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Zawya
05-05-2025
- Business
- Zawya
New report warns of a looming sugar shortage in Kenya
The United States Department of Agriculture warns of a looming sugar shortage in Kenya blamed on shrinking farms and declining processing, opening a window for increased imports that will stabilise retail prices. The agency, through its Foreign Agriculture Service (FAS) division, says the country faces a 19.8 percent drop in sugar production to 650,000 metric tonnes in the 2025/2026 marketing year (MY), from 810,000 metric tonnes in the 2024/2025 marketing year. A marketing year is a period designated for reporting and analysis of production, marketing and disposition of a commodity. The agency, in its latest Sugar Annual report for Kenya dated April 18, 2025, forecasts that Kenya's sugar retail prices will increase as supply tightens due to closure of local mills for annual maintenance, but will stabilise when imports start coming in. In January this year, the local sugar market saw pressure on prices, as ex-factory prices increased by five percent, rising to Ksh6,569 ($50.92) per 50kg bag from Ksh6,233 ($48.31) in December 2024. Wholesale prices rose nine percent to Ksh7,177 ($55.63) per 50kg bag while retail prices climbed to an average of Ksh157 ($1.21) per kilogramme, from Ksh149 ($1.15) per kilogramme in December. Currently, cane price is set at Ksh 5,300 ($41.08) per metric tonne. According to the US agency, Kenya's area under cane harvesting is expected to drop to 150,000 hectares in the 2025/2026 marketing year, from 190,000 ha, due to a lower proportion of mature plantations, which resulted from overly aggressive harvesting in the 2024/25 year. Kenya's main cane-growing regions are in the Western and Lake Victoria Basin region, with about 93 percent of the cane produced by some 320,000 small-scale farmers, on less than one-hectare individual holdings, while large plantations that are owned by millers produce the remaining seven percent. According to the Kenya's Sugar Research Institute, cane yields range between 50 metric tonnes to 70 metric tonnes per hectare, due to regional variability, including weather conditions, crop husbandry practices, and cane varieties. But, in the 2024/2025 period, the average cane yield decreased substantially to 51 metric tonnes per hectare from 56 metric tonnes per hectare in the previous year, due to dry weather conditions that preceded harvesting in some of the cane growing regions. The agency says this year (2025/2025) millers would have to scramble for cane to utilise their installed capacity amidst increasing cane shortages. In 2024, Kenya's retail sugar prices averaged Ksh138 ($1.06) per kilogramme, down from Ksh197 ($1.52) in 2023, prompting the government to ban sugar imports from the Common Market for Eastern and Southern Africa (Comesa) and East African Community (EAC) trading blocs. Read: Kenya bans sugar imports from outside Comesa, EAC trade blocsNow sugar imports are expected to increase 37.93 percent to 600,000 metric tonnes in the current marketing year (2025/2026), from 435,000 metric tonnes in the 2024/25 period to offset the supply deficit.'Sugar consumption is anticipated to increase 1.6 percent to 1.25 million, due to rise use in households and in the hospitality sector, driven by higher disposable incomes, and the growth in the hospitality sector,' the report says.'Sugar imports are also expected to surge by 38 percent, to offset the anticipated local supply deficit. Imports are expected to come from the Comesa and EAC countries because of tariff advantages.'Duty-free imports from the Comesa countries are however subject to a limit of 350,000 metric tonnes per year, due to a safeguard that has been granted to Kenya. The safeguard, which has been in force since 2002, was extended by two years in November 2023 and expected to expire in November this year. Sugar imports from non-Comesa and EAC countries face a 100 percent tariff, unless a specific waiver is granted by the government of Kenya. In September 2024, Kenya imposed a ban on sugar imports from outside Comesa and EAC, citing an increase in local production, with the country expected to produce more than 800,000 metric tonnes in the year. The 2023 had been an unusual year, beginning with a severe drought that led to reduced sugar output, necessitating significant imports to bridge the supply gap. The average annual consumption of table sugar in Kenya is about 950,000 metric tonnes, with the shortfall covered by imports from Comesa and EAC under existing trade protocols. Under the EAC revised four band Common External Tariff structure that came into force on July 1, 2022, sugar is among items considered to be 'sensitive' and which attract higher duty of above 35 percent to protect local industries from competition. Kenya's cane marketing is currently undertaken through 17 operational mills, four of which are government-owned, with total installed capacity of about 1.7 million tonnes. State-owned mills' market share, estimated at eight percent, has been dwindling due to technological and operational inefficiencies, including obsolete milling technology, mismanagement, high debt portfolios, and the collapse of cane development programmes. Private millers have been expanding their market share by investing in modern cane processing equipment and prompt pay to farmers. Some of the private millers have also invested in cane development programmes that include input supply and extension services to their contracted farmers. Average sugar extraction rates are also higher in private mills at 10 percent, compared to 5.6 percent in government-owned mills. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
Zawya
07-04-2025
- Business
- Zawya
Kenya: Harambee sacco writes off $1.42mln in Kuscco
