Tanzania’s sugar producers are up in arms over the government’s decision to allow more imports, which they say has not only left them with a cashflow crisis, but is also threatening the existence of 10,000 cane growers.

The Tanzania Sugar Producers Association says that while the country’s deficit stands at 80,000 tonnes annually, the window provided by the government allowing importation of up to 200,000 tonnes denies them a huge share of the market. The country’s demand is estimated at 400,000 tonnes per year, while local firms produce 320,000 tonnes.

READ: Tanzania to import sugar as deficit bites

Owing to the huge surplus of imported sugar, local firms are left with large stocks of the commodity still unsold, said TSPA in a report on the state of the sugar industry.

However, Minister for Agriculture, Food and Co-operatives Christopher Chiza denied the existence of surplus sugar in the market.

“Currently, the government is not receiving any complaints from consumers because there is enough sugar in the market at an affordable price, but producers are complaining because the decision to import denies them an opportunity to maximise from the shortfall,” he said.

The producers say millers are holding over 82,000 tonnes, worth at least Tsh100 billion ($62.5 million), which is causing a cashflow problem.

This has forced the producers to delay payment to their suppliers, with the ripple effect of the suppliers being unable to service their debts.

“The forced delay in payment to outgrowers is of particular concern, as it puts at risk the excellent co-operation between the factories and the outgrowers, which has been painstakingly established,” says TSPA.

Further, the delayed payments and the reduced income of outgrowers endangers the following year’s cane crop due to outgrowers’ limited financial ability to finance best practices in crop husbandry.

The four sugar producers in Tanzania — Kilombero, TPC Ltd, Mtibwa and Kagera Sugar — together pay Tsh45 billion ($28.8 million) annually to outgrowers for their sugarcane.

However, Mr Chiza said the government had permitted the producers to export any excess sugar, but TSPA questions the requirement of an export licence to sell within the EAC where there should be free movement of goods.

“Normally, particularly within a Customs Union such as the EAC, we would expect that sugar would move freely between areas of surplus and deficit in the interests of both the producer and consumer,” said the TSPA.

Tanzania also enjoys tariff and quota free access to the EU through the Everything But Arms (EBA) initiative, which TSPA says would be appropriate to enable members to sell part of their produce to that market.

According to TSPA, the current system requiring an export licence slows down the export process, and denies sugar producers the opportunity to achieve much-needed cashflow relief when the domestic market is oversupplied.