Friday, February 11, 2011

Kenya ready for duty free sugar imports from COMESA

NAIROBI, Feb 10, 2011 (Xinhua via COMTEX) -- By Peter Mutai

Kenya is implementing measures to compete with imports of cheap sugar from low cost producers when the Common Market for Eastern and Southern Africa (COMESA) safeguards expires next year, industry regulators said on Thursday.

Kenya Sugar Board CEO Solomon Odera said the European Union has already provided 6 million euros to help Kenya's industry achieve competitiveness. He said out of the amount, 1.5 million euros will be used to maintain roads in the sugar growing belt in an effort to reduce cost of transporting raw cane to the factories.

"Kenya's sugar millers are well prepared to face competition from the other sugar producers in the region," Odera told journalists in Nairobi.

The East African nation is a member of COMESA free trade area that comprises 19 member countries with a population of 430 million people.

The sugar industry has 250,000 small scale farmers and a total of 500,000 people employed along the sugar value chain. Local consumption is 770,000 tons.

The sugar sector has been shielded since 2000 when Kenya was allowed to limit duty-free sugar imports to 200,000 tons annually.

Odera said the board is expecting four new sugar mills, including Kwale international Sugar, Tana Sugar, Transmara Sugar and Sukari industries to come on board before the end of 2012.

"These new plants should help Kenya increase its production from the current 550,000 tons annually and eliminate the need for imports," said Odera. "The Kenya Sugar Board also spent an additional 10 million U.S. dollars in the past two years to build roads and also construct bridges to shorten the distance to deliver crop from farm to factory," Board Chairman Saulo Busolo said.

He said the cost of transportation accounts for 40 percent of farmers' cost of production while the sugar development fund receives an equivalent of 4 percent of value of all sugar consumed in the country.

"The Kenya Sugar Board has already released 6 million dollars for soft loans to be disbursed by Agricultural Finance Corporation (AFC) to individual farmers to buy fertilizers and other inputs," Busolo said.

The sugar Fund will this year offer an additional 6 million dollars loan to be distributed by a Financial Intermediary (Equity Bank) to individual farmers.

"Kenya's sugar industry is already diversifying its revenue streams in order to improve its competitiveness ahead of the expiry of the COMESA safeguards in next year," Odera said. Mumias Sugar, Kenya's largest sugar miller, has already commissioned a co-generation plant that produces 25 mw of electricity in the national grid. Its new alcohol distillery plant will be operational this year for the production of industrial alcohol.

"We are already helping the factories shift their focus to other revenue streams. Sugar will no longer be the main product," said Odera.

Busolo said the industry has already tabled a sugar amendment bill in parliament which will reduce the shareholding of farmers in factories from the mandatory 51 percent in order to encourage strategic investors to buy the soon to be privatized government sugar mills.

Local sugar production since 2001 just after the COMESA safeguards took effect has increased from 377,000 tons to 523,000 tons in 2010. Although the east African nation has a deal with the COMESA trade bloc to restrict imports from the bloc to 200,000 tons per year to protect its industry, members supplied only 40 percent.