Kagwe defends 4 percent Sugar Development Levy amid cane shortage

Agriculture Cabinet Secretary Mutahi Kagwe has defended the four percent Sugar Development Levy stating that the government was not about overburdening the sugar industry but aligning the resources to the scale and scope of today challenges and opportunities.

Kagwe who appeared before the Senate Delegated Legislation Committee said that the Kenya Sugar Research and Training Institute had its mandate broadened under the new Act to include training, a development that requires heavy investment in curriculum and infrastructure.

The Cabinet Secretary told Senate that the levy rate followed extensive public participation and a Regulatory Impact Assessment while some stakeholders had pushed for lower rates while the majority supported maintaining the maximum 4% as provided for in the law.

“During the public participation, stakeholders expressed various opinions on the Sugar Development Levy rates with majority proposing the imposition of the levy be at 4% while others proposed it be imposed at between 6-10%, while another section wanted it fixed at 3%,2% and 1%,” said Kagwe.

The Cabinet Secretary told Senators that under the Sugar Act 2024, the levy proceeds are ring-fenced for key sector priorities such as 40% for cane development and productivity, enhancement, 15% for factory development and rehabilitation and 15% for research and training.

The Cabinet Secretary told the Senate that a further allocation of 15% for infrastructure development, 10% for administration of the Kenya Sugar Board and 5% for farmer organizations had been made stressing that these allocations are critical at a time when the industry is grappling with a severe cane shortage.

He said that in strict compliance to the provisions of the Statutory Instruments Act, Cap. 2A, the Sugar Development Levy Order was subjected to a Regulatory Impact Assessment with the Public Notification circulated through MyGov publication dated April 22, 2025, which called for written comments from the public on the draft Regulatory Impact Assessment on the draft Levy Order.

“The draft Sugar Development Levy Order 2025 was presented to a public validation forum and further, stakeholders’ comments were incorporated with this including the adoption of the Sugar Development Levy rate at 4% as proposed by the majority of the stakeholders,” said Kagwe.

He told the Senate that the industry is set to transition from a weight to quality-based cane payment system which requires significant investment in the development, multiplication and distribution of suitable sugarcane varieties that are high yielding, drought and disease resistant.

Kagwe told the Committee Chaired by Tharaka Nithi Senator Mwenda Gataya that transition requires a total replacement of the old sugarcane varieties which currently account for 97% of the total area under sugarcane in the country.

He pointed out that the industry has expanded, attracting significant new investor interest in establishing sugar milling facilities across the country with Angata and Soit in the Transmara Zone and a new Green-field project in the Bura Irrigation Scheme.

“This growth underscores the urgent need to identify new regions with sugarcane production potential, this opportunity will require substantial investments in cane development and supporting infrastructure, efforts that can only be achieved through application of the current Sugar Development Levy rate of 4%,” said Kagwe.

The CS said the sugar industry is currently grappling with a severe cane shortage, a challenge that cannot be resolved merely through investment in additional milling capacity with the immediate priority being sugarcane development with improved varieties to guarantee adequate supply to meet factory requirements.

“While it is true that prior to the revocation in 2016 the Sugar Development Levy was charged at 4%, it is important to recognize that the circumstances of the industry have since changed significantly. The sector has not only doubled in size but also in complexity, with greater demand for research, training, cane development, infrastructure, and regulatory oversight,” said Kagwe.

The committee is expected to look at the Ministry’s submissions alongside stakeholder concerns before issuing its decision on whether the levy will stand at 4% or be revised downward.