Kabuye Sugar Works Limited is set to lose Rwf6.6 billion in potential revenues after floods destroyed its 2,000 hectares of sugarcane - the main raw material in sugar manufacturing.
Joel Uwizeye, Director of Corporate Affairs at Madhvani Group Rwanda - the parent company of Kabuye Sugar Works - said that the plantation destroyed was part of a project initiated nearly six years ago to conserve the marshland along Nyabarongo River.
He told The New Times that persistent flooding is one of the main drivers of the factory's high cost of production.
Kabuye Sugar Works plant in Kigali. Net photo.
In 2013, he said, Kabuye Sugar Works launched an 8 million Euros (Rwf8 billion) project, in partnership with the governments of Rwanda and Netherlands, to bring wasteland under cultivation.
Through an investment outlay of 3.9 million Euros, Kabuye was able to reclaim 2,000 hectares of formerly unutilised land along Nyabarongo River.
"To our dismay, all the 2,000 hectares were affected by the floods of last year," Uwizeye added.
The company had projected to generate Rwf6.6 billion from the plantations.
The sugarcanes had been planted between 2015 and 2018.
"Our marshlands have been persistently facing heavy floods, year by year. We grow sugar cane today, put [in] a lot of money, put [in] a lot of fertilisers, [and] employ people for planting, weeding or other related activities. But, at the end of the day, rain comes and sweeps away everything," he observed.
Kabuye produced 10,000 tonnes in 2018 - about 60 per cent of its annual production capacity of 17,000 tonnes - as floods destroyed some 40 per cent of its total sugarcane plantations.
Total sugarcane plantations were 4,350 hectares including outgrowers' farms, according to information from the factory.
The devastating floods were caused by heavy rains witnessed in April and May last year.
This is likely to affect sugar production and encourage more imports of the commodity.
Uwizeye said that the factory has not sold 20,000 bags of sugar with 50 kilogrammes each - or 1,000 tonnes in total - as it would be incurring losses given the production cost and the price at the market.
On average, due to the loss of sugar plantations, the factory spends Rwf32,000 on producing a 50-kilogramme-bag of sugar, while the factory price for one bag is Rwf31,200 implying a loss of Rwf800 per each bag.
This means that for 20,000 bags, the factory would suffer a loss amounting to Rwf16 million.
"Ultimatel, we are forced to sell because of survival; we have to pay the bank, and meet the costs of running the factory," he said.
With all those challenges, he said, "here comes now imported subsidised sugar, which is very cheap."
"With these floods affecting us, we end up having high cost of production. If you grow one hectare of land, expecting to harvest, let us say, 120 tonnes of sugarcane, and then because of floods you harvest 12 tonnes, that is a tenth of what you expected to harvest," he said adding that it ruins investment and the cost of production goes high.
In order to tackle the problem of flooding, the company is looking to upland sugarcane growing where it can apply irrigation.
"He said that they found around 5,500 hectares of such land in two sectors - Kamabuye and Ngeruka in Bugesera District, along Lake Cyohoha.
In that area, he said, Madhvani Group intends to invest in a project consisting of a factory with capacity to produce 56,000 tonnes of sugar per year, which, he said, is about 80 per cent of the national demand.
The project is estimated to cost $92 million (over Rwf80 billion), according to information from the firm.