A study by World Bank indicates that importing of cheap sugar would save Kenyan consumers some substantial amount of money.
According to the ‘Competition in Kenyan Markets and Its Impact on Income and Poverty: Case Study on Sugar and Maize’, which seeks to investigate the link between competitive, well-functioning food markets and consumer welfare, the prices of local sugar is considerably above world prices due to current policies aimed at shielding the domestic industry from competition.
The study observes that from 2009 to 2012, Kenyan wholesale prices were on average 149 percent above the international wholesale sugar price.
Consequently, the burden falls on poor consumers who have no choice than to contend with the high prices because sugar remains a basic necessity for most households.
“On the contrary, it is precisely this protection against competition from more efficient producers that allows the sugar sector in Kenya to remain so unproductive,” authors Jonathan Argent and Tania Begazo said in the study.
CHEAP SUGAR IMPORTS FROM UGANDA NECESSARY
Apparently, the study was published in January by the World Bank’s Trade and Competitiveness Global Practice Group months before the now controversial sugar deal signed by president Uhuru and Uganda’s Museveni a few weeks ago, allowing for the importation of cheap sugar from Uganda to Kenya.
The authors argue that if Kenya cannot become a low-cost producer of sugar, then in the long-run, it would be better to lower trade barriers and allow other countries to subsidize Kenya’s consumption of cheap sugar.
“Tariff and non-tariff barriers such as the suggested locking out of Uganda sugar, are no panacea for the domestic challenges in the industry. On the contrary, it is precisely this protection against competition from more efficient producers that allows the sugar sector in Kenya to remain so unproductive,” the authors maintain.
The paper shows that relaxing trade barriers to allow sugar prices to fall by 20 percent could reduce poverty by 1.5 percent and see just over 40,000 families cross the poverty line.
This, they argue, will happen because low sugar prices will help the consumers to channel the saved shillings to other household commodities.
According to the last household survey (KIHBS of 2004/5), at least 89 percent of households regularly consume sugar and going by the current cost of inflation its almost certain that mwanachi will no longer be keen on remaining loyal to the local sugar at the expense of their already stretched pockets, when there is an alternative of cheap sugar.