Taxing imported refined sugar will stimulate local production

Masindi based Kinyara sugar Ltd, one of the domestic manufacturers of refined sugar, has called upon the government to maintain a 25 percent import tariff on imported refined sugar to protect local production. 

The company in a press statement said that, “the 25 percent tariff encourages long-term investment in local production of refined sugar, creation of thousands of jobs for young people and reduces over reliance on imported refined sugar.”

Price increase  
This statement followed the earlier remarks by Mr Stephen Asiimwe, the Executive Director of the Private Sector Foundation Uganda (PSFU) who warned the government over the new import duty.

Mr Asiimwe said the import duty is likely to result in price increases of sugar-based beverages, soft drinks and confectionery. 

“This proposal to increase duty remission rate to 25 percent will drive costs of products, which will eventually lead to low consumption and less production,” said Asiimwe,

Adding, “We are most likely to see a flight of industries to neighbouring countries which will heavily harm our economy.”

Kinyara protests
However, in a statement, the sugar company, which is apparently Uganda’s largest producer of refined sugar used mainly by manufacturers of soft drinks and beverages, said,

“If PSFU wants to remove protection on importation then why don’t they say they want to do it for all industries and then we just import everything?” 

The sugar company, which employs over 7,000 people and has over 8,500 out growers, added:

“The products being produced by manufacturers of sodas and beverages also benefit from protection from imports of 25 percent minimum and some products go up to 60 percent.”

Compromise
Uganda Revenue Authority’s (URA) Assistant Commissioner for Trade, Irene Muliika, said in a letter to Uganda Manufacturers Association on June 7 that the import tariff under the East African Community raw material duty remission scheme for 2023/24 for “White Refined Sugar (for industrial use) is 25 percent.”  

Manufacturers of soft drinks protested the new tariff, arguing that it would increase their costs of production. 

Uganda Revenue Authority officials said this represented a compromise position that protects local producers of Industrial refined sugar while also leaving the door open to imports for any user that requires it for technical reasons. 

Less production
PSFU said Kinyara Sugar was only able to produce 23,000 metric tonnes of refined sugar between October 2021 and October 2022, yet Crown Beverages, Coca-Cola, Harris and Jesa Dairy require more than 100,000 tonnes of white sugar annually. 

In response, Kinyara Sugar said, “That is what we supplied locally because there was no market and that is what we are complaining about. Our capacity is 75,000 yet we only had a local market for 23,000.”

The soft drink companies import the rest of the required refined sugar from foreign countries, which government officials say undermines efforts to stimulate and scale local production. 

Government has been raising import duty on industrial goods to boost local production. 

In 2019, URA imposed a 35 percent tariff on imported granite, marble, and clay (ceramic) tiles which officials say promoted local production and consumption of Goodwill tiles manufactured from Kapeeka.

It is understood that Kakira Sugar, which was previously worried of building a sugar refinery, is now considering one after the government introduced a 25 percent import duty on refined sugar.