Kenya's hard-hit sugar industry is facing an increasing glut thanks to a likely bumper sugar cane harvest in the coming months.

Sugar producers are already sitting on thousands of tons of unsold sugar - because their home market is being undercut by an unrestricted flood of imports.

Kenya and other sugar producers are also facing a slowdown in global demand for their product.

Emmanuelle Rossi of Sucre Export told World Business Report that world prices have been dropping rapidly over the last three weeks.

World prices falling

Part of the reason is the volume of exports from Brazil.

Last year the Common Market for Eastern and Southern Africa (COMESA), of which Kenya is a member, removed its barriers to regional trade.

Kenya charges an 18% value added tax and a 7% sugar development levy on all sugar imports from COMESA members.

This is less than the tax imposed upon local sugar producers.

The industry has been asking for the Kenyan government to rethink its policy and bring in duties of around 30-40% on all imports across the region.

Imported and smuggled sugar retails at a lower price than locally produced produce.

Market shrinks

Kenya has the capacity to produce around 400,000 tonnes of sugar a year.

At the moment there is reportedly some 75,000 tonnes of unsold sugar as buyers turn to cheaper sugar from their neighbours.

Smuggling is a huge problem in the region and very difficult to control.

According to Ms Rossi, however, recent events in the United States have also played their part.

"Major markets who would be buying at this time of the year would be Muslim countries that stock up sugar for the Ramadan season," she said.

Furthermore, some of those countries are at war risk, so shippers are refusing to travel to them.

In addition to world prices, Tanzania and Kenya have obsolete production units which are not cost effective.

"The sugar is not up to export standard either in quality or packaging and they have a problem competing with low world prices, " Ms Rossi explained.

But a spokesman for Mumias, the largest sugar producing company in Kenya, told World Business Report that because they were a major international exporter, the current glut would not affect their business.

Relief sought

The Kenyan government is hoping to get increased quotas into the European Union, but Ms Rossi doesn't think that will help very much because the quotas will still not exceed 10,000 tonnes.

"Our sentiment is that sugar prices are going to move further downward in the medium term," she said.

She cited the large crops expected from Brazil, India and Thailand - which meant there would be a lot of sugar on the world market.