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    Home » Lack of industry regulation fuels cane scarcity
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    Lack of industry regulation fuels cane scarcity

    EditorBy EditorJuly 13, 2023Updated:July 13, 2023No Comments4 Mins Read
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    Kakira

    Uganda is a sugar surplus producer, with local consumption currently at about 400,000 tonnes. Over the last 10 years, the industry has been expanding production by nearly 15% per annum on average, culminating into production of 622,243 tonnes of sugar in 2021, and anticipated production for 2022 in excess of 770,000 tonnes.

    As of 2021, 34 licenses had been issued by the government for sugar production, with the majority concentrated in Busoga region, eastern Uganda. Most of these mills rely on outgrower farmers to supply sugarcane, rather than on planted nucleus estates. This has led to instability in the sector, with sugarcane supply and prices swinging wildly from season to season.

    Since the beginning of 2023, sugar millers have been operating at half capacity due to lack of sugarcane and prices have shot up to UGX 210,000 per tonne. When farmers and prospecting middlemen hear about the high cane price, they will rush to plant or rent land to plant cane, and two years from now, the market when the crop matures, the market will be flooded, which will drive the cane price down. In the past it has gone as low as UGX 60,000 per tonne.

    Farmers will make losses and be discouraged, and many will exit the trade or opt to use their land for other crops. Eighteen months later, there will be a cane scarcity and the prices will shoot up again. Prospectors and farmers will get excited again and plant plenty of cane… and so on and so forth. Unless the government intervenes meaningfully to end the cycle.

    All countries that produce sugar from sugarcane have some form of legislation to support the productivity and competitiveness of the sector while at the same time protecting sugarcane farmers and millers. After years of lobbying for legislation of the industry, Uganda finally released a Sugar policy in 2010, which gave birth to the Sugar Act 2020 – a full decade later. However, the Act is still yet to be operationalised. As a result, consumers, farmers, millers and the economy are being adversely affected.

    When the cost of producing sugar goes up, the increment is passed along the value chain, resulting in higher costs for the consumers. Since mid-last year, Ugandans have experienced a steady rise in sugar prices, which fluctuated from UGX 3,500 per kilo to seasonal highs of UGX 10,000. Now the price is hovering in the area of UGX 6,000.

    The farmers cannot thrive in a wildly fluctuating environment, and the uncertainty has caused many to abandon their cane investment even before they reap the benefits of ratoon harvests. They sometimes fall victim to unscrupulous millers with compromised weighbridges. They are also driven to harvest immature cane, which affects yield and further reduces their earnings.

    For millers, the single largest variable in the production cost is the sugarcane, which accounts for a big portion of the total cost of production. It is also costly to have mills operating on and off or at greatly reduced capacities. This has a knock-on effect on economies of scale and factory wear and tear. Furthermore, the harvesting of immature cane affects the amount of sugar a miller can get from the same tonnage, with recovery dropping from 8% to 6%.

    At the macro level, Uganda is losing income from sugar exports.

    In the absence of an authoritative external influence, this will continue to be the trend for the foreseeable future, which does not bode well for the sugar industry. Sugar legislation recommended, among other measures, the constitution of a Sugar Board to oversee the sector and handle issues of cane pricing, ratify agreements between millers and out-grower farmers, and general issues like sugar quality, safety and health standards. This has yet to be done, while the Trade Ministry continues to license mills in the name of promoting investment, and the Agriculture Ministry has failed to take out-grower farmers under its wing.

    Moving forward, there is an urgent need to ensure more balanced, factual information and data collection on the sugar industry; operationalisation of the Sugar Act as a matter of priority and no politicisation of sugar for personal gain by local leaders and other stakeholders.

    This content is sponsored by Madhvani Group 

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