Kenya faces Comesa axe over its bad sugar

The drama surrounding Kenya’s sugar imports is dragging in regional players with revelations that the country now risks suspension from the Common Market for Eastern and Southern Africa (Comesa) after disregarding its rules on importation and exportation.

The EastAfrican has learnt that the controversial importation of an unknown quantity of sugar — which has raised a storm in Kenya, with claims of the commodity being contaminated — was done without the approval of Comesa.

Under the rules of the 19-member trading bloc, any sugar imports from outside Comesa attract a common external tariff (CET) of 25 per cent. Goods qualify for preferential tariff treatment only if they originate in the member states and are traded within the bloc.

Kenya’s move has not been well received and could hurt its trade relations with other member states.

Ironically, the country enjoys a Comesa Safeguard Measure, which limits the amount of sugar that can be imported duty-free from the bloc's members. This special consideration was made in 2002 to give the country time to make its sugar production competitive, as it was feared imports from the bloc would kill local manufacturing.

The safeguard, which restricts duty-free sugar imports from the Comesa member countries to 350,000 metric tonnes per year, expires in February 2019.

Suspension

The government is therefore keen on an extension after failing to meet key conditions including privatisation of its ailing state-owned millers.

With its outright disregard of Comesa rules, Kenya now risks being denied more time to limit the amount of cheap and duty-free sugar brought into the country to protect its ailing sugar sector.

Suspension from the bloc would deal the country a heavy blow as the rest of the members consume about 12 per cent of Kenya’s total exports, including tea, coffee, and horticulture, articles of apparel and clothing accessories and iron and steel.

Comesa rules allow member countries to import goods from non-member states, on condition that the goods attract duty. However, it is understood that Kenya unilaterally passed a domestic law to allow the importation of sugar duty-free.

“Kenya should have told other Comesa countries before passing a law to import sugar from the rest of the world because failure to do this caused challenges and we had to step in as the Secretariat to explain their action. The way this law was communicated was not effective,” said Francis Mangeni, Director in charge of Trade and Customs at the Comesa Secretariat.

While allowing importation of duty-free sugar opened the door for all countries to sell sugar to Kenya’s importers, the Kenya Revenue Authority is said to have blocked sugar from some Comesa member countries, such as Mauritius, prompting the intervention of the Secretariat.

It is alleged that Kenya has also denied Mauritius a licence to export sugar to the country pending the conclusion of investigation into adulterated sugar in the local market.

Kenya is understood to have requested a discussion of its sugar issues during the 20th Comesa Heads of State and Governments’ Summit scheduled to take place from July 9 to July 19 2018 in Lusaka, Zambia.

“We are waiting to see how other countries are going to react when Kenya asks for an extension of its safeguard measures,” said a source who asked not to be named.

Last year, Principal Secretary in Kenya’s Department of Trade Chris Kiptoo said the country’s situation at that particular time was unusual and required unusual interventions.

He said the duty-free window for the importation of sugar was a temporary stop-gap measure to bridge the domestic shortfall and during this period the Comesa quotas did not apply.

During the 19th Comesa Heads of State and Government Summit in Antananarivo, Madagascar, in October 2016, the Council of Ministers agreed to extend Kenya’s sugar safeguard measures to February 2017. One of the conditions was that the country increase its sugar imports from the bloc.