Kenyan sugar industry needs $400 million to survive

Kenya's struggling sugar industry requires 30 billion shillings ($408.4 million) to survive stiff competition from more efficient regional producers, a minister said on Monday.
Kenya's sugar industry is still weighed down by cheap sugar imports, heavy debts, high cost of cane production, delays in payment to farmers and poorly managed factories which operate outdated machinery.
Kipruto arap Kirwa, Kenya's agriculture minister said Kenya needs to invest urgently to cope with cheap sugar imports from countries in the Common Market for Eastern and Southern Africa (COMESA) trade bloc, whose cost of production is relatively low.
"To survive, the industry must achieve competitiveness by 2007. It is incumbent upon all stakeholders to contribute towards this goal," Kirwa told reporters.
Kenya is a signatory to COMESA's free trade agreement (FTA) which allows products from the 20-member trade bloc to enter its market duty and quota free.
The government applied and was granted permission to limit sugar imports from COMESA to 200,000 tonnes annually from 2003 to 2007.
Industry players fear the local industry would collapse after the COMESA import curbs end in 2007 because its cost of production is higher than more efficient COMESA producers such as Swaziland, Mozambique, Malawi and Zimbabwe.
"We must strive to make the industry more viable ahead of the collapse of COMESA safeguard. Sugar is a delicate commodity of trade that we cannot let our industry to die," Kirwa said.
The government levies very high duties on imported sugar from non-COMESA countries - 123 percent for white sugar - to deter dumping of cheap sugar into the local market.
Kenya produced 516,803 tonnes of sugar last year up from 448,489 tonnes the previous year, which officials say shows a gradual recovery in the industry.
The government has put Kenya's sugar deficit at 200,000 tonnes although some analysts say it is much lower.
The government says it hopes to halve the country's sugar deficit by next year on the back of expansion of existing and construction of new factories.
Kirwa said to revitalise the sugar sector, the industry must be more efficient and diversify into sugar by-products.