Kenya’s Sugar Act 2024 and Mill Privatisation Set to Reshape East African Sugar Trade

Kenya’s sweeping sugar sector reforms under the Sugar Act 2024 and long-term leasing of four state-owned mills to private investors are pushing the industry into a recovery phase, with output forecast to rebound sharply in marketing year (MY) 2026/27. Rising domestic supply and a new levy-backed investment model are expected to trim import demand, ease retail prices and gradually re-balance regional sugar trade flows.

For global and regional traders, Kenya is shifting from a chronic deficit market reliant on managed imports under COMESA safeguards toward a more market-driven regime combining duty-free regional access with expanding local production and upgraded milling capacity.

Introduction

The Sugar Act 2024 re-established the Kenya Sugar Board (KSB) as the core regulator and introduced a 4 percent Sugar Development Levy on domestic and imported sugar, earmarked to fund cane development, factory upgrades, infrastructure and research. In parallel, the government has executed 30-year operational leases of four major state-owned mills—Sony, Chemelil, Muhoroni and Nzoia—to private operators in a bid to restore efficiency and processing capacity.

These policy shifts follow a sharp output slump in MY 2025/26 that forced Kenya to increase imports under a duty-free COMESA/EAC regime after the country exited its long-standing safeguard mechanism on November 30, 2025. With reforms now being implemented, the latest USDA/FAS sugar annual projects Kenyan sugar production to climb around 40 percent to 850,000 metric tons in MY 2026/27, supported by expanded harvested area and improved factory utilisation.

🌍 Immediate Market Impact

The combination of higher domestic output and ongoing duty-free access for COMESA and EAC suppliers is set to loosen Kenya’s near-term balance sheet while reducing the structural import gap over the next 12–24 months. FAS Nairobi projects imports falling from about 510,000 metric tons in MY 2025/26 to roughly 370,000 tons in MY 2026/27 as local production recovers.

Retail prices are already easing from the peaks seen during the 2025 shortage: official statistics show average table sugar prices declining to about KSh 166–167/kg in February, down more than 4 percent month-on-month and further below highs recorded in late 2025. For refined sugar traders, this softening domestic price environment, combined with levy-funded investments, points to a gradual narrowing of Kenya’s import premium versus global benchmarks.

📦 Supply Chain Disruptions

Short term, the transition from state to private management has created operational friction—labour disputes, redundancy concerns and temporary disruptions to cane intake at some mills—though authorities maintain that most workers will be retained as plants are modernised. These adjustments may still generate uneven plant utilisation rates in 2025/26, but they are expected to normalise as private lessees stabilise operations and clear arrears.

On the logistics side, the 4 percent levy and KSB’s strengthened enforcement of crop calendars aim to improve cane maturity, recovery rates and throughput, reducing historical inefficiencies such as premature harvesting and irregular deliveries. Over time this should support more predictable supply for industrial buyers and temper the frequent recourse to emergency imports that has characterised Kenya’s sugar trade in recent years.

📊 Commodities Potentially Affected

• Refined sugar (white, ICUMSA 45): Rising Kenyan output and a more efficient milling base are likely to cut the country’s import requirement, pressuring regional suppliers’ premiums but potentially narrowing Kenya’s domestic prices relative to world market offers.
• Raw sugar for refining: With private investors incentivised to maximise plant utilisation, some mills may increase toll refining or blending of imported raws, but the medium‑term policy thrust favours higher local cane-based production rather than larger raw imports.
• Ethanol and molasses: Reform plans emphasise diversification into co-generation and ethanol, which could raise demand for by-products and create additional revenue streams for mills, modestly affecting regional molasses and industrial ethanol flows.
• Electricity from bagasse co-generation: New investments in co-generation capacity may incrementally boost grid-fed power from sugar mills, potentially improving plant economics and narrowing production costs per tonne of sugar.

🌎 Regional Trade Implications

Kenya’s exit from COMESA safeguards and its move to a duty-free regime for regional partners initially opened the door for higher inflows from traditional suppliers like Mauritius and Uganda, which have held leading shares in the Kenyan import market. However, as domestic production recovers, these exporters may face reduced volume opportunities or greater competition on price into the Kenyan market.

For non-COMESA origins such as Brazil, India and Middle Eastern refiners, Kenya’s structural shift is even more significant: outside of time-bound waivers for industrial users, imports from non-regional suppliers continue to attract high tariffs, making Kenya a less attractive destination as local output rises. Over time, surplus Kenyan sugar could increasingly find outlets in neighbouring deficit markets if efficiency gains push production beyond domestic needs.

🧭 Market Outlook

Over the next one to three quarters, traders should expect a gradual softening of Kenyan domestic prices as the MY 2026/27 crush ramps up and mill modernisation gathers pace, though execution risk around private investment timelines and regulatory enforcement remains. Any delays in capital expenditure, or renewed climatic stress in cane-growing zones, could temper the projected 850,000‑ton output and keep Kenya more dependent on imports than currently forecast.

Beyond 12 months, the convergence of expanded harvested area, higher plant efficiency and levy-funded infrastructure suggests Kenya is on track to reduce its structural deficit and volatility, with ending stocks projected to rise and provide a modest buffer against shocks. Traders will closely monitor cane price policy, enforcement of crop calendars and the performance of the newly leased mills as lead indicators for the pace and durability of this transition.

CMB Market Insight

Kenya’s sugar reforms mark a structural inflection point for East African sugar markets, shifting the country from a heavily protected, chronically short importer toward a more disciplined, investment-driven production model. For international and regional players, the immediate window of elevated import demand is narrowing as local supply recovers and retail prices ease off their peaks.

Over the medium term, this policy and business reset is likely to compress import margins into Kenya, reallocate volumes within COMESA, and gradually deepen liquidity in East African sugar trade as Kenya’s role evolves from pure deficit buyer to more balanced market participant. Positioning along this trajectory—through flexible sourcing, hedging around Nairobi-linked demand, and strategic engagement with Kenyan industrial buyers—will be critical for sugar exporters and downstream users in the region.