KENYA: Import quotas dropped after COMESA complaint
Published: 03/08/2010, 3:39:19 PM
Kenya has abolished the auction of sugar import licenses after the Common Market for Eastern and Southern Africa (COMESA) bloc said it hampered free trade, according to Reuters.
The Kenya Sugar Board (KSB) has been carrying out the auctions on behalf of the government, which introduced the auction system in 2008 to curb what Agriculture Minister William Ruto said was cartel-like behaviour by importers.
"It was brought to our attention that the auction system amounted to a form of a non-tariff barrier and we had to act to avoid any conflict with our COMESA partners. We are reverting back to our old system," KSB chairman Okoth Obado said.
The old system, which importers sought to keep in place by suing the government, is based on a first-come-first-served principle. "We thought the auction system would help free the market by allowing competitive bidding," Obado said.
Kenya's sugar deficit is estimated at around 200,000 tonnes a year. A mission from Comesa that visited Kenya in September 2009 however ruled that the auction of import licenses introduced in 2008 "was clearly a non-tariff barrier".
"It does not remedy the purported mischief of a purported cartel monopolising imports under the quota," the mission said in an assessment report seen by Reuters.
"The auction system also raises the cost of importing sugar into Kenya, of which the cost is passed on to consumers. Besides it does not guarantee that there would be no bid-rigging."
Obado said they had noticed that some of the auction participants lacked sufficient capital and experience, which hindered a smooth flow of imports to cover the deficit.
Despite the scrapping of the auction system, importers would still face tight rules, he added.
"We shall keep our eyes open so that we watch every move to avoid any form of flooding of the local sugar market. The old regulations were prone to abuse but we will watch for any tricks," Obado said.