Harambee deposit taking sacco has written off its entire investment in the Kenya Union of Savings and Credit Co-operatives (Kuscco) valued at Ksh184 million ($1.42 million) to clean up its books as it eyes to mobilise up to Ksh4 billion ($31 million) of additional share capital to enhance its resilience. The country's fourth largest sacco by assets Ksh38 billion, ($294.57 million) which is recovering from the financial bruises inflicted by mismanagement and governance challenges by former directors, says the non- refundable share capital is a 'safe' cushion for the society compared to members' deposits. The saccos board has entered into a deal with its members to inject an extra Ksh4 billion ($31 million) in the business in return for dividends on share capital at the rate of 15 percent every year for a period of five years (2024-2028). Under the plan which has been approved by Sacco Societies Regulatory Authority (SASRA) Harambee sacco will grow its share capital to at least Ksh6 billion ($46.51 million) in 2028 from Ksh2.4 billion ($18.6 million) last year and match its reserves with the same amount pushing the reserves to Ksh10 billion ($77.51 million) from Ksh4 billion($31 million) in the same period. The extra funding is expected to help the sacco strengthen its capital adequacy ratios and boost its lending capacity.'We are targeting Ksh4 billion ($31 million) in that period of five years and then we will slow down because it is a very costly source of capital. You know once you have given a promise of 15 percent you can't go down. So our target is to push our share capital to at least Ksh6 billion and that will put us at a level where we have got some stable source of capital to lend out ,' George Ochiri, the society's chief executive told The EastAfrican in an interview last week.'The challenge with deposits is that any day a member can choose to walk away and they will ask you to return their deposits. With share capital by law we are covered because it is permanent financing in the organisation. So till the law changes it is a very safe source of capital to run a business or to run a Sacco.'The capitalising raising started last year (2024) with the Sacco mobilizing about Ksh900 million ($6.97 million) of fresh capital from its members following the approval of the plan by the regulator—Sacco Societies Regulatory Authority (SASRA).'We were selling this concept of members investing in share capital in a manner that if we pay you 15 percent for five years by the end of the fifth year you will have almost recouped your entire original investment,' says Mr. Ochiri.'So along that period we also expect to grow our reserves to match the same Ksh6 billion ($46.51 million) or more so that the impact of dividends on share capital is neutralized. So reserves should grow and share capital should grow so that you meet that ratio of core capital which should be at least 10 percent of the total assets.'Harambee Sacco has consistently paid out dividends on share capital and interest on deposits in the last four years signaling a major turnaround of the society catapulted by a Ksh4 billion ($31 million) facility from Co-operative bank in 2022. Its dividends on share capital has increased by a higher percentage in the last four years from eight percent in 2021 to 15 percent in 2024 while interest on deposits has increased from seven percent to nine percent in the same period. Last year (2024) the Sacco's net earnings grew by 21.66 percent to Ksh1.46 billion from Ksh1.2 billion in 2023 while total revenue grew by 23 percent to Ksh7.01 billion($54.34 million) from Ksh5.7 billion($44.18 million) in the same period. Total assets increased by five percent to Ksh38.6 billion($299.22 million) from Ksh36.7 billion($284.49 million) while loan book expanded by 10 percent to Ksh32 billion($248.06 million) from Ksh29.1 billion($225.58 million). Its core capital increased by 23.52 percent to Ksh6.3 billion ($48.83 million) from Ksh5.1 billion ($39.53 million). Harambee Sacco embarked on a transformation journey in the year 2019 with a viewing to reclaiming its glory in the Sacco sector battered by years of mismanagement and embezzlement of funds.'When we were starting this journey to transform Harambee to be what it should be we started by appreciating that we had lost our glory and we had to accept and list down what are these that we lost Of course image, of course financial performance , confidence of membership and performance of the staff. So we went on and gradually we have been improving in terms of financial returns, 'says Ochiri.'In 2021 our philosophy was strengthening our processes and that was also the peak of Covid-19 so we invested quite a bit in technology and we moved most of our services onto the mobile internet platform.'Ochiri says the difficult operating environment characterized by increased taxes and several statutory deductions has adversely impacted the Saccos operations.'Last year it was quite a challenge most of our members the pay slips are very tight. So when the government introduced those very many deductions some to do with National Social Security Fund (NSSF), Social Health Authority (SHA), increase in tax rates, PAYE increase, even tax on allowances went up,' he says'Now you find we are in a situation where members' uptake is highly moderated. They would have taken more but they can't. The room in the pay slip is too tight. So you find we are doing business largely on top ups meaning that our potential of growth is so huge but we can't attain it because of the many deductions that were introduced. There also no increase in salaries and the other bit that has slowed us is very few new employees. That has significantly affected our funds mobilisation. It is true we are feeling the heat.'The Sacco disclosed that it had invested Ksh184 million ($1.42 million) in Kuscco in the form of share capital which it has written off the entire amount.'Yes it is true we had money in Kuscco but what we had was share capital. We were one of the original investors in Kuscco, in fact one of the oldest so all over the period we accumulated Ksh184 million ($1.42 million) in shareholding,' says Ochiri.'We didn't have money invested in the special deposits. So this Ksh184 million with the advice of our auditors and of course guidance by the regulator we wrote if off the entire amount. ' © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
