Monday, August 24, 2015

UGANDA SUGAR STIRS UP KENYAN POLITICS

Perennial nearly-man of Kenyan politics, Raila Odinga is kicking up a storm in the sugar growing regions of western Kenya, mobilising the population to resist the importation of Ugandan sugar to bridge the shortage in the market.

Kenya’s sugar manufacturing industry, which is mostly controlled by the government has failed to keep up with the population’s demand for sugar. As a result their local industry only produces 500,000 tons of the 830,000 tons the region’s largest economy demands.

Mumia’s Sugar Company ltd which posted record losses for last year owes farmers more than Ksh500m (sh16.5b) from last year’s harvest. The western Kenya company with a market share of 30 percent nevertheless has been limping along at less than 50 percent capacity. It is currently closed for maintenance.

However connected to Mumias woes was a forensic audit carried out in 2012 which found a one billion (sh33b) hole in the company’s accounts attributed partly to the illegal importation of sugar from Sudan.

"Obviously Mumias’ inefficiencies affect the sugar industry in Kenya. But it is not a stretch to see that those inefficiencies leave the door open for powerful individuals to import sugar into the country to make huge profits...

Enter the Uganda sugar deal.

During a recent trip to Uganda by Uhuru Kenyatta, Kenya agreed to lower the impediments to importation of Ugandan sugar.

 Uganda, which last year produced 438,300 tons against a domestic consumption of 320,000 tons expect that these production figures will rise again this year. It is projected that this year just over 500,000 tons will be produced which will more than match the increased consumption of 360,000 tons.

"The resistance to Uganda sugar by these powerful sugar importers is not too hard to see.
Kenyan sugar retails for about Ksh120 a kg or about sh4,000. Uganda sugar retails for about sh3,000 but sugar is landed in Kenya for an average of Kshs62 a kg or about sh2000 from the COMESA region or further afield...

Giving priority to Ugandan sugar would destroy the mouth-watering margins these importers have been enjoying or cut them out from the lucrative trade altogether.

The influence these sugar barons wield in Kenya is not to be underestimated. Kenya’s deputy president William Ruto recently claimed he was shuffled out of the agriculture ministry in the last cabinet after he dared to cancel some of their sugar importation licenses.

The influence of interest groups in politics is not new nor that they can influence policy to their own selfish aims and the rest be damned.

Through their political cronies they are selling the Uganda sugar deal as a threat to jobs and business in western Kenya but they have not needed any help killing these on their own.

Mumias for example owes farmers millions of Kenya shillings from last year’s harvest and their outgrowers have sold their cane to other players in the industry instead, partly causing the shortfall in cane crushing at the industry giant.

These same interest groups have resisted the privatisation of these largely obsolete and mismanaged sugar mills, which would allow private capital and efficiencies to take hold and several other initiatives critical to the revamping of the industry.

In fact Uganda with its privately controlled sugar industry has clearly not only caught up with the Kenyans but overtaken them in terms of meeting local demand and lowered production costs.


"The writing is on the wall for the Kenyan sugar industry. Either they restructure it completely, including uprooting the sugar barons in whose interest the status quo works or let the industry die, with no help from Uganda...

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