Trade and regulatory arbitrage are becoming the new frontier for grand corruption in Kenya. Consider what Parliament has just done to the sugar industry.
Under the populist banner of “protecting local millers and sugarcane farmers,” the Finance Act 2026 aggressively increases excise duty on imported finished table sugar from Sh7.50 to a punishing Sh40 per kilogramme.
Conversely, sugar imported as raw—and therefore classified as an “industrial raw material for refining”—has been deliberately insulated from these massive tax increases.
Compounding this discrimination, a new East African Community (EAC) Customs Management Gazette has approved duty remissions allowing industrial raw sugar to enter the region at a heavily discounted tariff of just 10 percent for a 12-month window.
This policy architecture is not accidental. It slams the door on open-market table sugar imports—making them prohibitively expensive for ordinary consumers—while leaving a wide-open, lightly monitored backdoor for massive quantities of nominally “raw” sugar.
The big question is this: why are we giving preferential tax treatment to raw sugar when the country’s only local refinery capable of processing it is broken down and mechanically offline?
By doing so, the State has created a lucrative opportunity for cheap, unrefined sugar to leak directly into the retail market, where it will be sold at newly inflated local prices. The stage is set for a manufactured crisis and a massive transfer of wealth from ordinary households to a handful of well-positioned individuals.
Kenya faces a chronic structural deficit, consuming roughly 1.1 million metric tons of sugar annually while producing barely 600,000 tonnes. The domestic market simply cannot bridge that 500,000-tonne gap.
In the coming months, when retail shelves begin to empty and prices spike, the government will inevitably deploy its usual playbook: open an emergency import window. Legitimate importers will bring in expensive, heavily taxed finished table sugar, while politically connected cartels exploit the regulatory backdoor to flood the market with cheap, lightly taxed raw sugar under industrial licenses.
In a functioning economy, these two streams would remain strictly separated. Raw sugar would go directly to a refinery, be processed into edible white sugar, and enter the market legitimately.
However, a recent National Assembly committee investigation blew that convenient myth apart.
When MPs probed a controversial Sh1.5 billion consignment of nearly 28,000 metric tons of raw sugar imported by a prominent local player, the deception was laid bare.
The legislative investigation concluded that Kenya cannot actually refine raw sugar at scale.
They found that the country’s primary designated refinery was mechanically non-operational—yet thousands of tonnes of raw sugar, completely lacking manufacturing or expiry dates, were cleared through customs and quietly routed to bonded warehouses in Mombasa and the Inland Container Depot in Nairobi.
The upshot of the current situation is clear: by granting tax exemptions for an industrial input that cannot be industrially processed, the State has engineered a highly lucrative parallel market. On one side stands prohibitively expensive, legally imported refined sugar.
On the other, lies a massive loophole where mountains of cheap, potentially toxic raw sugar will surreptitiously find its way onto retail shelves.
If the government genuinely wants Kenyans to believe the Sh40 per kilogramme duty hike on imported table sugar was designed to protect farmers and resuscitate Western Kenya’s sugar belt, it must pass a simple test of sincerity: immediately ban raw sugar imports.
Until Kenya has verifiable, fully operational domestic refining capacity operating under strict public health oversight, there is no economic or logistical justification for allowing a single kilogramme of raw sugar into the country.
Continuing to permit these imports when the capacity to refine them is non-existent is not a policy oversight; it is complicity. It proves that public policy is no longer being written to manage the economy, but rather to manufacture artificial price gaps for the exclusive benefit of corrupt elites.
We are witnessing a fundamental shift in the tactics of the corrupt. For decades, grand corruption in Kenya followed a predictable playbook: greedy elites extracted rents and kickbacks from multi-billion-shilling capital projects, inflating procurement costs and loading the national balance sheet with unsustainable sovereign debt.
That game is changing. Choked by a mountain of debt, a punishing fiscal deficit, and the intense scrutiny of international financial institutions, the government no longer has the fiscal space to launch massive infrastructure projects.
The taps of easy, debt-fueled capital expenditure have run dry, and large capital projects are now financed through securitisation and off-balance-sheet transactions. As a result, corruption has migrated upstream—engineered through trade and regulatory arbitrage.
The Kenyan consumer is, quite literally, being made to pay the price.
The writer is a former managing editor of The EastAfrican.