Zawya
25-03-2025
- Business
- Zawya
Varying licensing fee regimes leave investors unsure of banking costs
Banking investors in East Africa are still subjected to a varying licensing fee regime, with greater implications on the cost of banking services despite efforts by regional monetary authorities to harmonise banking laws and regulations, to bolster the implementation of the single currency regime, the third pillar of regional integration after the common market and the customs union. Data by the regional Central banks show investors seeking to set up banking operations in the region are still paying different licensing fees despite efforts to promote the region as a single investment destination in line with the broader East African integration agenda. Kenya which prides to offer investors the least cost licensing regime for banks in the region has announced a plan to raise the fees over a three-year period, setting stage for increased cost of banking services as lenders pass on the extra charges to the consume of financial goods and services.'The Central Bank of Kenya (CBK) proposes to adopt gross annual revenue (GAR) methodology at a rate of one percent prorated over a period of three years. The progressive review of licence fees over three years is expected to moderate the potential adverse and significant impact on profitability and viability of banks,' says CBK. CBK proposes the upward review of licence fees for commercial banks to be done progressively over a period of three years to ensure that the banks are able to transition smoothly into the new licensing fee framework. CBK is forecasting the profitability of Kenyan banks to fall by an estimated 1.8 percent in the first year (2025), 2.4 percent in the second year (2026) and 3.1 percent in the third year (2027), with Central bank generating Ksh4.5 billion ($34.88 million), Ksh6 billion ($46.51 million) and Ksh7.5 billion ($58.13 million) from the new fees respectively. During the first year of implementation, CBK proposes to apply a rate of 0.6 percent, second year, a rate of 0.8 percent and ultimately in the third year at a rate of 1 percent. Kenya Bankers Association (KBA), the banks' lobby group says the proposed increase in the licensing fee will increase the banks operating costs prompting lenders to pass it to consumers. Read: CBK gives digital credit providers six months to apply for licencesThe latest disclosure by Kenya's Central bank over the proposed licensing fee hike for commercial banks comes after the Bank of Uganda(BoU) took a similar measure in the year 2022, increasing the licensing fee for a new commercial bank from Ush2 million ($542.81) to Ush50 million ($13,570.5) , that of a new credit institution from Ush2 million ($542.81) to Ush30 million ($8,142.27) and that of a new micro-deposit taking institution from Ush2 million ($542.81) to Ush20 million ($5,428.18). Uganda's existing commercial banks, credit institutions and micro-deposit taking institutions were required to pay 0.05 percent of their gross annual revenue when seeking a renewal of their licences. A central bank study that sampled four countries in the East African region reveals that Uganda is the most expensive destination in terms of bank licensing fees followed by Tanzania, Rwanda and Kenya being the least cost. CBK's 'Consultative paper on the review of commercial banks licence fees in Kenya' published this month (March) shows that the Bank of Uganda (BoU) charges lenders ( in Kenya shillings equivalent) a minimum of Ksh2 million ($15,503.87) in licence fee based on the 0.05 percent of the gross annual revenue of the bank while the Bank of Tanzania (BoT) charges a standard set fee of Ksh600,000 ($4,651.16). The National Bank of Rwanda (NBR) charges an estimated Ksh628, 350 ($4,870.93) in licence fees for commercial banks, also based on 0.5 percent of gross annual revenue of the bank. Kenya is the least cost destination for banking business with the minimum licensing fee based on of between Ksh100,000 ($775.19) to Ksh400,000 ($3,100.77) using the branch-based methodology.'A review and analysis of licence fees charged by selected regional and international regulators indicate that Kenya's license fees are lower. In East Africa, Kenya's licence fees are the least compared to Uganda, Rwanda, and Tanzania,' according to the CBK study. Read: Uganda taxes, high cost of business keep investors at bayAccording to Tanzania's Banking and Financial Institutions (Licensing) Regulations 2014, an applicant for a banking licence must pay a non-refundable application fee of Tsh10 million ($3,776.23) or any other amount as may be determined by the regulator. Across the continent Ghana and Nigeria charge standard set fees of Ksh1.3 million ($10,077.51) and Ksh953, 667($7,392.76) respectively, according to the CBK study. Globally Malaysia and Canada charge standard set fee of Ksh4.8 million ($37,209.3) and Ksh4 million ($31,007.75) in banking licences respectively. Singapore charges a fee of between Ksh1.5 million ($11,627.9) and Ksh1.875 million ($14,534.88) based on a branch-based methodology. Kenya and Singapore use a branch-based methodology to determine the applicable annual licence fees payable by each commercial bank where a variable model is used while Zambia uses the Proportion of Deposits methodology. Uganda and Rwanda used the Gross Annual Revenue (GAR) methodology where a predetermined rate is used to levy licence fees on total revenue generated by a bank, including both funded income from lending activities and non-funded income from fees and commissions, dividend income, and interest income from other investments. © Copyright 2022 Nation Media Group. All Rights Reserved. Provided by SyndiGate Media Inc. (
