Bitter-Sour Economics of Kenyan Sure.

The Bitter-Sour Politics of Kenyan Sugar.

The Kenyan sugar is peculiar; it has a bitter and sour taste. This is
especially so because Kenyan tax payers have been given the unholy
burden of subsidizing inefficient sugar farmers from western Kenya. Of
course from the government’s point of view this is ‘politically
correct’. This though stems from sheer shortsightedness when it comes
to economic policy making. While it is grossly amoral for Kenyan tax
payers to subsidize inefficiencies in production in the Kenyan sugar
belt in Western Kenya, the government does not think with its
rational head but rather with its ‘political head, read elections
2012’. Currently a two Kilogram packet of sugar retails for 370KSHs (4
US$D) which is by all means exorbitant.

The genesis of the problem though lies in the government’s appeasement
policy to sugar farmers and allied stake holders in Nyanza and Western
Province. In the year 2000 the government of Kenya applied for
safeguards to the local sugar industry by capping the net importation
of sugar from COMESA (Common Market for East and Southern Africa) to
200, 000 tonnes of sugar annually, domestic demand stand at 900,000
tonnes of sugar. Two years ago the Kenyan government sought to
increase the safeguards from the initial eight years to ten years;
this was in the hope of resuscitating the local sugar industry.
Whereas sugar importation was meant to off-set the balance in supply
of sugar to the market, inefficiencies, high overhead costs and low
production capacity by the local millers have connived to rob Kenyans
of their rights to extract value and bargain through free markets.

At a production cost of 45,000KSHs, (500 US$D) per tonne of sugar,
Kenya has the highest production cost compared to her COMESA peers
which stands at 20,000KSHs (US$D 200). The tragedy though is that the
Kenyan government has given all indications that it is going to seek
for an extension to the current safeguard that expires on February, 28
2012. This means that in meantime the Kenyan populace has to live the
idea of the massive bailouts to Kenyan Sugar millers which are debt
stricken, are going under and have the government as the main and the
principal shareholder.

Rather than make the tough decisions and give Kenyan consumers a
reprieve by allowing importation of sugar from the COMESA, bureaucrats
are not ready to perform political suicide especially as election year
beckons. This means that the Kenyans will make do with reduced
spending power for resources channeled towards purchase of sugar may
have been elsewhere or make do without sugar altogether. Kenyans on
their part are short unaware that the government is actively
responsible for high sugar prices, the apportion blame to blameless
traders not knowing that if Mr. Government were to keep his hands
where everybody would see them life would be sweeter. Ludicrous, isn't it.