The policy paper ‘Competition in Kenyan Markets and Its Impact on Income and Poverty: A Case Study on Sugar and Maize’ was published in January by the bank’s Trade and Competitiveness Global Practice Group.

 

Jonathan Argent and Tania Begazo argue that sugar is so dear to Kenyans that they are not ready to forgo it even over high prices.

 

This, the authors argue, makes the poorest to forgo other goods, with a Kenyan adult estimated to spend Sh2,147 on the commodity annually. The poorest rural and urban families, the study says, are generally large net buyers and will benefit the most from lower prices.

 

“We estimate that just over 40,000 families would cross the poverty line as a consequence of a 20 per cent price decrease in sugar – approximately a 1.5 per cent decrease in poverty for Kenya overall.”

 

Lowering of sugar prices, they demonstrate, would see a decline in how much families are spending on the sweetener and then households could use some of their ‘saved’ income to purchase other goods.

 

Argent argues that current policies that aim at shielding the domestic industry from competition keep Kenyan sugar prices considerably above world prices and this is a burden to majority of poor consumers.

 

Tariff and non-tariff barriers such as the suggested locking out of Uganda sugar, the team says, 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,” says the authors.

 

The duo, who also got input from the Competition Authority of Kenya, wants the sector to investigate whether it is able to become a competitive sugar producer without punishing consumers.

 

“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 subsidise Kenya’s consumption of cheap sugar,” the team suggests. In the meantime, resources meant for reviving the sector, the World Bank paper says, could then be used in an industry in which Kenya is more competitive.

Source : IN 2 EAST AFRICA