Kenya: Producers Struggle With Sugar Crisis

The sharp increase in the cost of sugar could see the price of products like bread, cakes, alcoholic and soft drinks go up soon.

Industrial sugar users say they are struggling with the crisis and are considering hiking prices of their finished products.

With additional problems such as power shortages and prices of other raw materials, some producers have already cut on their production.

"The sugar crisis have gone from bad to worse. We had reduced production by 20 per cent in April 2011, now we have reduced by another 25 per cent ," said Millicent Mathenge ,Managing Director of Mill Bakers. "We are hovering around 60per cent of the production that we had in March this year," says the bakery adding it has already adjusted its prices by 15-20 per cent during the period.

Players in the sugar production industry have indicated the ongoing sugar shortage is not going to ease anytime soon due to persisting cane shortage , import shortfalls and maintenance works in some factories. A 50-kg bag of sugar has risen to Sh7,600 up from Sh6,000 last month. "Now if this goes on any further, say one month ,we will definitely reduce our production further and the spiral effect will get worse because we may default on our overheads and other costs," says Mathenge.

Tabitha Karanja , CEO of Keroche Breweries says ,"It is really affecting the companies on the cost because at the end of it all we can not be able to increase our prices every time price of sugar goes up". Karanja says ,"Even if if you add today, tomorrow it goes up again, we are trying to absorb the costs which I think cannot go on long,at the end of the day, prices have to go up for the products".

If the product prices go up, retail consumers will be the overall losers as they are already paying the high cost. A spot check in the outskirts of Nairobi during the weekend showed a 2kg of local sugar going for around Sh330 ,this is up from an average of Sh280 last week and Sh190 in May. Domestic production of sugar has been on the decline this year . Records from the Kenya Sugar Authority show this has declined from 55 974 metric tonnes in January to around 38 700 metric tonnes in June and worsened in July and August . The shortage has been worsened by reduced sugar imports .Of the 340,000 tonnes of imported sugar that was expected, only 10,000 tonnes have come in between March and August.

source: allafrica