Monday, March 26, 2007

Sugar crisis countdown

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.


we~a~do said...

The issues Mumias raises are valid and established facts. In fact, Egypt, Swaziland and Malawi are dumping (imported) sugar into Kenya. Egypt is even worse because everything is subsidized or prices controlled by government--that's the reason they have very low fuel/electricity prices. However, Mumias' pursuit of the truth is in vain. The problems of the sugar industry is a domestic problem; sugar barons making quick billions from imports. It's our own people killing our industries, not the originating countries.

Cryton Chikoko said...

Mumias, while I agree with you that there is a need to count costs and benefits before March 2008 when COMESA import restriction expires, I would like though to point out that Malawi sugar is not imported from any country. Malawi produces loads of high quality sugar enough to export some.Thanks

kudrinketh said...

Mumias should just put up or shut up. Its needless for the government to subsidise an industry if we could get cheaper imports at half the price. Maybe we need to concentrate on producing tea and coffee since we have a comparative advantage(quality) rather than trow good money after bad.

Ken said...

I think the question to ask here is: why is the industry not ready to compete at this level yet ?

There has been enough time to develop methods to produce higher quality at lower costs but this moostly hasn't happened.

Rice, like in the maize business, we let middle men run the show and needlessly escalate the prices so much that we cant compete locally.

I think the local sugar industry had better think of ways to cooperate amongst themselves for their own survival.

As for consumers, we welcome the lower costs.

bankelele said...

we~a~do: The Egyptian issue has been mentione before and not just in the sugar context.

Cryton Chikoko: thanks for the clarification 7 I'll read up more on the Malawian sugar industry

Ken & kudrinketh: Mumias has done its part - (management, marketing, distribution, diversification and modernization etc.) and should be ok. It's the other comapnies who'll be wiped away in 2008

One good thing about 2008, will that importation will be open & transparent. no more political companies with mysterious sugar shipments.

أُكتب بالرصاص said...

great blog

ToneLoc said...

kudrinketh said...: "Mumias should just put up or shut up. Its needless for the government to subsidise an industry if we could get cheaper imports at half the price."

kudrinketh, what tells you that the EU, Brazil and Pakistan do not subsidize their exports???? What do you think is behind the repeated collapse of WTO talks? Have you been asleep? Go to google and search "dumping sugar wto".

Wake up! With Kenyans as airheaded as you, slyer countries will confuse our heads silly.

Anonymous said...

toneloc is quite right,kenya has no friends at the wto or anywhere.the GoK if concerned (are they) should find a way to sneak around the comesa rules.create a company and give it sole right to import.then find a way of listing it at the nse. maybe that'll sweeten mumias' life a little more.


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