9 May 2017

Uganda: Sugar Crisis On for Another 2 Years - Manufacturers

Sugar manufacturers are warning that the current sugar crisis, which has escalated sugar prices, is likely to last up to two years.

Wilber Mubiru, the secretary of Uganda Sugar Manufacturers' Association, says the industry is experiencing scarcity of mature sugar canes that has greatly impacted sugar production.

According to Mubiru, about a dozen sugar plants in operation, currently have no mature cane plantations nor out growers for supplies, which forces them to "poach" immature cane from other established sugar companies and farmers.

He blames the sugar crisis on shortage of cane and premature harvest, adding that the situation is likely to normalize in two years' time when the canes are expected to mature in about 18 months' time.

Mubiru says despite the shortage of cane and reduced production of sugar, the mill gate price of most plants has not increased significantly, citing the average price per 50-kilo-bag of sugar at Shs 187,000.

He observes that due to the free market policy, middlemen are cashing in on the crisis by overcharging wholesalers and retailers, hence the spike in sugar prices. In downtown Kampala, a 50kg bag of Kakira sugar costs between Shs 280,000 and Shs 300,000, while Kinyara sugar is the cheapest at Shs 260,000.

From last year's average of Shs 3,000 per kilo of sugar, the price shot to Shs 4,000 early this year and is now hovering over Shs 5,500. A kilo of Kinyara sugar is the cheapest at Shs 5000, while Kakira sugar is selling at 6,000 a kilo. On the shelves, Kakira sugar and Lugazi sugar are scarce compared to Kinyara sugar, which is in plenty. Many dealers have now started hoarding sugar in order to benefit from anticipated price hike in the short term.

Mubiru says the free market policy has created a scenario, whereby speculators are now dictating the prices. He says since there is no government control, traders are taking advantage of the shortage to make a killing at the expense of Ugandans, most of whom are poor, adding that traders should avoid greed.

Asked why, as, manufacturers they can't voice their concerns and dampen the sentiments, Mubiru says they do not have the power to do so.

According to Mubiru, government could intervene in the market by buying sugar in bulk and saturate the market to stabilize the prices. Mubiru says although Uganda produces sugar in surplus, neighbours Kenya, Tanzania, Rwanda, Burundi, the Democratic Republic of Congo and South Sudan have deficits and partly depend on imports from Uganda.

Uganda produces over 400,000 metric tonnes of sugar per year and consumes 360,000 metric tonnes. The balance of about 50,000 metric tonnes is exported to the region, especially to Kenya where sugar prices are much higher.

Asked if the government could control export of sugar, Mubiru says under the East African Community that would be unlawful, adding that it has the potential of creating a trade and diplomatic stir.

Mubiru says a more long term solution to the sugar crisis would be for government to pass the National Sugar Bill of 2015 in order to streamline the industry, particularly ensuring that each sugar company has its own territory and out growers ecosystem. According to Mubiru, Uganda still has a lot of land for sugarcane growing and it makes no sense for the companies to crowd in a few locations with disastrous consequences.

On sentiments that the current sugar crisis could be as a result of the 'Big Three' - Kakira, Lugazi and Kinyara - trying to arm twist the government to grant their wishes in the sugar bill, Mubiru says that isn't the case. According to Mubiru, the crisis impacts negatively on them as well, because while they have low productivity, they have to incur costs like wages, medical services, loan servicing.

He says many sugar companies also supply power to the national grid and have to fulfill their agreed quotas lest they get penalized. Meanwhile, as the sugar prices are going upwards, desperate consumers are rushing to shops and supermarkets to stock up supplies. With a kilo of sugar is between Shs 5000 and 6,000, a number of supermarkets have run out of the precious commodity. At Nakumatt Acacia Mall, sugar has run out altogether. In Kikuubo shopping area, traders could be seen buying and spiriting away bags and bags of mainly Kinyara sugar.

The last time Uganda experienced higher sugar prices, was after the 2011 general election when a kilo of sugar sold at Shs 10,000 and above.

URN

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