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Illegal sugar: Economic terrorism


Tuesday July 3, 2018



The bulk of the contraband sugar impounded in the country is smuggled through the Somalia border, we can report. According to a June 2017 FDD report, Kenya imports $1.2 billion worth of sugar from Somalia. [FDD is the US-based think tank Foundation for the Defense of Democracy.] The report cites an International Business Times report dated June 4, 2014. That, from a country that does not own a single sugar mill.

At current world market prices of $349 (Sh35,179 ) per tonne, that is 3.45 million tonnes of sugar. However, at the current domestic price of Sh76,000 a tonne, we import 1.58 million tonnes of sugar a year from Somalia.

Local analysts doubt whether Kenya can absorb all this sugar. The demand is about one million tonnes a year. Analysts however say 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 to 50,000-100,000 tonnes. “If all contraband from Somalia was sugar only, then all other importers [would] have closed shop,” a source said. “The millers would also have closed.”

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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, a report says.

The contraband, including sugar, is then loaded onto Kenya-registered trucks (or so they appear) and smuggled into Kenya through the Dadaab refugee camp. The report, an analysis of al Shabaab’s sources of finance, says contraband exports, including sugar, are the major source of financing for the terror group.

Reuters, in a June 2015 report, said 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 $1,025 (Sh103,319 ) per truck by al Shabaab. Corrupt Kenyan police officers ask for $600 (Sh60,479 ) per truck to allow them to enter Kenya.[Security and defence forces deny involvement.]

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 being inspected.

This explains why the bulk of the sugar so far impounded by 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 (Sh1.8 billion) a year from contraband taxes. At a rate of $1,500 (Sh151,199 ) a truck, we are talking about 122,000 truck-trips a year. This works out to 334 truck-trips a day. Of course all the contraband does not finds its way to Kenya. Some of it is sold in Somalia.
If we work with 10 truck-trips a day, the smugglers make 3,640 trips a year. At $600 (Sh60,479 ) a truck, the corrupt cops make $2.184 million (Sh218.4 million) a year to endanger Kenyan 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 could be as a result of poor handling and storage, especially during transport and repackaging.

Dirty sugar is increasingly finding its way into the market, suggesting poor handling at the repackaging stage. For 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 FDD blames Kenya’s high tariff on imported sugar for the rampant smuggling. The high tariffs are magnate for smugglers, who make a killing. The world market price per tonne of sugar is $349 (Sh35,179) per tonne, while the local ex-factory price is $760 (Sh76,607). This gap is an incentive for smugglers to cash in.

Without credible border controls and with alleged complicity of KDF as well as the alleged involvement of powerful individuals in government, smuggling of contraband will remain a thorn in the flesh for Kenya. And, al Shabaab will not be effectively neutralised.

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 through the hawala system. This system leaves no paper trail to identify sources or destinations 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 neutralise 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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