CS Kagwe Defends Sugar Development Levy

Cabinet Secretary for Agriculture and Livestock Development, Mutahi Kagwe, on Thursday, October 2, 2025, defended the 4% Sugar Development Levy before the Senate Committee on Delegated Legislation. He maintained that the gazetted rate, implemented from July 2025, achieves a crucial balance between fostering industry development and ensuring its long-term sustainability.

The CS highlighted varied opinions from industry players, with some advocating for a reduction to as low as 1% and others proposing an increase to 10%. However, the Ministry of Agriculture and Livestock Development insisted on the 4% rate, which is now in effect.

Context of the Levy

The Sugar Development Levy was introduced through the Sugar Act, 2024, with the aim of revitalising Kenya's sugar industry. The levy applies to both locally manufactured sugar, calculated on the ex-factory price, and imported sugar, based on its Cost, Insurance, and Freight (CIF) value. The Kenya Revenue Authority (KRA) was appointed as the collector of the levy, which is channelled into the Sugar Development Fund.

The funds collected are allocated to several critical areas within the sugar sector. Forty per cent is dedicated to cane development and productivity enhancement, while 15% supports factory rehabilitation. Another 15% is allocated to research and training at the Kenya Sugar Research and Training Institute, and an additional 15% goes towards infrastructure projects in sugarcane-growing regions. The administration of the Sugar Board receives 10% of the levy, with the remaining 5% strengthening farmer organisations.

Stakeholder Perspectives and Policy Implications

During the Senate session, industry stakeholders presented diverse viewpoints on the levy. Some argued for a reduction to alleviate financial pressures on struggling millers, while others suggested an increase to generate more funds for long-term development. CS Kagwe, however, reiterated that the 4% rate is sufficient to balance sector growth funding with avoiding an undue burden on producers.

Analysts suggest that this development could significantly influence public debate and policy execution in the near term. Stakeholders are urging for greater clarity on the timelines, costs, and safeguards associated with the levy's implementation.

Evidence and Data

• The 4% Sugar Development Levy was gazetted and implemented from July 2025.
• The levy is applied to local sugar millers (on ex-factory price) and importers (on CIF value).
• Sugar imports into Kenya have seen significant growth, rising from KSh 6.9 billion in 2015 to KSh 49.4 billion in 2023.
• Allocation of the levy: 40% for cane development, 15% for factory rehabilitation, 15% for research and training, 15% for infrastructure, 10% for Sugar Board administration, and 5% for farmer organisations.

Risks and Implications

The effectiveness of the Sugar Development Levy hinges on transparent and efficient utilisation of the collected funds. Mismanagement or diversion of these funds could undermine the intended revitalisation of the sugar industry, potentially leading to continued struggles for millers and farmers. Conversely, successful implementation could boost local sugar production, reduce reliance on imports, and enhance the livelihoods of sugarcane farmers.

What to Watch

Future developments will likely focus on the actual impact of the levy on sugar production costs, consumer prices, and the overall competitiveness of Kenyan sugar in regional and international markets. The Senate Committee on Delegated Legislation will continue to play a crucial oversight role in ensuring the levy's objectives are met and that it aligns with broader national agricultural policies.