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Go slow on taxing white sugar, PSFU tells govt
Beverage and soda companies say the locally manufactured industrial sugar is more expensive than the imported one . Photo / Edgar R Batte
What you need to know:
- Beverage companies say apart from quality and capacity issues, locally produced white sugar is expansive
Private Sector Foundation Uganda (PSFU) has said while government wants to use high duty to protect domestic manufacturing of white sugar, inconsistency in quality, quantity and cost must not be ignored.
Speaking in an interview, Mr Stephen Asiimwe, the PSFU executive director, told Monitor that the move is likely to result into price increases, especially for beverage, confectionary, beer and soft drinks companies which are some of the biggest users of the product.
“The proposal to increase duty remission rate to 25 percent will drive costs of products, which will eventually lead to low consumption and less production,” Mr Asiimwe said, noting that on the extreme “we are most likely to see a flight of industries to neighbouring countries, which will heavily harm our economy”.
During his Budget Speech for the 2023/24 financial years Finance Minister Matia Kasaija increased duty remission on industrial sugar from 10 per cent to 25 percent.
This is higher in relation to neighbouring countries where Kenya and Tanzania charge 10 percent per litre, while Rwanda and Burundi it is zero-rated.
However, Mr Kasaija insists that government needs taxes to provide services and infrastructure to the people.
“If there are no roads how are they going to transport their sodas? If there is no security how are they going to get customers? You raise those questions to them for me,” he said.
Beverage companies have previously petitioned Parliament against increasing the tax remission, saying apart from quality and capacity issues, white sugar produced locally is expensive.
Combined, Crown Beverages, Coca-Cola, Harris and Jesa Dairy require more than 100,000 tonnes of white sugar annually.
However, production data published by PSFU indicate that from October 2021 to October 2022 Kinyara was producing 23,260.45 metric tonnes.
Kinyara, however, has previously insisted that its plant has 75,000 metric tonnes capacity annually.
Other firms including Mayuge Sugar and GM Sugar that showed interest are taking a conscious approach.
The lack of capacity to meet market demand means that imports remain critical with Mr Asiimwe, noting that the production gap requires manufacturers to import white sugar to sustain production.
Massive losses
PSFU wants government to go slow on implementing the 25 percent rate, saying beverage companies, including Crown Beverages, Harris International and Coca-Cola Beverages Uganda have massively invested in new production lines to a tune of $270 million, which in the event of any disruptions, will cause such companies massive losses.
