6 December 2012

Tanzania: More Foreign Agricultural Investments Target Sugar Industry

THE country's sugar industry expects to largely target export markets in the next four years as more foreign agricultural investments flow in by 2016, a departure from the current situation where there is existence of sugar gap every year, authorities say.

The Sugar Board of Tanzania (SBT) says its nine projects whose implementation will see the country tripling its annual sugar production from the current estimate of 300,000 metric tonnes to 910,000 metric tonnes come 2016, targets the current usually experienced gap sugar. The projects, which are in various stages of implementation, include Rufiji (Coast Region), Kasulu (Kigoma Region), Ikongo (Mara Region), Luiche/ Malagarasi (Kigoma Region), Pangani (Tanga Region), Mahurunga (Mtwara Region) and Kilosa in Morogoro Region.

"These projects should come to fruition come 2016. With the total amount of sugar we are producing, we'll be able to export some to our neighbours in East Africa," the SBT project manager, Mr Abdul Mwankemwa, says. Currently, the country has four major sugar factories with an annual sugar production of at least 300,000 metric tonnes against the demand of 500,000 metric tonnes.

Yet, surprisingly, while the country experiences gap sugar, poor timings in importation of sugar to offset shortages has sometimes created excesses, that have affected businesses of local large-scale producers. However, according to checks conducted by 'Daily News' at plants such as the Kilombero sugar, it is evident that poor distribution network that is dominated by a few greedy middlemen is still a challenge.

The 'Daily News' has learnt that some 40,000 tonnes of unsold sugar for Kilombero's Illovo worth over 10bn/- still remained piled up in godowns and around Kilombero and Dar es Salaam due to failure to secure local markets, until a government export licence a few weeks ago to enable them to sell only 10,000 tonnes of the consignment in the European Union. But following requests to export, Kilombero Sugar Company and Kagera Sugar Company, the two firms among the country's sugar manufacturers, were allowed to export 19,500 tonnes of sugar to European Union, Uganda and Southern Sudan markets.

The development followed the piling up of tens of thousands of stocks of sugar in the companies' godowns in Dar es Salaam and at the premises in Kilombero and Kagera. A subsequent meeting between the Minister for Agriculture, Food Security and Co-operatives, Engineer Christopher Chiza with sugar companies agreed that the two sugar firms could no longer withstand the problem. The minister said the companies were allowed to offload part of the unsold sugar to settle the out-growers' arrears as well bolster their cash flows.

Confirming the reports, the Chairman of the Sugar Board of Tanzania, Mr Castor Ligarama said that the export licence given allowed Kilombero Sugar Company to export 10,000 tonnes of sugar to sustain the company's healthy cash flows. The company expects to export the 10,000 tonnes to the European Union markets. "So it would not be prudent to leave such a situation to go on and rains come to destroy their sugar yet we have a better option of letting them export some sugar to the international markets," he said.

He said Kagera sugar would sell 9,500 tonnes to regional markets of Uganda and Southern Sudan. "If sugar piles up, the factory can stop operations and thus not buy cane from the small scale out growers," said Mr Ligarama. The country's sugar consumption stands at 480,000 tonnes per year but the four factories - Tanganyika Plantation Company, Kilombero, Kagera and Mtibwa Sugar - produce only 320,000 tonnes, translating into a current deficit of 160,000 tonnes of sugar that is filled by importation.

He said importers had been given importation licence in September to bring in sugar to bridge the gap at the time but noted that they had delayed to bring in the sugar and by the time they brought the product in the country, the gap sugar had gone down already. In an interview with the 'Daily News,' the Kilombero Sugar Company Limited Managing Director, Mr Don Carter Brown said it was important for them to be able to sell their sugar so that their cash flow continues in a sustainable manner.

He said that last season, the company paid 34.4bn/- to small scale out growers and the money largely remains in local economy of Morogoro region. He said it was the first time the firm has faced the challenge of such magnitude with huge consignment of sugar being stranded. Tanzania is a deficit sugar producing country because local production does not meet demand.

Normally, the demand gap is covered by licensed imported sugar that has to arrive in the country at the time when all factories have closed for maintenance or have less stocks for sale. The Minister, Engineer Christopher Chiza, blamed poor distribution system as one of the major reasons pushing up sugar prices in the local market despite high supply of the commodity.

"There is need to have official distributors of the commodity to ensure that consumers get it at an affordable price," he added. For example, he said he has received a case from the Kilimanjaro Native Cooperative Union (KNCU) after the Tanganyika Planting Company Limited (TPC) refused to supply it with sugar only because it was selling to final consumers at a price between 1,700/- and 1,800/-.

"This is a typical case showing complications in the distribution systems, which affect largely final prices to the ultimate consumer," he said. Tanzania's sugar consumption stands at 480,000 tonnes per annum, but the four factories, namely the Tanganyika Plantation Company (TPC), Kilombero, Kagera and Mtibwa produce only 320,000 tonnes. This translates to a current deficit of 160,000 tonnes of sugar, with the excess demand filled by importation.

So far, current production in the country is only about two thirds of total demand, despite availability of plenty arable land and favourable climate suitable for sugarcane cultivation. Statistics show that there were more than 50,000 tonnes of unsold stocks of sugar worth over 1bn/- still piled up in godowns of factories after failure to secure the market locally. "After undertaking consultations with the sugar technical committee and after verifying that there were unsold stocks piled up in the factories, the government issued permits to the factories to sell the commodity in East Africa," Eng. Chiza said.

However, he said, last month some suppliers came again to seek export permits to the European markets after failing to get premium prices in the East African countries. "Currently, the government is carrying consultations with various experts including the Sugar technical committee to determine possible effects which could arise in case export permits are granted to sell the commodity to the EU market," he said.

In comparison with the other countries in the region, Eng. Chiza said prices in the local market are still minimal apart from being determined by the market forces. The Sugar Board of Tanzania (SBT) Chairman, Mr Castor Ligallama, said in an interview that some manufacturers are seeking permission to offload the unsold sugar stocks in order to settle the out-growers arrears as well bolstering their cash flows.

"Delays in introducing imported sugar until the time when local factories had resumed production is the major reason for the surplus supply of the commodity in the local market," remarked Mr Ligallama. Tanzania has four major factories - Kilombero and Mtibwa based in Morogoro, Kagera Sugar Company and TPC sugar factory in Moshi in Kilimanjaro Region.

They have a combined capacity of at least 300,000 metric tonnes a year, according to the Tanzania Sugar Board project manager, Mr Abdul Mwankemwa. In the 2011/12 financial year, he said, the government issued permits for importing 200,000 metric tonnes of sugar tax-free. Of this, registered companies were able to import 150,000 metric tonnes only.

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