The politics around sugar prices in Uganda and the big three producers

Saturday May 5 2018

Sugar from Kakira factory in Uganda at the

Sugar from Kakira factory in Uganda at the Kisumu pier in western Kenya. PHOTO | FILE 

DICTA ASIIMWE
By DICTA ASIIMWE
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Over the past year, sugar prices in Uganda have gradually dropped to an average of Ush3,500 ($0.9) per kilogramme, from a high of Ush8,500 ($2) in May 2017. 

When parliament and the public complained at the height of the price hike in 2017, Uganda Sugar Manufacturers Association blamed government’s failure to zone the location of sugar factories for shortages, which made sugar too expensive for many households.

Households’ inability to find affordable sugar often has political connotations due to Uganda’s scarcity years in the 1970s and the 1980s when the people had to line up or get chits from government to access the product.

Consequently, the big sugar manufacturers under their association got government to promise a law blocking the establishment of sugar factories within a 50 kilometre radius of Kakira Sugar Works, Kinyara Sugar Works and the Sugar Corporation of Uganda (SCOUL). The sugar law was to be passed by March this year. 

The three who are the main members of Uganda Sugarcane Technologists Association (USCTA) say they can only maintain sustainable supply and affordable prices, if government only licenses sugar factories that will be established 50 kilometres away from the existing ones to avoid the competition for sugarcane from farmers.  

The law has been delayed, as members of parliament have not agreed on whether to include the clause on zoning of sugar factories. Yet the prices have reduced to what Amelia Kyambadde the Minister of Trade and Co-operatives says is even below the standard. A kilogramme is selling for as low as Ush3000 ($0.8) in some places.

Change in prices

Asked about the reduction in price, even when several factories are competing for the sugarcane, Jim Kabeho the USCTA chairman says the change can partly be explained by sugar being an agricultural product. 

“Sugar is an agricultural product. And just like other agricultural products, supply and prices fluctuate,” he says.

He said that the reduction in supply last year explains the high prices. And the higher than expected supply which is on account of Kenya’s decision to import duty free sugar from outside of the East African Community explains the current slump in price.

“Kenya imported 130,000 tonnes, causing oversupply in the market,” he said.

Under the EAC Customs Union, the cost of sugar imported from outside the region is charged 100 per cent duty, a move that was taken to protect local manufacturers.

Uganda is the only EAC country with domestic surplus, of just over 100,000 tonnes, while Kenya produced 327,000 tonnes of sugar versus a demand of 870,000 tonnes.

Tanzania and Rwanda on the other hand had shortages of 200,000 tonnes and 70,000 tonnes respectively. As a result of these deficits, at least one partner state will on an annual basis end up at the EAC asking for an import duty waiver to bring in affordable sugar for its citizens.

Kenya is one of the countries that sought a waiver last year, which saw the country import sugar duty-free from outside of East Africa. 

Glut in the market

According to the sugar manufacturers, Kenya’s importation of duty-free sugar caused a glut in the market. Since demand in the Democratic Republic of Congo and South Sudan is now unreliable due to ongoing conflict, the manufacturers are relying more on the Ugandan market.

Uganda sugar producers say they are now selling their surplus in Tanzania, thanks to an agreement reached by leaders of the two countries last year.

Mr Kabeho who is also East African Business Council chairman, however said Tanzania’s demand is too low. And this is causing the sugar manufacturers losses in revenue.

As a result, of demand that is lower than supply, factory prices have seen a 32 per cent reduction from Ush190, 000 ($51) per 50-kg bag, to Ush130, 000 ($35) currently.

Mr Kabeho says their factories are also losing money, as they have had to close some of production lines, due to a shortage in cane.

Until 2010, when a sugar policy from the Ministry of Trade, Industries and Cooperatives banned jaggery cane crashers, the SCOUL, Kakira sugar works and Kinyara sugar works were running a monopoly of sorts, determining at leisure both the prices of sugar and cane.

Kenneth Barungi the assistant general manager at Kakira Sugar Works said the policy from the Ministry of Trade and Cooperatives ended the establishment of jaggery mills. But these jaggery mills have since been morphed into small factories, which are competing for the same cane, as the big plants.

Mr Barungi warns that this could cost Uganda in lost taxes to the government, lost jobs and lack of a market for farmer’s cane.

Sugarcane farmers and politicians from Busoga region where the biggest sugar factories Kakira and SCOUL get their cane from disagree with Mr Barungi’s view.

Peter Mugeme a Member of Parliament from Iganga Municipality said that creating 50 kilometre radius buffer between sugar factories leads to monopoly and impoverishes the population.

Legislation

With 42 per cent of the population living below the poverty line, the Uganda National Household Survey shows that Busoga, which is home to most of the sugar factories, is among the top three poorest sub regions with the in the country.

To mitigate the poverty and food insecurity in the sub region, politicians in Busoga have tried to legislate against it poorest people growing sugarcane.

In an attempt to improve food security in Luuka, the district attempted in 2013 to pass a law that would have barred those with less than two acres from engaging in sugarcane farming.

Luuka district councillors rejected the law, but within six months district chairpersons from Busoga region were back discussing this same proposal, with a view to passing it.

Mr Mugeme, who represents a constituency in Busoga says such legislation is no longer necessary, as the arrival of more sugar factories, means communities can now make reasonable incomes from growing sugar cane.

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