|SUCAM, the sugar campaign for change advocacy group, today declared that the sugar zoning proposed in Kenya’s draft Sugar Regulations, 2018 is an illegal and anti-competitive constraint that would require an express waiver by the Competition Authority.
The draft regulations, now under review by the Agriculture Ministry’s Sugar Industry Taskforce, propose that sugar cane farmers be obliged to sell their produce to specific sugar mills, with a single buyer for each area dictated by regulation.
The proposed reintroduction of zoning has ignited memories among farmers – most especially in Mumias, SONY, Chemelil, Muhuroni and Nzoia – of the losses caused during the 1990s by the same policy. At that time, many farmers failed to harvest, while others delayed harvesting by up to four years. The zoning caused delayed payments, currently totaling to Sh2.6bn, and hit the development of ratoon crops. As a result, many farmers, especially in Mumias, abandoned cane farming and the poverty index soared in the sugarcane growing areas.
“Forcing farmers to sell to a single buyer, who will be the only miller they can sell to, offers no remaining scope for market forces,” said Michael Arum, SUCAM Coordinator.
Farmers will be forced to conform to the price set by their local enforced mill, which is a breach of the Competition Act that prohibits restrictive trade practices and anti-competitive agreements.
“For farmers in areas with poorly performing mills, any mill mismanagement will mean that their own livelihoods are ruined. They cannot seek other sellers, or better prices. In effect, they will simply work for a single mill, and without ever having signed a contract to do so, but by regulatory dictate.”
The zoning law also is a breach of COMESA rules that prohibit the introduction of a contract, agreement or understanding that is anti-competitive or substantially lessens competition within the common market, said SUCAM.
“Imposing a single buyer contract on farmers will, in fact, drive many Kenyan farmers away from sugar production. It means farmers must produce without any possibility of selling their produce freely, versus switching to producing other crops entirely,” said Hon Saulo Busolo SUCAM Chairman.
The proposed regulation also breaches the WTO Agreement on Agriculture, which encourages the use of domestic support policies to maintain the rural economy and increase market access and which do not distort trade or pricing.
The proposal that Kenya’s sugar industry introduces zoning comes after similar policies have failed and been abandoned all over the world.
Worldwide, measures that span sugarcane zoning; the allotting of land to farmers for sugar growing based on sugarcane supply and demand; the allocation of supply areas; the enforcement of minimum distances between sugar mills; as well as reducing the number of sugar mills, have all failed in countries that include Australia, Pakistan, India and Mauritius.
“Moving sugar farmers out of entrepreneurship and business into a tied service to their local sugar mill is simply retrogressive and damaging,” said Michael. “It is anti-competitive and would do our nation’s sugar industry untold further damage.”