Saturday, 23 June 2018

Contraband sugar: Economic terrorism?

Contraband Sugar Being
 destroyed at Mombasa
 The bulk of the contraband sugar being impounded in the country is smuggled through the Somalia border, we can report. According to a June 2017 FDD report, Kenya imports US$1.2 billion worth of Sugar from Somalia. The report cites an International Business Times report on the same dated June 4, 2014. That, from a country that does not own a single sugar mill!  
At the current world Market prices of $349 per ton, that is 3.45 million tons of sugar. However, at the current domestic price of KES 76,000 a ton, we import 1.58 million tons of sugar a year from Somalia!
 Local analysts doubt whether Kenya can absorb all this sugar. The demand for sugar in the country is about one million tons a year. The analysts however, say that this could be the total value of all contraband from Somalia including low-volume but high- value goods such as electronics, apparel and textiles.
Sugar could form perhaps, 10 to 20 per cent of the contraband which will come 50,000 to 100,000 tons. “If all contraband from Somalia was sugar only, then all other importers will have closed shop,” said the source. “The Millers would also have closed,” they add.
Regardless of the quantity smuggled into the country, the sugar and other contraband goods are not taxed and do not originate from the preferential countries. The sugar for instance originates from Brazil and is transshipped from Dubai into the port of Kismayo and other ports in Al- shabaab controlled areas in Somalia, reports say.
The contraband, including sugar is the loaded onto Kenya Registered trucks (or so they appear) and smuggled into Kenya through Dadaab refugee camp. The report, an analysis of Al- shabaab’s sources of finance says that contraband exports, including sugar, is the major source of finance for the terror group.
The international News agency, Reuters, in a June 2015 report says that 35 trucks laden with Sugar and rice among other contraband enter the Dadaab Refugee camp every week- an average of five trucks daily. An unknown number also enter Wajir every week, said the Reuters report. The trucks are taxed at $1025 per truck by Al- shabaab. Corrupt Kenyan Police Officers ask for $600 per truck to allow it to enter Kenya.
Since the Kenya - Somalia border is officially closed to freight and passenger traffic, there are no Customs checks. The contraband, therefore, finds its way into the market without being taxed in Kenya or even being inspected.
This explains why, the bulk of the sugar so far impounded by the government agencies is concentrated in areas near the border with Somalia such as Isiolo, Kitui, Meru and Eastleigh in Nairobi, “the little Mogadishu.”
The UN estimates that Al-shabaab makes anything up to $18 million a year from contraband taxes. At a rate of US$1,500 a truck, we are talking about 122,000 truck -trips a year. This works to 334 truck -trips a day. Of course, all the contraband does not find its way to Kenya. Some of it is sold in Somalia.
If we work with ten truck trips a day, the smugglers make 3,640 trips a year. At $600 a truck, the corrupt cops make $2.184 million or KES218.4 million a year to endanger Kenyans’ lives!
 According to Health sources, sugar never expires although it is good to use within two years of production.
 However, unhygienic handling and storage could contaminate it. The sugar in the country is alleged to be contaminated with Mercury and Copper. This is as a result of poor handling and storage, especially during transport and re-packaging.  The Sugar is loaded in Dhows in Dubai and shipped to Somalia Ports. It is then loaded onto open trucks for transportation into Kenya.  These vessels carry anything and everything, raising the probability of contamination to almost 100 percent.

Dirty Sugar is increasingly finding its way into the market, suggesting poor handling at the re-packaging stage. For the avoidance of doubt, the sugar samples should be taken elsewhere for testing to confirm the level of contamination and the contaminants.


The Sugar may not even be toxic to humans, although some reports suggest that weapons could also be hidden in the Sugar bags thus contaminating it. But it is toxic to the economy in three ways; the smugglers do not pay taxes and two, it kills our sugar sector and three, it funds enemy fighters. This is commodity terrorism!
 The report, Al- shabaab Financial Assessment, by the Foundation for the Defense of Democracy (FDD), a US-based think-tank blames Kenya’s high tariff on imported sugar for the rampant smuggling. The high tariffs are a magnet for smugglers who make a killing. The world Market price per ton of sugar is US$349 a ton while the local ex-factory price is US$760. This gap is an incentive for smugglers to cash in.
 Without credible border controls and with alleged complicity of KDF in the vice and alleged involvement of powerful individuals in the government, smuggling of contraband will remain a thorn in the flesh for Kenya.  And, Al-Shabaab will not be effectively neutralized. 
That is why, Al shabaab, which relies heavily on sugar taxes to finance its operations, has Kenya as its dumping ground.  Charcoal, its former lifeline has been drained by restrictions especially by the interim authorities in jubbaland, Southern Somalia.
Contraband barons, linked to Al- shabaab, says the FDD report, are exempt from paying the tax. But they also finance the terror group by sharing profits which are transferred to through the hawala system. This system leaves no paper trail to identify sources or destination or even the amounts transferred.
 Most of the barons, reports say, are based in Kenya among the Somali diaspora. Kenya has thus become the lifeline for Al- shabaab, a terror group it is fighting to neutralize in Somalia. The report calls for tough action against the smugglers regardless of their status. Making smuggling expensive in the same way drug trafficking was destroyed is one way of dealing with the vice. And it’s urgent, Kenyans say.

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