Sugar producers in the region are forming an association that will raise $6 billion in investments to help make the region self-sufficient by 2030.
The association comprises producers, farmers’ representatives and national sugar boards, which are driving the initiative, according to Per Carstedt, the executive chairman of Agro EcoEnergy Tanzania.
Agro EcoEnergy is a subsidiary of a Swedish-based firm that has invested $550 million in sugarcane farming in Bagamoyo, Tanzania. Among the association’s key objectives is to promote free trade within East Africa and to help create jobs in the sector.
Sicily Kariuki, Kenya’s Principal Secretary for Agriculture, said the initiative would go a long way in helping the region.
“We will support such initiatives to create regional bodies with common interests. It will bring transparency in terms of the volumes each member state produces,” said Ms Kariuki.
Producers said it was a move in the right direction because the industry would fill the funding gap that has hampered modernisation efforts.
“The region needs investments to upgrade the technology in sugar production and become competitive globally, saving the industry from global shocks while checking on smuggling,” said Dan Ameyo, chairman of the Kenya-based Mumias Sugar.
Uneven production regimes in the region have led to protracted wars between EAC members, the latest seeing Uganda accuse Kenya of blocking its sugar from entering the country.
Shem Bageine, Uganda’s Minister of State for East African Co-operation, said the dispute was being handled at a bilateral level and was not the subject of the EAC Heads of State Summit held in Nairobi last week.
Kenya is also asking Comesa to extend safeguards that allow it to restrict the volume of duty-free sugar that is imported, in order to protect local millers.
Jim Kabeho, chairman of the Uganda Sugar Manufacturers Association, said Kenya requires Ugandan sugar exporters to get permits from the Kenya Sugar Board and KRA in order to send sugar into Kenya.
“We want total reciprocation by Kenya, whose sugar and other products enter the Ugandan market hassle free,” Mr Kabeho said.
In Tanzania, about 50 per cent of the sugar consumed is imported, of which a proportion is smuggled into the country. It is estimated that between 40,000 and 60,000 tonnes of sugar were imported illegally in 2014.
Tanzania has not introduced new sugar projects in the past 40 years. Mr Carstedt said illegal sugar hurts Tanzanian factories with some of them nearly closing down.
If the smuggling continues, Mr Cardstedt said the country could fail to attract investors or banks to support the sector.
He added that investors want the government to make sure that all imported sugar is charged import tariffs and VAT, and that this must be collected by TRA.
“Procedures to ensure that transit sugar is not allowed to enter the market without tariffs or taxes paid should be introduced. Imports of industrial sugar must be managed and audited in such a way that industrial importers can verify that it is only used for their own processes and not for anything else,” Mr Carstedt said.
Last week, Tanzania’s Minister for Finance Saada Mkuya announced that the government had formed a team to investigate the amount of taxes lost through illegal imports, and its impact on the sugar industry.
The minister said duty remission schemes would be changed after the investigations are complete, and blamed importers for misusing their licences.
“We are waiting for the expert report, which we will use to decide on the way forward for this problem,” Ms Mkuya said.
The government’s move came after complaints from sugar producers who said they had 55,585 tonnes of sugar in stock by December 2014 but were unable to sell it because the market was flooded with cheap imports.
Zitto Kabwe, the chairman of the Parliamentary Public Accounts Committee, said they have asked the TRA to finalise the investigations. He said the government would provide solutions to the challenges facing the sugar industry if the recommendations are acted on.
“The committee has directed the sugar board to look into ways to reduce waste by introducing medium-sized factories to process cane. We could increase the production of sugar by up to 80,000 tonnes, and reduce the amount of sugar imports,” Mr Kabwe said.