Mumias is Kenya’s main sugar company with diversified operations and whose future plans include ethanol production and electricity generation.
However while they believe they are ready to compete in the future, they worry that other companies and the sector will be negatively affected and could collapse after March 2008 when an import restriction expires - thus allowing unlimited amounts of sugar to be imported duty free from other COMESA COMESA countries.
As such they are commissioning a study (pre-proposals to be sent to the company by 5/4) to see what impact this will have on the sector and calling for urgent action.
Issues they are raising:
- Other countries - Brazil, Pakistan, Australia, Mauritius, SA, Zambia etc. protect their sugar sectors though tariff and other non tariff means like subsidies – so why not Kenya?
- Is the sugar imported from COMESA country Egypt - truly Egyptian in origin? Mumias suspects much of it is dumped from Brazil and under-invoiced by the time it reaches Mombasa. Malawi and Swazi sugar is also suspect.
- The sugar sector has not been supported by in terms of tax breaks, subsidies, infrastructure and incentives like other Kenyan agricultural sectors such as coffee, dairy, tea and livestock. Also, when the sector was liberalized/privatized it was not recapitalized as expected leaving companies with debt burden.
- Does Kenya benefit from COMESA more than it loses by supporting the local sugar industry? What is the value of Kenya exports to / imports from other COMESA countries? Are sugar, ceramic, textiles and rice from Egypt truly Egyptian products. What is the value of exports to COMESA by Kenyan owned companies?
- Ascertain Kenya sugar contribution to the economy in terms of taxes, infrastructure and employment.
For Mumias: It’s troubling that you can but rice from Pakistan at Uchumi or Nakumatt is priced cheaper than the local Mwea rice (which I buy). So what will happen with sugar? The March 2008 date has always been a crucial day for any Mumias shareholder to consider and the company will certainly benefit from a continued exemption. Mumias makes a great deal of mileage as the only widely circulated Kenya branded sugar product – with the connotation of buy Kenyan, your taxes at work etc.