Sugar price to rise from February as new 4 per cent development levy on sweetener takes effect

Consumers will pay more for sugar starting February 1, 2025, following the introduction of a new tax on the sweetener.

Agriculture Cabinet Secretary Aden Duale has officially gazetted the Sugar Development Levy Order, 2025, which imposes a levy of four per cent on both domestic and imported sugar.

The new levy follows the signing into law of the Sugar Act of 2024 by President William Ruto three months ago.

The Act grants the Agriculture Cabinet Secretary the authority to introduce such a levy.

"There is hereby imposed a levy, as prescribed in Section 40 (1) of the Sugar Act, 2024, at the rate of four per cent of the value for domestic sugar and four per cent of CIF (cost of insurance and freight) value on imported sugar," Duale stated.

Under the new regulation, local sugar millers will be required to remit the levy to the Kenya Sugar Board (KSB), which has recently been re-established as an independent parastatal.

The KSB will collect the levy directly from sugar importers or their appointed agents.

"The levy shall be remitted to the board not later than the 10th day of the month following the month during which the levy shall become due," Duale added.

Support sugar industry

The funds collected from the Sugar Development Levy will be used to support various operations within the sugar industry, including price stabilisation, infrastructure development, and research.

The allocations from the levy are set as follows: 15 per cent for factory development, 15 per cent for research, 40 per cent for cane productivity, 15 per cent for infrastructure in sugar-cane-producing regions, 10 per cent for KSB administration, and 5 per cent for farmers' organisations.

The KSB, which was recently separated from the Agriculture and Food Authority, is tasked with overseeing these new initiatives and ensuring the effective implementation of the levy.

This new tax is expected to raise the cost of sugar, which has recently seen a significant price drop.

The introduction of the levy comes just one month after the government increased the excise duty on imported sugar.

The Tax Laws Amendment Act 2024 raised excise duty from 5 per cent to 7.5 per cent. These new taxes on sugar, combined with the previous excise duty hike, are likely to push sugar prices higher.

The increase in taxes comes after a year in which sugar prices had declined due to increased local production.

According to data from the Kenya National Bureau of Statistics, the average price of a kilo of sugar in December 2024 was Sh159.69, which marked a 25.4 per cent drop compared to Sh214.2 in December 2023.

While consumers enjoyed some relief from high prices, the new taxes are expected to reverse some of these gains.