KNBS: Kenya produces more sugar, but consumers still pay higher prices
Kenya’s record sugar production and 36.2% rise in cane deliveries have failed to reduce retail prices, which climbed to Ksh167.41/kg in July. High production, processing and supply-chain costs remain key challenges, highlighting the need for greater mill efficiency and competitiveness.
Kenya is producing more sugar than it has in years, cane deliveries to factories are recovering, and the government is tightening protection for local millers, yet households are still paying more for the commodity.
The average retail price of sugar rose for a fourth consecutive month in July to Ksh167.41 per kilogramme, according to the Kenya National Bureau of Statistics (KNBS), up from Ksh164.35 in April when prices reached their lowest level of the year.
The increase has come despite a sharp recovery in domestic production, highlighting a persistent weakness in Kenya’s sugar industry: producing more sugar does not necessarily mean producing it cheaply enough to lower the price paid by consumers.
Domestic sugar production rose 35.2 per cent to 437,852 tonnes between January and June, the highest first-half production on record, according to KNBS. The figure surpassed the previous first-half peak of 410,536 tonnes recorded in 2022.
Cane deliveries increased even faster, climbing 36.2 per cent to 4.93 million tonnes, pointing to a substantial recovery in raw material supplies to factories after the industry’s steep decline last year.
The stronger supply has, however, failed to produce sustained retail price relief. Average sugar prices fell from Ksh186.78 per kilogramme in July 2025 to Ksh166.56 in February 2026 before reaching Ksh164.35 in April, after which the decline reversed.
Prices rose 0.8 per cent in May, 0.58 per cent in June and another 0.47 per cent in July, bringing the average retail price to Ksh167.41 per kilogramme.
The price increases are modest, but their timing is significant because they have occurred as domestic production and cane deliveries have recovered sharply, suggesting that supply is only one part of the price equation.
Sugar passes through several stages before reaching consumers, with the final price reflecting the cost of cane, milling, transport, taxes, distribution and retailing, as well as the margins earned at different points in the supply chain.
Production cost
This means that higher factory output can coexist with high retail prices if mills remain expensive to operate or if costs and margins elsewhere in the chain absorb the benefit of additional supply.
A November 2025 joint report by the World Bank Group and Competition Authority of Kenya, titled From Barriers to Bridges, provides an important indication of where the problem lies, finding that domestic sugar was significantly more expensive to produce than imported alternatives.
The report also found that Kenyan ex-factory sugar prices rose by more than 40 per cent annually in both 2022 and 2023, outpacing increases in cane prices and diverging from global trends.
The findings suggest that the industry’s competitiveness problem extends beyond the cost of cane and into the efficiency of processing and the structure of the wider market.
Kenya’s State-owned sugar mills have historically struggled with ageing equipment, high operating costs and financial distress, forcing successive governments to provide extensive financial support.
The Ruto administration wrote off Ksh117 billion owed by State-owned sugar factories in 2023, while a further Ksh62 billion was written off in 2020 under the administration of President Uhuru Kenyatta, according to the World Bank–Competition Authority report.
The debt write-offs reduced the financial burden carried by the mills, but they did not establish whether the factories could produce sugar at a cost competitive with imports.
The government has subsequently sought to address the problem through private investment, leasing Nzoia, Chemelil, Sony and Muhoroni sugar factories to private operators under 30-year agreements in May 2025.
The leases were intended to inject capital, modernise equipment, improve management and reduce production costs, making the performance of the factories a crucial test of whether structural reforms can improve the industry’s competitiveness.
Tax bane
Production volumes alone will not provide that answer because a factory can increase output while remaining expensive to operate. More revealing indicators will include the amount of cane crushed, sugar recovered from each tonne of cane, factory downtime, operating costs, the cost of producing a kilogramme of sugar and the ex-factory price.
Those measures would show whether the increased supply now being recorded is accompanied by genuine efficiency gains or whether Kenya is simply producing more sugar at a cost that remains uncompetitive.
The competitive environment is also changing as Kenya reduces its reliance on imports. The country exited the Comesa sugar import safeguard regime in January 2026 after 24 years, ending a system that allowed imports of up to 350,000 tonnes annually while protecting domestic millers from cheaper regional supplies.
The government has since strengthened protection for local producers, with the Finance Act 2026 raising excise duty on imported sugar to Ksh40 per kilogramme from Ksh7.50.
In August, Agriculture Cabinet Secretary Mutahi Kagwe directed the Kenya Sugar Board to stop issuing new sugar import licences, arguing that domestic production was now sufficient to meet demand.
“I have asked the Kenya Sugar Board to stop sugar imports,” Mr Kagwe said on August 6, adding that the government would “ensure we do not mess up the internal market because of imports.”
The decision gives domestic producers greater protection from external competition, but it also increases the importance of improving efficiency within local factories because consumers have fewer opportunities to benefit from cheaper alternative supplies when domestic production costs remain high.
Surging household basket costs
The World Bank–Competition Authority report warned that government support could shield inefficient State-owned factories from market forces while limiting the expansion of more efficient private operators, highlighting the tension between protecting domestic production and maintaining competitive pressure.
The issue is therefore not whether Kenya should produce more sugar, since the latest figures show that production is already recovering strongly, but whether the industry can convert that recovery into lower unit costs.
For consumers, the clearest test is what happens between the farm and the kitchen. If higher cane supplies, private investment and improved factory management reduce the cost of producing a kilogramme of sugar, those gains should eventually be reflected in ex-factory and retail prices, although the timing and extent of any pass-through will depend on costs and margins elsewhere in the supply chain.
If production continues to rise while unit costs remain substantially higher than those of imported sugar, Kenya could find itself producing more of the commodity without becoming more competitive, leaving households exposed to higher prices while local producers remain reliant on protection.
The reforms should therefore be judged not only by tonnes produced or factories revived, but by whether the industry can produce sugar efficiently enough to compete without imposing a high cost on consumers.
KNBS data show that Kenya has made significant progress on the supply side, with record first-half sugar production and sharply higher cane deliveries, but the latest retail prices show that increased supply has not yet translated into sustained affordability.
The next measure of success will be whether the country’s mills can turn that stronger supply into lower production costs and, ultimately, a more affordable kilogramme of sugar for Kenyan households.
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Source : People Daily
