KISERO: Delays in testing sugar causing disruptions to the supply chain - Daily Nation

Delays in testing sugar causing disruptions to the supply chain

Wednesday August 15 2018

A man pick sugar

A man picks sugar at a supermarket in Nairobi. FILE PHOTO | NATION MEDIA GROUP 

By JAINDI KISERO
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I think we are yet to come to terms with the real damage and disruption that last year’s massive imports of dirty Brazilian sugar have visited on the domestic sugar supply chain.

Is it not the height of irony that, even as we continue obsessing with the ongoing cash-for-votes scandal in Parliament, the sugar barons who imported the dirty Brazilian stuff are quietly laughing all the way to the bank, accruing massive margins from selling the sugar at the very high consumer prices that are prevailing?

As we all know, the duty-free window was introduced to bring down pressures on domestic sugar prices. And, when the window was opened in May, consumer prices had risen to nearly Sh6,000 per 50-kilogramme bag of sugar.

As it turned out, the imports served to reduce pressures on prices to a point where consumer prices crashed by nearly 50 per cent.

PRICES HAVE RISEN

Today, prices have risen and are back to the levels where they were before the duty-free window was opened.

Clearly, the market conditions have allowed the barons to make huge profits on two counts.

First, because the raw, dirty and unprocessed sugar was imported at prices so cheap as to allow them to reap handsome margins even during the period of depressed prices.

Secondly, they did not pay duty on the massive imports.

If I were the Cabinet Secretary to the National Treasury, Mr Henry Rotich, I would immediately introduce an ‘excessive profit tax’ and charge it on all the shipments of the sugar that was imported under the gazette notices allowing duty-free imports.

CORRUPT NETWORKS

However, in a context like ours, where excessive profiteering means large amounts of patronage resources in the hands of the corrupt networks, it is not surprising that we are beginning to hear noises and claims about MPs being bribed to sanitise the parliamentary committee investigation into the sugar imports.

Indeed, the cash-for-votes scandal offers an illuminating lesson on how rich rent-seeking elites are able to subvert and re-purpose a key state institution such as the National Assembly to serve their whims.

As it is, the noises in Parliament and the public obsession with bribery claims in this National Assembly have caused the unintended consequence of deflecting attention from the collapse and disruption of the sugar supply chain.

HUGE DISRUPTIONS

Meanwhile, the sugar barons who imported the dirty sugar have the space to continue enjoying massive margins from selling their massive stocks.

And the disruptions to the supply chain have been huge.

When the campaign on counterfeit sugar started many months ago, the government imposed crippling controls on the sale of the imported sugar in the domestic market.

All imports had to be tested- first. The problem, however, is that the testing has been characterised by long delays.

Indeed, the long process of testing sugar has plunged the sugar supply chain into a period of regulatory uncertainties as never before.

Kwale Sugar, the only sugar manufacturer in the coastal region, has not been running for several months, having to await a decision from the investigating authorities.

COMESA REGION

Even the traditional sugar importers from the Comesa region have found it difficult to release their sugar into the market due to the delays. Industrial users of sugar, mainly, the food, beverages and pharmaceutical sectors, have also been affected by the crippling disruptions to the supply chain.

I know a case where a large manufacturer in the food and beverages sector has contemplated shutting down operations due to the difficulties in importing sugar.

The upshot of it all is that only a chosen few of those who imported the Brazilian sugar last year are allowed access to the local markets. The rest are blocked, ostensibly because their merchandise is still being tested for harmful substances.

IMPORTED SUGAR

I am not suggesting that the testing of imported sugar is a bad thing. My point is that the testing must be done expeditiously and in a way that does not cause long disruptions to the supply chain.

It is ironical that the people enjoying and making money by taking advantage of the disruptions to the supply chain are the same barons we have been complaining about.

Or, shall we say that the whole thing is being manipulated to push consumer prices even higher and to allow the barons to reap even more excessive profits?

For the fact of the matter right now is that the poor consumer is being forced to pay artificial prices caused by contrived scarcity.

The government should come out with a clear statement on public safety and consumer protection.