- The Sugar Bill 2019 aims to reinstate the Sugar Law which was repealed by the enactment of the Crops Law of 2013.
- One of the questions avoided is why the private millers were able to make a profit while the state millers suffered perpetual losses.
- Boards of directors have been populated by people appointed by politicians with little experience in the sugar industry who only serve the interests of their bosses and millers.
The long-awaited Sugar Act, which aims to restore the role of the Kenya Sugar Board (KSB) in the regulation, development and promotion of the sugar industry as well as to facilitate equitable access to benefits derived from the industry, has been stuck in Parliament since 2019.
But there is progress, the departmental commission for agriculture and animal husbandry, which was considering the bill, will table its report in the Chamber.
The 2019 Sugar Law aims to reinstate the Sugar Law which was repealed by the enactment of the Crops Law of 2013. Once enacted, the 2019 Law will restore the KSB’s mandate which is currently granted to the Sugar Directorate of the Agricultural and Food Authority.
Today there are around 300,000 small cane sugar producers and only 4,500 large cane sugar producers. The industry directly and indirectly supports the livelihoods of around six million Kenyans, making it a vital sector.
There has been a notion in policy that the government must control the industry and the Sugar Bill has given the Cabinet Secretary of Agriculture many powers. This strong government involvement is what has led to many problems in the sector, including mismanagement.
One of the questions avoided is why the private millers were able to make a profit while the state millers suffered perpetual losses.
On reading the committee’s report, it attempts to resolve these issues, but still fails in some areas.
First, the composition of the KSB. The bill proposes five representatives elected by the planters, one representative elected by the millers, the Principal Secretary (PS) of the Ministry of Agriculture, the PS Treasury, a person appointed by the Board of Governors and the non-executive chairman from producer representatives on the board of directors.
The committee, aware of the fact that agriculture is a devolved function, recommended three additional representatives appointed by the Board of Governors and two other representatives of the millers. But this remains heavily biased in favor of players on the supply side of the industry and there is a good chance that the board will pursue self-sufficiency at the expense of consumer welfare.
Further improvements should be made to add a representative from the Kenya Competition Authority, whose mandate includes protecting consumers from unfair practices and deceptive conduct in the marketplace.
Second, the administrative role of the CEO. The position of the stakeholders was that 10 years of experience was not enough and that the organization needed someone with professional skills in the agricultural sector.
Indeed, one of the biggest problems affecting the sector is the unprofessional nature of the boards of directors that manage the sector.
Boards of directors have been populated by people appointed by politicians with little experience in the sugar industry who only serve the interests of their bosses and millers.
Third, there is the issue of export licensing. Today Kenya has an annual domestic demand of over 900,000 tonnes of sugar, but local production stands at around 520,000 tonnes, so there is a deficit of around 380,000 tonnes which is filled by imports.
This is where the problem of the sugar imbalance in the local market comes from. Politically connected dishonest resellers, who often get the licenses, end up importing more quantities than prescribed with this import window.
The fact that the import license is duty free means that taxpayers subsidize the importer and the government loses tax revenue.
Thus, the committee’s recommendation should be that the license be auctioned so that the government recovers the money from the subsidy offered to importers.
For accountability purposes, the bill should categorically state that the board will publicly auction import licenses.
A share of the proceeds from the auction is expected to be donated to the Sugar Development Fund, which will finance research in the sugar industry, cane development and infrastructure development.