Proposed regulator could dampen Uganda Sugar Industry prospects

November 9, 2015 in Business, Companies, Trade & Industry by Editor

Kampala, September 10

A proposed regulator for Uganda’s rapidly expanding sugar industry would be inimical to the sectors continued growth if it turns out to be a cut and paste example of the discredited Kenya Sugar Board, industry players warn.

Speaking a fortnight before the Ugandan cabinet was due to receive a draft sugar bill, Sugar Corporation of Uganda (SCOUL) Chairman, Mr. Mahendra Metha, said such a development would be a reversal of the liberal regime behind the rapid recovery and growth of the industry over the past 25 years.

Mr. Metha was speaking September 4, during ceremonies to launch an additional 45,000 tons of milling capacity that would double the miller’s annual output to 90 metric tons of sugar. President Museveni was in attendance at the function that also saw the inauguration of a 9Mw bagasse fired power station and a food-grade carbon dioxide plant. French lender PROPARCO financed the $50 million expansion programme.

Metha, pointed out that it was to the credit of the liberal economic policies Uganda has pursued in the recent past that the country has been able to attract the private capital that has driven the sugar sector’s rapid development.

“It will be a backward step to control the sugar industry by introducing new rules and regulations for licensing, pricing and marketing, of sugarcane and sugar under a new Kenya like sugar board in Uganda,” Metha warned observing that the sugar industry in Kenya was in a mess because the sugar board had become hotbed of corruption, intrigue and political interference.

Metha said a key differentiator between the Kenya and Ugandan sugar industries was that whereas almost 75 per cent of the sugar industry is owned and controlled by the government in Kenya, the reverse was true of Uganda.

Commenting on the proposals in the bill, Jim Kabeho, the Chairman of the Uganda Sugar Manufacturers Association said the millers were supportive of developing a policy for the industry but there were lingering concerns about the role and composition of the proposed sugar board.

“There are many issues in the sugar industry which would need regulation but it would be a misstep if that regulator were to stray into setting prices because that is something that should be determined between the buyer and seller,” Kabeho said.

While confirming that a draft of Uganda’s long delayed Sugar Act would be considered during the next cabinet sitting, Ambassador Julius Onen, the Permanent Secretary in the Ministry of Trade and Industry downplayed the industry’s fears’ arguing that the board would be participatory and voluntary.

“There may be a need to have some non-governmental body to regulate the sugar industry but its purpose is affirmative and membership will be composed of sugar millers, government and the outgrowers who now supply about half the cane used by the industry,” Onen said.

Mr. Metha was speaking against the backdrop of an acrimonious three weeks following President Uhuru Kenyatta’s nod to proposals that allow Uganda to export its surplus sugar stocks to Kenya which suffers a 300,000 metric ton deficit of the commodity.

The Uganda Sugar manufacturers Association is projecting that combined production from the country’s 8 active millers will peak at 508,500 tons against domestic consumption of 360,000 tons at the end of 2015. Output is set to rise further when another seven millers that are setting up, begin production over the course of the next two years.

While the political standoff in Kenya over sugar imports from Uganda continues unabated, technocrats from the two countries were making progress last week, plugging loopholes that could be exploited by sugar barons to distort the market; and the EAC Secretariat ruling that the Kenya Sugar Board was afoul of regional protocols when it insists on import permits for Uganda produced sugar.

To lockout smugglers, Ugandan and Kenyan Tax authorities this week began joint collection of customs duty on imported sugar at the port of entry.

Until now, in addition to lengthy delays in issuing the permits and holdups at the border, the Kenya Sugar Board required exporters of Uganda manufactured sugar to pay an annual levy of Kshs 100,000 ($1000), provide tax invoices and estimates of the final sale price in Kenya.

The Ugandan millers argue that these hurdles eat into the importers margin, rendering Ugandan sugar uncompetitive in the Kenyan market

Uganda Production and Consumption figures 2014 / 15

Factory 2014 2015 (Estimated)