Mumias Sugar collapse stokes fear of massive sugar imports

Monday, October 7th, 2019 00:00 |
Mumias Sugar Company.

Musa Radoli

Placement of Mumias Sugar Company (MSC) under receivership has sunk the country into a more than 600,000 tonnes annual sugar deficit from the previous 300,000. 

The development has raised fears that the void left will lead to cheap imports, piling more pressure on factories and sugarcane farmers who are already suffering from delayed payments.

Kenya Sugarcane Millers Chairman Jayant Patel expressed concern that putting Mumias Sugar Company under administration will likely lead to increased cheap sugar imports.

Consumers Federation of Kenya (Cofek) shared the same concern, saying with MSC’s production grounded and under receivership, the government must tell Kenyans how it will fill the gap of over 300,000 tonnes the miller used to pump into the market.

The consumer watchdog has also raised a number of questions among them where the largest percentage of sugar currently feeding the Kenyan market coming from since the miller halted production in April 2018 because of what it said was a shortage of raw materials?

Who is importing it and from where? Of what quality is it? Does it meet the country’s standards on quality before being sold to consumers? How many billions are they making to the detriment of the local industry?

Cofek Chief Executive Officer Stephen Mutoro said last year there was widespread national outcry over contaminated poor sugar being smuggled into the country and sold to Kenyans.

Real trouble for MSC begun when its factory was shut down in October 2017 for five months due to lack of cane. 

While the cane processor was re-opened five months later, it was again shut because of inadequate cane supply.

KCB Bank placed the loss-making miller under receivership last month, in a move it said was meant to protect the struggling company’s  assets and maintain its operations. The bank appointed PVR Rao of Tact Consultancy Services as receiver manager.

At its peak, Mumias Sugar was the largest sugar producer in the country producing upwards of 300,000 tonnes a year, which is half of today’s production of all the operating factories.

Sugar Directorate latest data shows demand for the commodity has been rising annually while production has been decreasing. Kenya produces 600,000 tonnes of sugar annually and it relies on imports to meet  its demand that currently stands at 900,000.

Local deficit

Kenya has an annual quota of 300,000 tonnes of sugar from Common Market for Eastern and Southern Africa (Comesa) countries to make up for the local deficit.

Sugar Directorate says imports of the sweetener between January and February stood at 64,050 tonnes compared to 31,884 that was shipped in the corresponding period last year.

“Total sugar production in January and February was 99,199 tonnes compared to 116,654 tonnes achieved in the same period last year, representing a drop of 15 per cent. This decrease in production was recorded in most of the factories,”a report by the directorate indicates.

A sugar cane union official said a room was created for cartels – when Mumias stopped production in 2018 – to make a quick bucks by the stability of prices in the market and no outages.

“It created ample room for cheap sugar importing cartels to be making a killing since no acute shortages of sugar and hiked prices have been reported especially in the last financial year,” he added. 

Mutoro warned against over-reliance on sugar imports as it will lead to neglect of local production which is already suffering as farmers abandon growing of the cash crop. 

He wondered where reports of the numerous task forces constituted to look into issues affecting the sugar industry were. “Where are the findings and the comprehensive action plans to deal with the problems,? he posed. 

Mutoro warned that at this rate, the country is at high risk of being totally dependent on cheap sugar imports, especially  from South America since the cost of producing sugar locally is still very high.

More on Trade and Industry