Limiting of duty-free sugar imports in a bid to protect the struggling local industry even as consumption grows has instead fuelled smuggling, the Nation has established.
Thousands of sugarcane farmers are sliding into poverty, performance by millers has reduced drastically due to smuggling of cheap sugar and the government is losing over Sh100 million in potential taxes, annually.
A special investigation by the Nation reveals that organised cartels around ports of entry entice government officials to illegally bring in thousands of kilograms of sugar daily, yielding to the allure of a quick dollar.
The smuggled sugar enters the country at prices about 20 per cent cheaper than the locally produced product, having escaped the tax dragnet, and boxing out locally produced sugar which is more expensive by comparison.
While a 50kg bag of locally produced sugar cost Sh5,500 in January, a bag of the smuggled product sold at Sh4,450.
Kenya Revenue Authority (KRA) has intercepted 198 cases of sugar smuggling into Kenya through borders and the port of Mombasa between 2018 and 2021, seizing 1,695,625kgs of sugar, valued at Sh235.5 million.
“The tax implication (for the above) is Sh323.8 million. On average in a year, we are talking of about Sh100 million,” says Mr Joseph Kaguru, KRA’s Deputy Commissioner for Revenue at the Customs and Border Control.
But the Sh323 million represents only what KRA has intercepted, meaning the tax losses may well go over Sh100 million annually.
Studies by the World Bank and some scholars have blamed the emergence of smuggling on Kenya’s limitation of duty-free sugar importation from Comesa countries and other non-tariff bottlenecks, despite the product’s huge consumption.
A 2015 World Bank study shows Kenya’s adult population spends Sh43.6 billion on sugar annually, or 16.3kg of sugar per adult per year.
“Ugandan-origin sugar, which is produced at a markedly lower cost to the Kenyan product, is illegally trafficked in substantial quantities,” says a 2021 Counter Extremism Project on links between extremism and illicit trade in East Africa.
“Thousands of bags of sugar are believed to be smuggled into Kenya from Somalia every day, enriching Somali warlords.”
Between 2016 and 2020, the country produced 2.6 million tonnes of sugar, according to the Kenya National Bureau of Statistics (KNBS). Over the same period, the consumption was 5.1 million tonnes.
Both the government and the private sector agree that Kenya’s expensive sugar disadvantages the local sector, against neighbouring countries that produce it cheaply.
While Kenya taxes locally produced sugar and sugar imported from the East African Community (EAC) equally (16 per cent Value Added Tax), local millers face expensive power and fuel expenses, which increase the cost of production, already pressured by expensive farm inputs.
The result has been low production compared to consumption and returns for farmers and millers, creating opportunities for smugglers.
Around the sugarcane growing areas of Western Kenya, many farmers have uprooted cane and planted other crops, after some millers closed down and the remaining ones have been operating below capacity.
Antony Oliya Barasa, a sugar cane farmer.
Photo credit: Isaac Wale | Nation Media Group
“I uprooted cane from half of my four-acre land and planted maize about 10 years ago when the sugar sector started collapsing and could not make any returns. The two remaining acres with cane on it are just in case there comes a miller who can support our farming,” says Mr Antony Barasa Oliya, a farmer in Lurambi, Kakamega County.
Mr Oliya, who started sugarcane farming over three decades ago, says he built his family’s life on cane farming, buying property and sending his children to good schools, but slid back to poverty when it failed.
Problems started in the early 2000s when Mumias Sugar Company – Kenya’s biggest miller with a capacity to crush 8,400 tonnes daily – neglected farmers by delaying their payments and failing to harvest on time, before finally closing down in 2015.
Mr Oliya says he spent much of his savings trying to revive the Mumias cane development service for farmers but ended up with a brick house he had built in his compound as the only reminder of the times he enjoyed fruits of sugarcane farming.
“When sugarcane farming went down, we could no longer take our children to school since it was the only source of income. They are now at home, mostly working as boda boda riders,” says the farmer.
Shopping centres around the sugarcane growing areas lie lifeless, as poverty kicks in on many households.
Revenues for counties in this region that largely depends on levying sugarcane farming have also dropped, hovering between 28 and 79 per cent of their potential, with Sh1.4 billion potential revenue missed by Bungoma, Busia, Kakamega and Vihiga counties in 2020/21, according to the Controller of Budget.
As the local sector collapses, smuggling has grown. Probox vehicles, pick-ups, lorries and bicycles are used to ship the product into Kenya.
Kamuli brown sugar being transported from Uganda.
Photo credit: Isaac Wale | Nation Media Group
Right under the noses of border security at the Busia border, the Nation witnessed the smuggling of Kamuli Sugar – a Ugandan miller – through the porous borders of Marachi and Sofia, by use of bicycles and motorbikes. Bags of the smuggled product were also packed inside Matatus and booking offices in Busia town, for ferrying to other parts of the country.
Runners are paid Sh50 to ferry one 50kg bag across the border, while Kenyan police allegedly take bribes of Sh50 for every bag, according to the runners.
Kamuli brown sugar being transported from Uganda.
Photo credit: Isaac Wale | Nation Media Group
Busia County Police Commander Maxwell Nyaema did not respond to questions regarding integrity of police officers in the county.
Kenya in 2020 successfully urged Uganda to stop the warehouse framework of clearing sugar, claiming it encouraged smuggling of the product into Kenya.
The government is now establishing 14 new inland border points along routes heavily abused by smugglers across eight border counties, to intercept any product that enters Kenya.
‘This story was produced by Nation.Africa. It was written as part of Wealth of Nations, a media skills development programme run by the Thomson Reuters Foundation. More information at www.wealth-of-nations.org . The content is the sole responsibility of the author and the publisher.’
