Tanzania: Mpungwe - Tanzania Has Potential to Be Net Sugar Exporter in a Few Years

QUESTION: What is the current state of sugar production in Kilombero Sugar Company?

ANSWER: Currently, Kilombero Sugar Company (KSC) produces 125,000 tonnes of sugar annually. For the 2018/19 season, which ended in early March 2019, KSC has been able to produce 134,000 tonnes, which is its second highest sugar production since privatisation.

If you consider the state of production that we found soon after taking over then you can understand that it is a huge improvement. Before privatisation, production stood at 29,500 tonnes per annum.

What is the factory production capacity?

By producing 134,000 tonnes KSC has exceeded its capacity, which stands at around 128,000 tonnes. However, as you can see there is a huge potential. And I am happy to reveal that at its December board meeting, KSC shareholders agreed to invest between $250 million and $300 million to double its production capacity. And it has been partly contributed by President John Magufuli's call for industrialisation.

What is the place of outgrowers in this expansion drive?

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Outgrowers will be at the heart of KSC's expansion drive. KSC is one of the sugar producers in the country which pays the highest prices for sugarcane to its cane growers. We now work with 8,000 outgrowers, 6,792 of them being small scale farmers. They now contribute 40 per cent of the cane to the factory. After the expansion of the factory, 60 per cent of the cane will come from the outgrowers.

It is risky but we have looked at all the scenarios. And we are engaging them in a manner that they will not abandon their food crops. For us, the outgrowers are part and parcel of the KSC. In fact, we do not call them outgrowers. We call them Kilombero growers. We want the sugar firm to be part of the DNA of the Kilombero community. We want KSC to be part of the local development narrative.

KSC already pays Kilombero growers Sh67 billion annually from the cane they sell to the factory. We would pay more once the expansion project is complete. We are also spending Sh70 billion on local procurement, in addition to paying Sh69 billion on taxes to the government.

In terms of job creation, KSC employs 4,400 workers 2,087 among them being directly employed. Combining the number of KSC employees, cane growers and seasonal workers, KSC supports lives of at least 50,000 people along the Kilombero valley.

When do you think Tanzania will become a net sugar exporter?

It's just a matter of a few years. But for this to happen the sugar market has to be well managed and the sugar politics well controlled.

I have been in the sugar industry for 19 years now, I have witnessed first-hand the politics of sugar in this country. In the past, politicians were at the forefront of protecting sugar traders at the expense of producers.

So we had to fight against highly subsized sugar from Asia but also against dumping.

Luckily enough President John Magufuli has been very clear on protecting sugar producers from the very first day he assumed power. And this happened without even lobbying.

I must be clear that we, as sugar producers, do not want a ban on importation. And we say that anybody can import sugar. What we want is that importation should be of the right quantity and at the right time. It does not serve any purpose to allow importers to bring in sugar during the sugar production season by local producers.

So this is what we want the government, as the market regulator, to do to enable sugar self-sufficiency in Tanzania.

Firstly, determine the right deficit. Exaggeration of gap sugar leads to flooding of the market with cheap imports.

Secondly, allow gap sugar to come only during off season, between March and May, as I pointed out earlier. Don't bring in sugar when we have started production in the factories.

Thirdly, put in the right tariffs to protect local industries, bearing in mind that some countries heavily subside their sugar industries.

Fourthly, if you want the producers to import gap sugar then it should be on pro-rata basis to encourage increased production. This means sugar producers should be allowed to import in accordance to their capacity. Don't let the lower producers import the highest amount and vice versa, it will discourage production.

Do issues with sugar market management make Tanzania a conducive investment destination?

Tanzania is the best place to invest because it is a sugar deficit market. And as I pointed out earlier President Magufuli has been very steadfast in curbing arbitrary importation of sugar.

The commitment shown by KSC shareholders to invest in an expansion plan is also indicative of the trust and confidence that shareholders have on Tanzania's investment climate.

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