24 August 2014

Rwanda: Kabuye Plant Repairs Push Sugar Imports Up

The high volumes of sugar and sweets contributed to a general increase of Rwanda's import bill during the first six months of 2014, revealed the central bank governor John Rwangombwa, in his Monetary Policy and Financial Stability Statement, presented last week.

Between January and June this year, the value of imports increased by 13 per cent which widened the country's trade deficit by 17.4 per cent from $765.4 million last year to $898.6 million.

A trade deficit means Rwanda is buying more goods from other countries than it's selling to them.

What Rwanda earned from her exports in the first half could only pay 24.6 per cent of the products it bought from other countries hence explaining the huge deficit. During the same period last year, earnings from exports paid for 27.5 per cent of imports.

Rwanda imports three types of commodities; consumer goods, capital goods and intermediary goods including energy and lubricants.

Consumer goods, which account for the majority of Rwanda's imports, refer to products purchased for eating including sugar. Rwandans spent almost $1.2 billion on such products between January and June this year compared to $1.05 billion spent on the same products over the same period last year.

While this represents an increase of only 0.9 per cent, it meant a 13 per cent rise in expenditure.

Governor Rwangombwa attributes the increase in consumer goods to high import volumes of sugar and sweets which increased by 51.2 per cent.

"This is due to the low domestic production of sugar which decreased by 9.2 per cent in the first half of 2014 as Kabuye Sugar Works closed during the second quarter for maintenance of machinery," Rwangombwa said.

At least 12.3 per cent of the import budget was spent on sugar and sweets while 34.2 per cent was spent on food products.

Kabuye Sugar Works, owned by Uganda-based Madhvani Group, is Rwanda's only sugar plant and it produces about 10,000 tonnes of sugar annually out of its estimated full capacity of 60, 000 tonnes. The annual local market demand is around 80,000 tonnes. The shortfall is served by imports.

Last year, floods damaged part of the plant and 80 per cent of the sugar plantations, prompting producers to warn of low production this year.

The New Times couldn't reach the plant managers over the weekend for a comment but Jim Kabeho, the Madhvani Group (country) executive director, explained the nature of repairs the factory requires.

"The factory (is normally) closed as part of the annual maintenance programme. Usually, we do the maintenance work between 50 and 60 days, but this year it will take longer because of the floods," Kabeho said.

To offset its huge import bill on sugar, Rwanda has had a longstanding arrangement with EAC partner-states for tax-free sugar from outside the region.

However, the Kabuye Sugar Works plant managers have always opposed the move, saying it encourages cheap sugar imports which outcompetes their own supplies on the local market.

But sugar consumers counter that Kabuye producers are standing on weak grounds given that their factory can't satisfy the needs of the local market.

For example, between January and June 2014, volumes of cement imports dropped by 4.2 per cent and 4.7 per cent respectively, a development that central bank governor Rwangombwa attributes to 'good performance in the local production of cement whose output also increased by 0.9 per cent.'

Rwanda spends about $50 million every year on sugar related imports and the government has been on the lookout for a solution.

A couple of years ago, an investor, Stevia-life Ltd, was allocated a huge chunk of land in Rulindo District, in the Northern Province to grow the sugar leafed crop with the ultimate goal of setting up a processing plant to extract sugar from its sweet leaves.

The investor's company was officially incorporated in 2011 and held plans of sinking an initial investment of about $2m in the sweet crop with further arrangements to expand once more land was found.

A kilogramme of unprocessed Stevier leaves goes for a minimum of $1.5 while its processed form averages at $6.


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