Sugar Value Chain study - Agricultural Industry Network (AIN) and The Sugar Campaign for Change (SUCAM)

The sugar sector is a key agricultural sector in the Kenya economy.  The sugar sub-sector contributes 15 per cent of agricultural GDP, three per cent of national GDP and provides direct and indirect employment to 500,000 workers along the entire value chain. The sugar sub-sector is under-performing. According to the Kenya National Bureau of Statistics (2018):

  • Sugar production has declined to 376,000 tonnes in 2017 from 600,000 tonnes in 2013.
  • The revenue from sugarcane sold has declined by 17 per cent from KES 25 billion in 2013 to KES 20 billion in 2017. This can be largely attributed to the decline in acreage devoted to sugar cane falling to 191,000 hectares compared to 214,000 hectares in 2013.
  • The quality as measured by the amount of sugar recovered has slightly slipped from 9.35 tonnes of cane/tonne of sugar (TC/TS) to over 10 TC/TS. This is less than the recovery achieved by Kenya’s regional competitors.
  • The utilisation of milling capacity is estimated at 56 per cent which is sub-optimal level. Moreover, this means that industry is foregoing revenue of KES 40 billion per annum using the 2010 ex-factory prices.
  • Sugar exports are dismally low while imports have risen to 990,000 tonnes in 2017 compared to 238,000 in 2013.

There is a wide range of issues that affect the sugar value chain. These include:

  • Farmers are unable to make a decent living because their cost of production is too high as a proportion of their selling price.
  • Not only is the pricing structure a challenge as it does not give farmers a fair price for their crop, but they also do not get paid on time for their products making them arguably, the most disadvantaged players in the value chain.
  • Millers, too, find that production costs are high relative to the price at which they can sell processed sugar.
  • At the same time, there is a perception that there is a high level of regulation and a perception that the regulation does not always address the right issues or else does not address the issues in the right way.
  • The tax regime does not treat all the actors in the value chain equitably and encourages imports which are taxed much more lightly that domestically processed sugar.
  • There are too many vested interests pushing for competitive advantage and a perception that policy makers fail to take a holistic view.
  • Whilst there are appropriate quality and health standards, there is a perception that the mills do not comply with all the environmental standards (and lack of compliance with the standards that do exist).
  • The transport system is inefficient and expensive, and the costs are all passed back down the smallholder farmers.

In October 2018, SUCAM with a Business Advocacy Fund grant sought to conduct a review of the proposed Sugar Industry Regulations, 2018 and critique the existing Regulatory Impact Assessment to enable SUCAM to engage the Ministry of Agriculture, Livestock and Fisheries (MoALF) to gazette appropriate regulations.

Nonetheless, as outlined above, there is a myriad of issues affecting the sugar industry which go beyond the gazetting of appropriate regulations. The Government of Kenya has in recognition of all the issues created a Sugar Industry Taskforce in November 2017. The Terms of Reference for the taskforce is as follows:

  • Review past, present and emerging challenges facing the sugar industry;
  • Review the sugar industry value chain including research;
  • Review importation and taxation structures in the sugar sub-sector;
  • Undertake an absolute and comparative assessment of the sugar industry’s competitiveness in the East Africa Community (EAC), Common Market for East and Southern Africa (COMESA) and globally;
  • Undertake an analysis of the roles of different stakeholder segments and make recommendations on how stakeholders can collaborate amongst themselves and with the National and County governments to develop the sugar sub-sector;
  • Review pricing mechanisms in the sugar sub-sector and the funding mechanism;
  • Address all other issues that may revitalize the sugar industry and develop a comprehensive report with recommendations to be implemented in the short term, medium term and long term.

The Sugar Industry Taskforce has suspended its operations pending the payments of outstanding dues to sugar cane farmers by the government.

Whilst it would be inappropriate to blame government policy for all the sugar sector’s under-performance, it is a contributory factor. SUCAM argues that identifying these policy and regulatory issues may support them to advocate reforms that would benefit all value chain actors, and specifically sugarcane farmers.


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