Behind the politicized sugar imports and management row, there are admissions of corruption and production deficiencies that should be addressed. Yet these challenges do not seem to matter in what has degenerated into a political contest between the Jubilee regime and the Opposition.
The sugar saga should not be a tussle for the Luhya vote. It should not be about the 2017 General Election. It is a battle for a livelihood of a sugar growing community that spreads across ten counties. It is about the national economy and the national interest.
Although Kenya was an early arrival in the sugar sector, the country has always relied on imports to plug a national production deficit. The deficit stands at about 300,000 metric tonnes annually. But the production shortfall could be higher because of low performance of local sugar millers and the influx of illegitimate imports. Sugar millers report that their warehouses are stocked with local sugar at a time retailers are peddling imports.
Some of the sugar millers are targeted for privatization, with some under receivership. The Government will be selling 75 per cent stake in the South Nyanza Sugar Company, Nzoia, Chemelil, Muhoroni and Muhoroni. Miwani Sugar Company is down. Sony, Muhoroni and Chemelil are struggling with huge debts and huge stocks in their warehouses.
The privatization of some of these sugar millers could be complete within a year. But therein lies a bigger challenge: There may be no takers in a sector where the produce may not have a guaranteed market. This is because local sugar is expensive to produce and therefore costly.
Statutory taxes make the marketing and pricing of local sugar even more complex. Local sugar sells at about Sh180 per kilogramme. In Uganda, sugar sells at the equivalent of Sh120 per kg. The same volume goes for Sh110 in Tanzania. This means cartels will always flood the local market with imported sugar.
Major supermarkets are packaging the produce and retailing under their labels. Supermarkets shelves no longer stock the premier Mumias Sugar, the sweet Sony Sugar, or the Muhoroni brand. These supermarket do not have sugarcane plantations or milling plants. This raises the possibility of a conspiracy between retailers and sugar cartels.
But it is the expected official sugar exports from Uganda that has touched off a long overdue debate, with a mismatch of vested, political and community interests.
Uganda, a late entrance in the sugar sector, reports a surplus of 145,000 metric tonnes. It produces about 465,000 metric tonnes of sugar against a consumption of 320,000 metric tonnes. From an importer in 2011, Uganda is going to export sugar to Kenya. This means more value for the Uganda economy. The imports will undermine the ailing local sugar sector. The local consumer may get all the sugar the country needs, but the long term effect of this will be devastating to the national economy.
While Kenyans will be losing jobs, Uganda will be gaining more employment opportunities, and boost in foreign exchange. Uganda is scaling up production to meet Kenya’s deficit. Sugar production in Uganda is expected to soar to 623,700 metric tonnes this year.
The neighboring country is looking for a market for this surplus. Kenya offers the first opportunity for offloading a commodity the country can produce.
The sugar industry is the economic lifeline for about six million Kenyans who are also potential voters. If anyone – whether in Government or outside – wants the support of this impoverished population, the urgent business should be to address the challenges facing the sector. Playing politics or pandering to vested interests will make Kenya poorer. It will also undermine the Jubilee promise of creating employment and boosting agribusiness.
The sugar sector is a major employer in Kakamega, Bungoma, Trans Nzoia, Homa Bay, Migori, Kisumu, Narok and Kwale counties. Millions of people directly draw their livelihoods from the sector. This critical constituency should be an important force in any policy decisions. When this mass is sidelined, the national interest is undermined.
The stakeholders in the sector should have been involved so that all interested parties operate on the same wavelength. The current cacophony indicates the decision did not consider these clashing interests.
Promoting imports may plug a deficit in demand, but it will kill many direct and indirect jobs. Imports will enrich a few rich people while killing thousands of jobs for poor people who have always relied on the sector for a living.
Just two months ago, the Government released a Sh1,000,000,000 bailout cheque for the struggling Mumias Sugar. Poor management, illicit imports, corruption, and archaic technology were blamed for the lackluster performance of the once versatile sugar miller. Now, the country is going to import sugar from Uganda without considering the undercurrents of the low performance of Mumias. While the East Africa Community protocols allow this kind of engagement, the national interest remains supreme.