This research report was prepared by the Research Department of Old Mutual Securities Limited. Old Mutual Securities Limited is a securities trading company licensed by the Capital Markets Authority (Kenya) for the purpose of facilitating trade on the Nairobi Securities Exchange.

Here are our views on the news making headlines today for Kenya:
Consumers are set to benefit as a regional trading bloc moves to eliminate cartels that are blamed for distorting sugar prices in Kenya. The Common Market for Eastern and Southern Africa (Comesa) has formed a committee to decide how its members will export duty-free sugar to Kenya to help offset perennial production shortfalls estimated at 300,000 tonnes annually. A committee to decide on how the volumes will be shared among the member states is scheduled for June.

Our View: Elimination of sugar cartels in Kenya bode well for the consumer as this would lead to cheaper sugar prices. The extension of the import safeguard comes with strict conditions on how import volumes should be shared among member states unlike where the country could choose to import from one or two Comesa sugar exporting countries. Kenya is not ready to open up the market given the high cost of production. According to Kenya Sugar Directorate statistics, it costs USD 500 to produce a tonne of sugar in Kenya against USD 450 in Mauritius, USD 340 in Sudan, USD 250 in Egypt, USD 230 in Zambia, USD 200 in Malawi and USD 180 in Uganda. Regular imports from these countries would bring down sugar prices in Kenya from an average price of USD 2.4 per 2kg bag currently. The same quantity costs USD 1 and USD 1.4 in Uganda and Egypt respectively.

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