Imported Sugar is Biggest Threat

The Monitor (Kampala) - April 25, 2006 - Uganda - Interview - Tuesday 25 April 2006

The sugar industry in Uganda is perhaps one of the most viciously competitive. As the players tussle it out in the market place Bamuturaki Musinguzi asks Mr Cyprian Batala Assistant Commissioner for Trade what the government is doing to make Uganda's sweetened industry a leveled playing ground. Excepts below:

that are government's key policy interventions in this key industry?

The role of government is basically to ensure market stability so that the sugar industry can provide its social responsibility through a profitable industry. And here, it is known that the sugar industry provides employment, health services, and opportunities for out growers, education, infrastructure and this is quite important to the communities around them.

Why hasn't government encouraged the creation of a sugar board to control the price of sugar for example?

Government is currently concentrating on ensuring that the current factory capacity is expanded so that the factories enjoy economies of scale and therefore reduce the unit cost of production of sugar, which will result into reduced cost for the consumer. Introducing a sugar board means that it has to be supported by the sugar industry and this would be another overhead cost.

What are the major challenges facing the industry and how can they be addressed?

One of the major challenges is the price of imported sugar that keeps going down. And in some cases when it comes down it means that imported sugar is cheaper than our local sugar. And when this happens it means that our sugar will remain in the stores due to the competition from cheaper imported sugar.

Absence of cheap finance to support the expansion of the industry is difficult to come by and yet we need to greatly expand our industry to about 220,000 tonnes from the current production of 190,000 tonnes per year. The shortfall is met by imported sugar. We also need to see growth of the propensity to consume that stands at 9 kilogrammes per capita to about 14-15 kilogrammes to be at per with Kenya and Tanzania.

All the producers are engaged in investing in production. Do we see them embarking on improving the consumption rates?

Kakira Sugar Works is aiming at 120,000 tonnes of sugar per year, Kinyara Sugar Works to 93,000 tonnes and SCOUL certainly is striving to achieve full capacity.

Coupled with this they are engaged in marketing the product so that the public is aware and in the process increase the market share, which is important to the industry.

How much does it cost to produce a tonne of sugar in Uganda?

There are many factors to look at when considering the cost of production. In Uganda we spend in the region of $480 per tonne.

We are striving to bring down to about $390 per tonne, which is about the regional average. Although that is not good enough we should be aiming to go down to about $280-220 like it is in South African countries it's only then that our factories will enjoy good profits.

The potential to expand is there because land is available in areas of sugar production.

The population is quickly picking the interest of growing cane, which is an added advantage in that there is that partnership in the communities to ensure poverty eradication at the same time provide extra cane to the factories.

Uganda is struggling to meet its local sugar demand against a vicious foreign competition.

Investment in this sector is long-term because once you carry out the investment now; you can only fully utilize that capacity after two years. And for us to enjoy the emerging market opportunities we need to ensure our cost of production goes down so that we are able to compete.

Within the Comesa region there are highly competitive sugar producers like Zambia, Mauritius, Egypt and Malawi. With Uganda the disadvantage we have is that it costs us about $70 per tonnes in transportation to Mombasa.

So by the time you load at the port you have already increased cost of production by $70 making our sugar uncompetitive in the international market and therefore unable to penetrate into other opportunities. So we still need to improve on our infrastructure like transportation so that our goods are transported cheaply.

The major players have demanded for the registration of sugar importers to create a level playing field. What is government's position?

I have not known of any major players who has requested for registration and even if you registered importers you would not stamp out smuggling because it manifests itself in many ways. And our efforts are ensuring that it's reduced to a minimum.

Are there plans for Uganda to regain its International Sugar Organisation membership it lost in the 1970's due to economic instability

Yes. We are working on this process through the stages required to regain membership.