{UAH} Pojim/WBK: KISERO: Why cheap sugar will always get into Kenya - Opinion and Analysis
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KISERO: Why cheap sugar will always get into Kenya
I have not seen the details of the agreement detailing the concessions which President Uhuru Kenyatta signed away while in Kampala last week.
But what I know for sure is that even if he had wanted to offer the Ugandans the most generous of concessions on sugar imports, his hands were tied.
I think we are not asking the right questions on this raging controversy.
The first point to note is that under the Customs Union of the East African Community, sugar from Uganda enjoys full duty-free access into Kenya.
The problem, however, is that Kenya has been employing non-tariff barriers to regulate the flow of Ugandan sugar into the country.
The main non-tariff barrier employed by Kenya has been import licenses issued by the Sugar Directorate — formerly the Kenya Sugar Board.
But the point must be stressed that the purpose of the import licenses is neither to protect our sugar factories in western Kenya nor to prevent imports from Uganda.
You can't stop the imports from Uganda nor impose tariffs on sugar coming from any other fellow member state of the East African Customs Union.
What licensing authorities have been doing is to frustrate importers mainly by delaying and postponing issuances of permits and licences.
Mark you, first you have to be registered as an importer of sugar. In the past, getting registration was not easy. These days, it is not difficult and the procedure of registration is fairly transparent.
This explains why the list of registered importers is very long.
However, being on the list does not automatically qualify you for a license. You get a license only after you have produced documents showing that you have contracted a supplier and have the capacity to pay for the sugar you want to import.
Sugar import licenses are consignment-specific. Once you bring in a shipment, that specific license expires.
Did President Kenyatta promise the Ugandans that he'd abolish the licensing regime? I can't tell. But I still don't see what the problem is because our licensing regime for sugar imports is manifestly illegal under the rules of the Customs Union.
There is yet another poignant issue which has not been adequately articulated.
Who imports Ugandan sugar into Kenya? Who makes the big bucks from this lucrative business?
If you checked, you will find that this business is dominated by a clique of sugar barons operating out of Nairobi and Mombasa.
Indeed, the business is tightly controlled by a tiny elite of Kenyan merchants who operate in nearly all segments of the business, doubling as importers, distributors of local sugar, transporters, and owners of giant warehouses.
The point, therefore, is this: as long as the ex-factory price by Ugandan millers remains much cheaper than what the millers in Kenyan are charging, Ugandan sugar imports will keep flowing even if you put military tanks along the entire border between the two countries.
Secondly, as long as domestic sugar prices in Kenya continue to be higher than prices in Kampala, Kigali, Dar es Salaam and Bujumbura, the imports from Uganda will not stop. This notwithstanding the agreements signed by presidents Kenyatta and Yoweri Museveni.
The East African Council of Ministers are part of the problem. The practice of giving countries temporary waivers allowing them to import specified quantities outside the common external tariff, has opened loopholes for the region's sugar barons to bring in duty-free sugar and then export it to neighbouring countries – thus reaping huge margins.
Why can't we create a rule saying that countries given waivers to import outside the common external tariff must be obliged to buy only from countries with surpluses within the region?
Many of our people believe that sugar imports from Uganda are imported from Brazil under waivers granted by the council of ministers.
jkisero@ke.nationmedia.com
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