Days after the Kenya Revenue Authority (KRA) agreed to an out-of-court settlement on a tax dispute relating to imported sugar, a supply glut has hit the market. Local millers are unable to offload their more expensive produce, with fears that the 40 million kilos could have long-term implications for the industry.
Darasa Investments, owned by billionaire Ibrahim Noor Hillowly, was granted access to the sugar it imported mid-last year before the commodity was impounded. Mr Hillowly’s sugar has been released after he agreed to pay up to Sh3 billion in taxes amid the dying storm over irregular imports by other traders.
West Kenya Sugar Company, owned by the Rai family, imported 34 million kilos while several others brought in smaller but still significant consignments. Failure by the National Assembly to adopt recommendations to destroy suspected contraband sugar, and the release of Darasa Investments’ consignment, are responsible for the over-supply.
At the heart of the problem for local millers is how their produce will compete with imported sugar, whose landed cost (total price of a product or shipment once it arrives at a buyer’s doorstep) was below Sh40 per kilo against the local ex-factory price (price at factory) of Sh90. This is a more than 30 per cent drop and is expected to cascade to shelf prices in coming days.
Reuters, which tracks global prices of widely traded commodities, quoted the price of a kilo at about Sh33, a third of the local ex-factory prices. Adding shipping costs from major markets such as Brazil, the landed price per kilo is less than Sh40. Duty-free imports allowed last year, ostensibly to help tackle a biting shortage at home, opened the way for traders to make massive profits – at the expense of local farmers. More than Sh40 billion worth of sugar was imported during the three-month window, which was nearly the country’s consumption for two whole years.
[BUSINESS] Excess sugar causing cane farmers losses: The duty-free imports allowed last year to tackle a biting shortage opened the way for traders to make massive profits at the expense of local growers https://t.co/G6vOUPTmP1
— Breaking News (@News_Kenya) October 3, 2018