Sugar shortage bound to get sour

August 18, 2011
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, NAIROBI, Kenya, Aug 18 – As the sugar shortage continues to hit parts of the country and prices skyrocket (a two kilogram packet of sugar costs Sh300), things are likely to get worse before they improve.

Speaking to Capital Business on Thursday, Kenya Sugar Board (KSB) acting CEO Solomon Odera warned that cane deficiencies in the Nyando area that is operating at half its capacity compounded with an unfavourable sugar import turf in the Common Market for Eastern and Southern Africa (COMESA) will escalate the shortage.

“Most of the countries that would ordinarily send their sugar to Kenya seem to have gotten other markets, principally the European market where they say they are getting better prices. So most of their sugar is going to the European Union (EU),” he explained.

In order to guarantee supply to the EU market, Mr Odera said these countries had signed contracts with COMESA suppliers that run for the next couple of years, tying up most of the regional sugar.

The failure to privatise some of the mills which would have enhanced the factories’ efficiency ahead of the expiry of the COMESA safeguards in February 2012 is another factor to blame for the crisis.

Currently, Kenya’s sugar industry operates on annual deficit, producing 520 metric tonnes against a local demand of 750 metric tonnes, making it heavily dependent on imports.

Pressure to produce sugar and meet local demand, Mr Odera added, has pushed millers in the struggling areas to harvest premature cane.

“Consultations are on-going between all those mills, together with the Board and the Ministry, with the view to coming up with an amicable arrangement that would allow for cane to be allowed to grow to maturity,” he said.

He said the annual closure of companies like Mumias – the single largest sugar producer in Kenya with slightly over 50 percent of the country’s supply – can cause some elements of hoarding by suppliers who take advantage of the non-production period to manipulate prices.

“As they were planning for their closure, Mumias produced enough sugar that was supposedly sufficient to cover the entire period. They gave out that sugar to their normal distributors. The information we have is once the distributors had the sugar they were not releasing it as quickly as the market demanded,” he said.

Mr Odera said the board is exploring opportunities to develop the sugar industry in the Coast region with plans to set up another mill in Kwale by the second half of next year, and proposals by Mumias to establish a mill in the lower deltas of the Tana River.

However, even as the situation becomes dire, the government seems to have left sugar consumers at the mercy of private sector players.

While admitting that the country is facing an acute shortage of the sweetener, Agriculture Secretary Wilson Songa said the government cannot control the prices which are currently at an average of Sh270 for a two-kilogram packet.

“I cannot say we will get over the shortage any time soon,’ he admitted citing all the factors that are contributing to the crisis.

He said the government was now waiting to see how the private sector takes advantage of the importation quota through which they can bring in 340,000 Metric Tonnes (MT).

Unfortunately, the country has only been able to import 10,000 MT between March and August due to what has been blamed on the shortage of sugar in the COMESA region the region and the world in general.

“It is not cost-effective to bring in this sugar like it has been before because the world prices are also high,” the official explained.

According to a recent World Bank report titled ‘Food Price Watch’ the price of sugar has gone up 62 percent over the last one year, which pushes the costs to hover around 30 year highs.

And even as there appears to be no let up to the shortage, the government reiterates that it is undertaking several measures that should provide some relief to consumers.

The interventions will involve the provision of cheaper farm inputs and better seed varieties to farmers to enhance their productivity.

Unfortunately, their impact is unlikely to be felt in the short term.

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