Kenyan consumers are yet again expected to dig deeper into their pockets when buying sugar, as the prices are set to go up following the introduction of a new tax on the sweetener.
The government intends to impose a 4 per cent sugar development levy (SDL) on domestic and imported sugar that will take effect on February 1, 2025. This part of the new legislation under the sugar reforms that came into law late last year.
Agriculture and Livestock Cabinet Secretary Aden Duale has gazetted the Sugar Development Levy Order 2025, which will see prices of sugar edge up by at least 4 per cent.
The gazettement comes barely three months after President William Ruto accented into law the Sugar Act 2024, effectively giving the CS of Agriculture powers to introduce the levy.
In the new framework, local sugar millers will be required to remit the levy to the Kenya Sugar Board (KSB) and the sugar regulator that was recently introduced through the act.
The parastatal will also collect the 4 per cent on the cost of insurance and freight (CIF) from sugar importers or their appointed agents stationed in the country.
This levy is part of a broader strategy by the government to generate funds aimed at improving various aspects of the sugar industry. The sugar levy will be used to run the operations of the KSB, the Kenya Sugar Research Institute (KSRI), which is tasked with the stabilization and infrastructure development in the sugar industry.
The introduction of a 4 per cent is expected to have significant implications for sugar prices in the country.
According to projections for the financial year 2024/2025, Kenya’s sugar production is anticipated to increase by 40 per cent, reaching approximately 750,000 metric tons.
The increase is attributed to an expansion in the area harvested following the lifting of a previous ban on sugarcane harvesting.
As domestic production rises, it is expected that reliance on imports will decrease significantly by about 30 per cent, resulting in an estimated 455,000 metric tons of imports.
The government has already introduced a 7.5 per cent levy on sugar imports under the Tax Laws Amendment Act 2024, with the aim of deterring imports.
However, it’s important to note that while increased local production may help stabilize prices in the long term, there may be short-term fluctuations as producers adjust to new funding structures and operational changes brought about by the levy.
