Sugar producers stuck with tonnes as prices remain high

Jinja.

While the price of sugar has risen to Shs5,000 up from Shs3,500 in most parts of the country amid talk of shortages associated with drought driven shortfalls in production, it is emerging that all the country’s major sugarcane producers are stuck with stock piles of the commodity.

Last week, Trade minister Amelia Kyambadde described the hike in prices as an emergency and said she was due to meet sugar millers to discuss the hikes.

“I am meeting sugar factory owners because this is an emergency. They have to release reserves or we are going to allow people to import,” she said.

However, in an interview with Daily Monitor last Friday, the joint managing director Kakira Sugar Limited, Mr Mayur Madhvani, said there is no need for the country to import sugar as all the three major producers are not only stuck with lots of the commodity, but continue to produce on maximum capacity.

“I don’t think we should be talking about importing sugar. This is sensationalism. We the manufacturers have sugar. Kinyara has sugar, Lugazi has sugar. Go and see in the warehouse. You will see thousands of bags. We have enough sugar to go around,” he said.

Mr Madhvani said suggestions that sugar industries are conniving with traders to hike the prices are irresponsible, but hastened to add that the manufacturers only speculate on the cause of the hikes as they have never increased prices at their respective mills.

He said Kakira continues to sell its sugar at Shs3,500 per kilo, adding that it would have expected it to cost the consumer Shs3,800 or a maximum of Shs4,000, but certainly not Shs5,000.

“I don’t know what is going on here. I think this is a temporary situation because of the Christmas season. But you will soon find prices coming down and stabilising,” he said.

Mr Madhvani also dismissed reports that drought had caused shortfalls in production. Unlike what would have been the case with other crops where processors get more when it rains, sugar millers, he said, have been producing more as the recovery rate is higher during the dry seasons.

“When it is dry, we produce more sugar because the water in the cane disappears. It all becomes sugar. Right now we are making more sugar than we ever did. Our recovery rate is very high,” he said.
In a telephone conversation with Daily Monitor yesterday, Mr Kirunda Magoola, the corporate communications manager Kinyara Sugar Limited, said production of sugar at the Masindi-based firm has not reduced in any way.

“We have not cut down on our production. As producers of sugar in the country we continue to satisfactorily meet the demands of the domestic market. Ugandans should not panic because sugar is available. Both the supply and the price remain unchanged,” Mr Magoola said.

However, Mr Madhvani warned of tough times for sugar in the country unless government quickly moves to regulate the sugar industry by bringing into force the Sugar Act.

He said that the production shortfalls that are being experienced by the Sugar Corporation of Uganda Lugazi (SCOUL) have been precipitated by government’s decision to licence “small sugar firms”, to operate within the same zones as they do.

Such licensing, he says, contravenes the National Sugar Policy, which ordinarily prohibits the opening of new sugar mills within a radius of less than 25 kilometres of an existing plant and requires new factories to own at least 500 acres of sugarcane before commencement of operations.

He claimed that the small mills have been distorting the sugarcane supply chain yet they do not have capacity or efficiency to crush huge volumes of sugarcane.

Kakira is the biggest sugar producer in Uganda with an installed production capacity of 180,000 metric tonnes per year followed by Kinyara Sugar Works with 120,000 tonnes and SCOUL, with 85,000 tonnes per year.

Background
Past crisis. For the first time in 25 years, Uganda experienced a sugar crisis in 2011, causing prices to shoot up to as high as Shs10,000 for a kilogramme. Retailers also rationed the commodity, limiting individuals from purchasing more than two kilogrammes at a go.