Uganda: The Facts On the Sugar Industry in Uganda
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New Vision - Uganda - Monday 11 September 2006

As far as we know, there is no "recent report released by the Food and Agriculture Organisation (FAO) which shows that Uganda produces a meagre eight tonnes per hectare of sugar (?) as opposed to Malawi's 80 tonnes per hectare".

If Sunday Vision can provide the relevant details of any such report, the Uganda Sugar Cane Technologists Association would be glad to contact the authors/publishers to provide them the facts in the matter. Incidentally, the figures in the article for both Uganda and Malawi do not correspond to the data on the FAO website.

The article was unclear about the facts in terms of whether it is the yield of sugar or of sugarcane. Since sugarcane contains between 9-14% of sugar content (say 10% on average), a yield of eight tonnes of sugar per hectare would be equivalent to a yield of 80 tonnes of sugarcane per hectare. His figure of 80 tonnes of sugar per hectare in Malawi would be equivalent to a yield of 800 tonnes of sugarcane per hectare - which is a record unachieved to-date in any country in the world.

On August 29, 2006, the New Vision also published a letter from "Mr. Fred Babweteera, Department of Plant Sciences, University of Oxford, United Kingdom" - without specifying what position (if any) he actually holds at that prestigious university.

The FAO web-site: http://faostat.fao.org/site/567/Des... has figures for Uganda that are unchanged for the five years 2001 up to 2005. This should make any trained analyst question the reliability of this data; and we can confirm that the FAO data on Uganda's sugar industry is completely incorrect.

The underlying details of area harvested for sugarcane by the three major sugar complexes and their outgrower farmers in Uganda in 2005 are given in the table above.

All three Ugandan sugar companies are undertaking independent agronomic research for better varieties of sugarcane using their own funding. This research will further improve agricultural productivity.

We are sending a copy of this letter to the Resident Representative of FAO in Kampala, with a request that FAO updates its statistical data-base. The FAO web-site incorrectly shows Uganda harvested 125,000 ha of sugarcane area (actual 25,000 ha) in 2005 to produce 1.6 million tons of sugarcane (actual 2.16 m).

Whilst Sunday Vision does not state the sources of information for the article, it is indeed surprising that neither the author nor Mr Achilles Byaruhanga (head of Nature Uganda, who is quoted therein) appear to have taken note of the facts published in the USCTA response. There is absolutely no basis for the Mr Byaruhanga's statement that " sugar companies in Uganda are grossly inefficient".

The efficiency of the sugar industry in Uganda is comparable to that of neighbouring countries with similar climatic patterns. A regional comparison shows that Uganda's sugarcane yields are significantly higher than those in Kenya.

The New Vision editorial on August 24, 2006 states that "the sugar they (Ugandan manufacturers) produce sells at US $550 per tonne compared to US $400 on the world market. Sugar can be imported into Uganda at a lower cost than it can be produced in Uganda."

There are two errors in this proposition. Firstly, the world market price of US $400 per tonne is on FOB London basis. If one adds freight costs the landed cost in Uganda would work out to US $550-575 per tonne. It is also well established that the "world market sugar price" does not reflect the true cost of production - since many countries that are major exporters of sugar provide subsidies to sugar producers in their own countries or have higher domestic prices than their export prices on marginal costing basis.

Secondly, if Uganda decides to import all its sugar requirements (which are growing steadily as population and disposable income increase), then there will be no expansion of sugarcane farming with its cascading effect of increasing employment - with consequent socio economic consequences in rural areas. Moreover, Uganda will need additional foreign exchange resources to pay for such imports. If there is no generation of foreign exchange by the farmers who would stop sugarcane cultivation, there will be a shortfall between the country's availability of foreign exchange and its requirements to pay for imports. With foreign exchange demand exceeds supply, the Uganda Shilling exchange rate would depreciate - as a consequence of which imported sugar would become more expensive in Uganda shilling terms.

The commonly held theory of "free markets" where a country should import any product that is more expensive to produce locally works only when that country has adequate Gross Domestic Product with other products or services that it can produce cost-effectively in international terms and export to earn the foreign exchange that is required to pay for the imports.

As your editorial of August 24 states, the sugar industry in Uganda contributes significantly to the economy of the country. Below are the contributions of the three Uganda sugar companies:

Contributed over sh62.5b (US $34m) by way of taxes in 2005

Directly employ over 15,000 persons

Provide extension services (including supply of inputs and equipment services on credit) and purchase sugarcane from over 7,000 farmers

The outgrower farmers in turn employ over 20,000 persons

Provide business opportunities to local entrepreneurs who provide cane transport and other support services

Provide significant social infrastructure in rural areas - e.g. Kakira has its own 75-bed hospital, and runs three nursery schools, eight primary schools, and a secondary school on its estate.

The steady expansion of Uganda's sugarcane cultivation and sugar production is shown in the last table on the left.

All three Ugandan sugar companies are making significant capital investments to expand their sugar production capacities - to achieve economies of scale, which would make the industry even more competitive. Much of the future expansion of cane supply is to actually come from increased cane cultivation by outgrower farmers.

Kakira and Sugar Corporation (Lugazi) are in the process of installing high-pressure cogeneration equipment, which would enable them to use bagasse (the fibrous waste residue from cane crushing) to produce "green" electricity - for own use as well as for supply to the national grid. This would not only help ease the significant power shortfall that Uganda is currently facing, but would also provide electricity from bagasse which is more environmentally-friendly and significantly cheaper than electricity produced from diesel (as in the case of the Aggreko supply at four times the price).

From the FAO figures on the right, one can observe that the figures for Uganda are unchanged for the five years 2001 up to 2005; the figures for Malawi are the same the two years 2001-2002 as well as for 2003 -2005. Moreover, the site does not have any data for sugar actually produced in both countries. This should make any trained analyst question the reliability of this data.