“There is a general shortage but it is not yet a crisis. We have asked other mills to expand their processing capabilities,”

- Dr Kiome on telephone with Business Daily.

This festive season will be welcomed by a sugar shortage. Its consumption during this period is often high. The elevated demand coupled with dwindling supply means that the morning and night-time glory may not be as sweet. The Agriculture PS blames the shortage on shut-down and repair of some sugar companies such as Sony Sugar and Chemelil. Deficiency in sugar cane production by farmers has only served to worsen the situation.

But are these the only reasons for the shortage?

2007

In this year, the minister for planning and development Mr. Oparanya Wycliffe, argued that restructuring had taken place in other sectors of agriculture but not in the sugar industry. Farmers were poorer than when the industry was introduced in 1976. At this point in time, the government owned most of the sugar milling companies and according to him was the reason for the lacking welfare status. Sugarcane farmers were owed over KES 50 billion by the government through the Sugar Development Levy (SDL). The debts were as follows:

• Chemelil – KES 2.54 billion
• Miwani – KES 8 billion
• Muhoroni – KES 9.96 billion
• Busia – KES 375 million
• Nzoia – KES 26.6 billion  *over half the debt*

Kenya had been reaping off from the benefits of a preferential trade arrangement on sugar with COMESA. The country’s domestic market for the commodity was not fully liberalized despite time being given to ensure a competitive system capable of rivalling other nations. This condition however, had not been met and an application for an extension of the safeguards was made. An extension was granted under a few additional conditions. That;

1. Kenya government commits to enlarging the imports quota each successive year of application
2. Tariff on imported sugar above the quotas falls each successive year down to zero by 2012
3. Kenya government gives up ownership of sugar mills within first 24 months of extension
4. Operators in the sugar sector deepen research on high sucrose and early maturing cane varieties
5. Kenya government adopts an energy policy aimed at co-generation of energy from millers

2008 - 2009

The matter of sweet compensation for the farmers was not dealt with and the debt increased. In May 2009, a sugar shortage was reported. The sugar reserve levels had dipped from 16,500 tons in January to 3,900 tons in April. The last time such a shortage was experienced was exactly two years prior (in May 2007) when stocks hit a rock bottom of 1,890 tons. According to KSB chairman Okoth Obado, adverse weather conditions had slowed down cane production. Heavy rains in most cane growing zones had impeded movement of harvests but the situation was getting lighter by the day. The price rise then was said to be temporary as the effects of the weather would wane.

The hopes for the sector hinged on writing off the debt. It mainly stemmed from government guarantees that had largely been offset but treasury had to seek the consent of parliament to effect any write-off. Meanwhile, the minister for Finance Uhuru Kenyatta exempted local milling companies from paying an industrial sugar levy. This meant that they were not liable to pay a sugar development levy (SDL) for white refined sugar that was imported, but only from non-COMESA origins. At this point in time, Kenya’s consumption was about 750,000 tons of sugar against an annual production of 520,000 tons. The deficit is covered by imports and the exemption move by the minister was meant to effect a decreased price for sugar-made products. This was not to be.

The month of August saw increased global sugar prices and the supply to Kenya decreased. Shipments to Kenya were being diverted to other countries and this deepened the sugar crisis in the country. While Kenya imported at KES 30,000 per ton, the global average was KES 45,000 per ton. Meanwhile, Kenyans kept paying higher prices for sugar and the products for which sugar was a main component. Their cups of morning glory tasted less sweet to their pockets. Sugar retailed at KES 100 per kg compared to KES 75 earlier in the year.

The last part of this story shall be posted next week. It shall cover the fiascos of the sugar industry from 2010 to date. And explain why, it probably won't be a white christmas; at least not in terms of sugar.