Uganda is set to become a dominant sugar exporter within the East African Community, having recently inked new deals to enter the region’s two largest markets.
Kampala has in the past three months struck lucrative deals to export sugar to Tanzania and Kenya, even as it battles queries around the Rules of Origin and its capacity to produce surplus sugar for export.
Uganda's President Yoweri Museveni while on a two-day official tour of Kenya last month, struck a deal with his Kenyan counterpart Uhuru Kenyatta, that would see Ugandan sugar in Kenya.
According to the deal, Uganda will export between 36,000 tonnes and 90,000 tonnes of sugar annually to Kenya.
Earlier in January, Tanzania cleared importation of Ugandan sugar after a meeting between the countries’ ministers of trade broke a trade deadlock that had denied referential market access for Ugandan sugar.
Tanzania had barred Ugandan sugar on allegations that the Kampala imported and repackaged sugar before re-exporting it to regional markets.
Bone of contention
Last year, Tanzania banned Ugandan sugar traders from its market, claiming that they were importing cheap sugar from Kenya and Brazil, before repackaging and exporting it to Tanzania.
Tanzania then imposed a 25 per cent excise duty on sugar that had been exported by Kakira Sugar Works, which was later returned to Uganda.
Uganda’s sugar production is controlled by three millers: Kakira Sugar Ltd (owned by the Madhvani Group), Kinyara Sugar Works Ltd (majority owned by Kenyan-based Rai Group) and Sugar Corporation of Uganda Ltd (owned by the Mehta Group).
It is argued that Uganda is the only EAC member state that produces excess sugar for export with its surplus estimated at just over 100,000 tonnes by last year 2018.
In 2017, Uganda’s sugar production was estimated at 365,452 tonnes against an annual consumption of 360,000 tonnes, according to Bloomberg.
On the other hand, Kenya’s domestic sugar production decline by 41.2 per cent to 376,100 tonnes in 2017 from 639,700 tonnes in 2016, compared with a growing demand of 870,000 tonnes.
Rwanda has an estimated annual sugar shortage of 70,000 tonnes while Tanzania produces about 320,000 tonnes of sugar against an annual demand of 670,000 tonnes, with plans to issue import permits to non-sugar producing companies from June this year to help bridge the deficit.
In February the Ethiopian Sugar Corporation advertised an international competitive tender to purchase 200,000 metric tonnes of white cane sugar with delivery of shipments expected for April, May, June and July.
The country will however halt sugar imports after July 2019 in anticipation of increased local productions from recently inaugurated sugar factories.
The country’s annual production of sugar is estimated at 400,000 metric tonnes and demand ranges between 600,000-650,000 metric tonnes.
Imported sugar helps the country to stabilise serious supply shortages in both household consumption as well as industrial use.
Surveillance at ports
Cabinet Secretary in Kenya’s ministry of EAC Affairs Adan Mohamed told The EastAfrican that the country would beef up its surveillance at ports to ensure that cheap sugar imported from across the world does not find access into the Kenyan market.
“As EAC, we have an agreement under the Common Market protocol to buy goods manufactured within the region. We have no choice. If Uganda produces surplus sugar, then we are obligated to buy from them rather than buying from elsewhere,” said Mr Mohamed.
“But what we are not going to agree on is if it turns out that Uganda is importing the commodity from outside the region and then selling to us,” he added.
According to Mr Mohamed, Kenyan sugar millers should increase their competitiveness to be ready to compete with goods from other EAC member states.
“I think people should not be worried about sugar from Uganda. They should be worried about increasing competitiveness to compete with goods from other EAC member states,” he said.
Uganda and Kenya often grant each other free market access under the EAC agreement.
Under the EAC Customs Union, sugar imported from outside the bloc is charged 100 per cent duty, a move that was taken to protect local manufacturers.