Sugar consumers should brace for higher prices as the government implements a 4% Sugar Development Levy (SDL) from February 1, 2025.
This move, introduced under the Sugar Act 2024, aims to revitalise the country's sugar industry but comes with immediate cost implications for consumers of the product.
The Sugar Development Levy explained
Agriculture and Livestock Cabinet Secretary Aden Duale gazetted the Sugar Development Levy Order 2025, granting the Kenya Sugar Board (KSB) authority to collect the levy.
The levy will apply to both locally produced and imported sugar, with local sugar millers remitting it directly and sugar importers paying based on the cost of insurance and freight (CIF).
The primary objective of the levy is to support key initiatives in the sugar industry. These include funding operations of the Kenya Sugar Board, advancing research through the Kenya Sugar Research Institute (KSRI), and improving infrastructure.
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According to the ministry, this levy is essential to stabilise the sector and boost domestic sugar production.
Boosting domestic sugar production
Projections for the 2024/2025 financial year show promising growth in the sugar sector.
Local production is expected to rise by 40% to 750,000 metric tonnes, driven by the expansion of harvesting areas and the lifting of a sugarcane harvesting ban.
As a result, sugar imports are anticipated to decline by 30%, with imports falling to 455,000 metric tonnes.
This growth is part of the government's broader strategy to reduce reliance on imports and enhance self-sufficiency in sugar production.
Impact on sugar prices
Data from the Kenya National Bureau of Statistics KNBS shows that the average cost of a kilogramme of sugar in December 2024 was Sh159.69, reflecting a 25.4% decrease from Sh214.20 recorded in December 2023.
Despite the expected increase in local production, consumers will feel the pinch in the short term. The SDL, combined with an existing 7.5% tax on sugar imports under the Tax Laws Amendment Act 2024, is likely to drive sugar prices higher.