letting Ugandan sugar into Kenya. Although debate is healthy, it is only fruitful when it is structured and within topic. The debate on Ugandan sugar, however, has quickly spiralled out of control and the issue has taken a strong political dimension. This is deeply troubling as it sets the stage for potential misrepresentation of the facts to the public.
Merit holds very little sway in political debate. All too often in politics it is always about who said what rather than the actual argument they made. The Uganda sugar deal is no exception.
The debate has veered off course in the political arena, and the fundamental questions such as the fact that both Kenya and Uganda are bound by the East African Customs Union are not being addressed. This is not the direction that we want Kenya to take.
Under the East African Customs Union, Kenya can’t stop the sugar imports from Uganda nor impose tariffs on sugar coming from any other fellow member state.
Furthermore, an elemental feature of agreements between nations is that they remain immune to changing circumstances. Kenya cannot therefore use the current weakness in its sugar industry as an excuse to disallow entry of imported sugar from Uganda. The market is dictated by demand and supply.
Another point that must be stressed is the fact that Kenyan sugar millers don’t produce enough to sufficiently meet the country’s demand. As a result, the country has a 210,000-tonne deficit. This deficit is typically plugged through imports. The big question therefore is not whether Kenya imports sugar, but from whom it imports it.
Importing sugar from Uganda is by far the best choice. It is far much closer than other import markets such as Brazil. More importantly, Uganda is Kenya’s largest export destination and the market currently produces a multibillion-shilling trade surplus in Kenya’s favour.
It is, however, worth noting that Kenyan exports to Uganda have steadily declined since 2011. The sugar deal is therefore timely as it could help inspire some reciprocation from Uganda to buy more Kenyan products. A country grows if it trades more and it can only trade more if it allows others to come and trade with it. It is also worth mentioning that higher trade volumes between Uganda and Kenya serve in the interest of regional integration, a goal that both countries share.
Even as we try to separate fact from fiction in this debate on Uganda sugar imports, there is one inconvenient truth that both supporters and opponents of the deal have to attest to — Uganda’s sugar industry is more efficient than Kenya’s.
At the end of the day, the more fundamental question is why Uganda is able to produce a sugar surplus while Kenya’s sugar industry languishes on its deathbed.
Perhaps the secret to Uganda’s success in the sugar industry is the fact that the business is in private hands. In contrast, Kenya’s government is heavily involved in the sugar industry. We may perhaps have to review the ownership model in the Kenyan sugar industry.
Ultimately, we may also need to rethink the whole issue of government involvement in business. Most of the businesses where the government owns a significant stake have performed poorly, with KQ and Mumias being good examples.
It is possibly time to start thinking about private ownership. This is because taxpayer-funded bailouts have not worked. Instead, they have taught us – quite painfully for that matter – that putting money in an inefficient business doesn’t make it any more efficient; it only makes it more wasteful.
We must not tolerate this kind of waste of taxpayer money. A forensic audit of businesses that have gone down with taxpayers’ money will help set us in the right direction.
The author is the chairman of the Kenya National Chamber of Commerce and Industry.