Faced with a 290,000-tonne shortage, Tanzania is now issuing permits to traders to import sugar from Uganda.
Last June, Tanzania stopped issuing new permits for importation of sugar to protect local producers and traders.
With a population of more than 50 million, the country’s annual sugar consumption is estimated at 590,000 tonnes, of which 135,000 tonnes are for industrial consumption and 455,000 for domestic use.
Tanzania produces about 300,000 tonnes of raw sugar annually, leaving a high demand gap.
Tanzania’s Minister of Agriculture Japhet Hasunga said the country is currently experiencing a shortage and needs to fill the gap.
However, Tanzania had charged a 25 per cent import duty on sugar from Uganda, contrary to the zero rate recommendation of the EAC Common Market Protocol.
According to Mr Hasunga, sugar production in Tanzania rose to 303,431.14 tonnes in the financial year 2017/2018, from 293,075 tonnes in financial year 2015/2016.
Sugar trade in the region has been dogged by controversy. When Tanzania blocked sugar imports from Uganda last year, it was on the claims that the sugar was actually from Kenya. The restrictions were informed by reports that Kenyan sugar had entered the Ugandan market, where it was repackaged then exported to the regional market.
Tanzanian President John Magufuli said the ban on sugar imports from Uganda was because some government officials had been abusing their powers and issuing orders to import sugar for their own interests.
Sugar in Tanzania comes mainly from four companies: Kilombero Sugar Company, majority owned by South Africa's Illovo Sugar, Mtibwa, Kagera, and TPC, a unit of Mauritius sugar producer Alteo.
More sugarcane plantations and factories are planned across the country to meet the growing demand.
The National Social Security Fund and the PPF Pension Fund, the two leading pension schemes in Tanzania, are growing sugar cane at Mkulazi Sugar Farm in Morogoro region, aiming to produce 30,000 tonnes of sugar per year.
Meanwhile, in Uganda, the top three sugar producers are urging the government to reconsider parliament’s rejection of zoning for millers, saying it will undermine output due to competition for cane.
Allowing producers to establish mills within 25 kilometres of each other would lead to competition and cause producers to operate below capacity, Jim Kabeho, the chairman of the Uganda Sugar Manufacturers Association, said on Wednesday by phone from Jinja, in eastern Uganda.
“We asked for zoning and we didn’t get it,” he said. “We are now waiting to hear from the government because we are already losing on production.”
At least nine factories were established in the past decade, some too close to other plants, according to the lobby that groups Kakira Sugar Ltd, Kinyara Sugar Ltd, and Sugar Corp of Uganda Ltd.
Last year, lawmakers in the country rejected demands for zoning, saying it would force the government to move millers or to buy land. Under Ugandan law, the president can either sign the bill or ask the lawmakers to review legislation that they have enacted.
Additional reporting by Bloomberg.