New law gives Uganda sugar zoning offenders “Grandfather Rights”

January 19, 2016 in Business, Companies, Land & Agriculture, Policy, Trade & Industry by Editor

KAMPALA, JANUARY 19- The big three of Uganda’s sugar industry can hardly be expected to cheer. Wildcat millers who have ruffled feathers in the past decade will not lose their rights under a new sugar law that prescribes a 25 kilometre separation radius between competing millers.

A draft of the National Sugar Act 2015 has cleared cabinet and will be presented to cabinet after the elections, but incumbent millers in breach of that provision will enjoy immunity “because the law cannot apply retrospectively,” according to Ministry of Trade Permanent Secretary Ambassador Julius Onen.

But he explains that the new law should deter poaching in the industry because parliament is expected to put stiff penalties in place.

“Poaching will always be there but we hope that parliament will set stiff penalties to minimize the practice,” Onen said.

In law, Grandfather Rights are legal non-conformities allowed to existing entities whose existence was legal under a legal regime that has been superseded by new legislation.

The industry has been in a state of disorder as the number of licensed millers shot up from just 3 incumbents in 2005 to 23 today. Some of the new comers set up in violation of the 25kilometre zoning principal but politicians and local authorities desperate for new sources of revenue backed them forcing a stalemate.

In some instances, rival millers have set up operations within just a dozen kilometers of incumbents operations and without a core plantation. This has led to pervasive poaching of raw cane, yet the established millers often supported affiliated out-growers with credit and inputs.

Despite opposition from the industry, the draft law sets up a Uganda Sugar Board to regulate the subsector including the issuance of import licenses for sugar products. It also establishes a formula for determining the price of raw cane from out-growers.

Players have in the past warned that the law could discourage investment in the sector if the regulator is given arbitrary powers to determine prices.

“We cannot take a position until we have seen the draft that has come out of cabinet but judging from what has been published in the media, we are likely to have issues with some aspects of the proposed sugar board as they relate to its size and function,” says Mr. Wilber Mubiru, the office manager at the Uganda Sugar Manufacturers association.

Despite the high number of producers, and a 162,000 ton surplus in 2014, sugar remains expensive in Uganda pointing to inefficiencies related to scale. Just before the holiday season, retail prices for the commodity had peaked at UGX 4000 ($1.13) per kilogram and have only slightly retreated to $1.05, this week.