Sugar cartels on the spot as price hits Sh145 a kilo

Tuesday September 27 2016

Henry Ouma buys sugar at the Tuskys Beba Beba branch on Mondlane Street in Nairobi. PHOTO/FILE

Henry Ouma buys sugar at the Tuskys Beba Beba branch on Mondlane Street in Nairobi. PHOTO/FILE 

By GERALD ANDAE, [email protected]

The price of sugar has risen to a new peak buoyed by heightened activity from industry cartels out to mint cash ahead of next year’s general election.

A survey of retail outlets throughout the country indicates that sugar is now priced at an average of Sh145 per kilo despite the recent surge in imports to cover up for the shortfall resulting from decline in local output.

At Nakumatt Supermarkets, a kilogramme of branded sweetener has shot to Sh145 from Sh135 early last week and Sh125 last month, indicating the speed with which prices are rising. The same quantity of sugar is priced at Sh135 at Tuskys and Naivas outlets.

The acute shortage has, since last week forced Nakumatt to start rationing the commodity on the shop floor restricting customers to purchasing only one two-kilogramme packet of sugar.

A letter sent to branch managers says the decision is informed by the acute shortage of the sweetener in the country.

“Following the prevailing shortage of sugar, please note that prices for this commodity continue to fluctuate every day, we would like to strongly recommend that there should be no bulk purchases of this product, therefore, have the customers understand that we are only doing a maximum of one per shopper,” reads the letter.

Solomon Odera, the head of sugar directorate, described the shortage of sugar and the resulting price increase as artificial, pointing to the huge stocks that distributors are holding on to in various stores around the country.

“If you look at quantities that have been released to the market, both imports and local stocks, you will realise that distributors are withholding sugar. This is because what they take from factories and from imported consignments is not reflecting in the market,” said Mr Odera.

Some 15,000 tonnes of sugar have been shipped in this month alone to prevent a shortage that is causing prices to rise besides the 9,000 tonnes imported last month.

The directorate issues permits for importation of not more than 10,000 tonnes every month to supplement local stocks in an ever expanding domestic market.

Locally-produced sugar stocks declined to a low of 5,000 tonnes by close of last week, against the required 9,000 tonnes at any given time, mainly due to poor performance of local millers.

On Monday, the directorate said it had written to millers requesting details of their distributors to monitor the quantities that they are holding at any given time.

The regulator said this will enable it to quickly diagnose any supply challenges within the distribution network as well as plan for imports based on local needs.

“We currently have difficulty telling how much sugar is held by these distributors because we do not have information on what their holdings are at any given time,” he said.

Agriculture and Food Authority director- general Alfred Busolo, however, said the agency was in talks with Nakumatt to establish why it is the only retail shop that is rationing the commodity.

“We want to understand why they are rationing sugar when it is evident that they do not want to create shelf space for brands from local millers,” said Mr Busolo.

Mr Busolo accused Nakumatt of creating an artificial shortage to push for own-branded product, commonly referred to as Blue Label and is mainly of repackaged imported sugar.

Nakumatt managing director Atul Shah said the retail chain is not stocking sugar from local factories because they do not get stocks.

“As you all know there is a shortage of sugar from the factories and we have hardly been getting stocks from local millers for stocking,” said Mr Shah.

Global sugar prices have been rising in the past six months hitting the 50 per cent mark by mid this month, pointing to a possible continuation of cost inflation in the coming weeks.

A tonne of sugar from the Common Market for Eastern and Southern Africa (Comesa) rose from $500 (Sh50,000) in March to $750 (Sh75,000) currently, making the imports more expensive than the locally manufactured sugar, for the first time.

Consumption of sugar in Kenya has been growing in recent years, saddled by population growth and changing lifestyles.

Statistics from the sugar directorate indicate that consumption stood at 889,233 tonnes in 2015 from 860,084 tonnes the previous year.

Kenya is a sugar deficit country and relies on Comesa member states to bridge the annual deficit.