By PHILOMENA MATSIKO
In Summary
The price of sugar has steadily risen across East Africa, leaving producers and consumers with a sour taste in the mouth.
In Uganda, it has risen from $0.98 to settle between $1.21 and
$1.41 per kilogramme over the past year, with producers blaming the high
cost of producing sugarcane for the increase.
Mwine Jim Kabeho, chairman of Uganda Sugar Manufacturers
Association, in a letter to the Ministry of Trade, Industry and
Co-operatives, said that the average cane price has almost doubled, from
$23.8 per tonne in April 2016 to $44.8 per currently.
“The wholesale prices have continued to rise, so we are forced
to increase the retail prices,” said Abdul Lwanga, a wholesale sugar
trader in downtown Kampala.
The USMA said the adjustment was due to the higher production
costs and to sustain the value chain. However, some traders have taken
advantage of the changes, with some raising their margins from $0.6 per
50kg to $5.6 per bag.
Cost per unit
The industry also notes other challenges as being shortage of
cane. “Sugar production is below half of the installed capacity, thereby
increasing the cost per unit; this will automatically be reflected in
sugar prices,” the association said.
Harvest of immature cane is another factor that the industry attributes to failure to implement a zoning policy.
“The USMA has constantly drawn the attention of the ministry to
this, small mills have continued to be established in close proximity to
old mills” without investing in out-grower schemes. They instead offer
incentives to farmers to lure them away from the established factories,
leading to harvest of immature cane. Inflation, speculation and high
taxes are cited as the other causes.
The association was responding to a note from the ministry that demanded an explanation for the price increase.
Trade and Industry Minister Amelia Kyambadde has long been
locked in a battle with the sugar manufactures over price and production
figures. While established manufacturers want exclusion zones to
protect their outgrowers, the government has looked on and in some cases
encouraged the opening of new factories, some of which do not even grow
their own cane.
Competition
On one hand, the government thinks competition will benefit cane
farmers, while on the other established producers think that the
unregulated sprouting of millers will hurt the industry generally.
Uganda produces an average 500,000 metric tonnes of sugar
annually but Kenneth Barungi, a senior manager with Kakira Sugar, the
country’s leading manufacturer, says the past two years have been
difficult.
Production has dropped by about 86,000 tonnes. Mr Barungi blames
the crisis on poor regulation, “We have proposed to government that the
regulations should require a 25-kilometre radius between one factory
and another.”
The government had previously proposed a nuclear estate of at
least 500 hectares but manufacturers say this would be insufficient.
But Uganda is not alone.
In Kenya, the price of sugar has risen to Ksh300 ($3), up from
Ksh200 ($2) for a two-kilogramme packet in less than a year, following a
sharp drop in cane production.
The Kenya Sugar Directorate now projects that there will be a
deficit of two million tonnes in cane production this year, a signal
that prices could surge further with the recent drought and fall army
worm adversely affecting output.
Held by millers
Cane production fell from 126,362 tonnes in 2015 to 105,000
tonnes last year while sugar stocks held by millers have dwindled from
7,000 tonnes to 5,000 tonnes in the past month, forcing retailers to
restrict purchases per customer.
Kenya is a sugar deficit country and imports 300,000 tonnes to
cover shortfalls that are partly blamed on inefficiency at state-owned
millers.
Sugar prices in Tanzania have been stable for a year with a
kilogramme of sugar selling at between Tsh2,400 ($1.0) and Tsh2,500.
However, the price is more than a third above the official indicative
price of Tsh1,800 ($0.90) announced by the Sugar Board in April.
Sugar prices surged to Tsh3,000 per kilogramme towards the end
of 2015 on the back of hoarding by traders after the government banned
imports to protect the country’s four millers [Mtibwa Sugar and
Kilombero Sugar Limited in Morogoro; TPC Moshi in Kilimanjaro and Kagera
Sugar].
The factories have a production capacity of 320,000 tonnes
against an annual demand of 420,000 tonnes. The deficit is filled by
imports from South Africa, Brazil and Kenya and a permit system overseen
by President John Magufuli himself.
In Rwanda, some respite
The retail price of sugar in Rwanda has eased by Rwf200 ($.02)
per kilogramme in the past two months, but is expected to drop further.
Reason is that Uganda and Tanzania have put strict controls on exports
as they seek to plug internal deficits.
The commodity is now coming in from South America and China.
Sugar prices jumped from Rwf750 ($0.9) in September 2016 to Rwf1,200
($1.4) in January this year, before dropping slightly to Rwf1,000 ($1.2)
recently.
Initially, importers turned to Zambia and Malawi, but those countries now face a cane shortage
Rwanda’s production has remained far below domestic demand of
about 80,000 tonnes per annum, with the sole operational sugar maker,
Kabuye Sugar Works, producing only 14,000 tonnes, or 20 per cent of the
local sugar consumption. Last year’s announced entry of an investor,
Mauritius ACS Ltd, buoyed hopes that the country could save over Rwf20
billion spent on sugar imports annually.
Government plans to acquire 8,000 ha of land to lease to the
investor for cane plantation. Additional cane would be from outgrower
farmers.
In Kigali, a 50kg bag that was Rwf45,000 ($54.6) in December 2016, now ranges between Rwf43,000 ($52.1) and Rwf43,500 ($52.7).
— Additional reporting by Maryanne Gicobi, Emmanuel Onyango and Johnson Kanamugire
No comments :
Post a Comment