Why Atiak Sugar Project is not firing on all cylinders

Atiak Sugar Limited is battling an acute shortage of sugarcane to supply the multi-billion sugar factory located in Atiak Sub-county, Amuru District. The vast bulk of its sugarcane plantations in both Amuru and Lamwo districts were ravaged by suspected arson attacks from alleged aggrieved members of two separate outgrowers societies.

The Atiak Sugar Project is still being spoken of in the present tense. It is essentially a public-private-community partnership between the National Agriculture Advisory Services (Naads), participating farmer cooperatives and respective local governments of Amuru, Lamwo and Horyal Investment Holdings Ltd.

The first bags of sugar from Horyal Investment Ltd’s multi-billion investment in the post-conflict north hit the streets of Gulu City once President Museveni commissioned the factory on October 22, 2020. The factory was initially meant to provide a ready market for the sugarcane outgrowers in the region where sugar production has already begun.

Under the partnership, the community under Atiak Outgrowers and Gem-pachilo Cooperative Societies are to plant cane on the land and weed the plantations. Once the cane is ready, the plantation—apportioned to the outgrowers by Naads—would be harvested and sold to the factory.

At its inception, the project targeted to cover 13,841 acres at the main plantation at Atiak in Amuru District. An expansion of 15,000 acres was, however, later made in Ayu-alali, Palabek Kal Sub-county, Lamwo District, in 2020. A further expansion of 31,159 acres is planned and is being established in Palabek-ogili, Lamwo District, bringing the total acreage to 60,000.

In September 2020, before its commissioning, Ms Amina Hershi, the chief executive officer of Horyal Investment Ltd, told a delegation of government officials that 3,000 acres of sugarcane were ready for supply to the factory to begin its maiden production. This section of the plantation belonged to Gem Pachilo and Atiak Outgrowers Cooperative Societies, she revealed, adding, “…we also now produce 6 MWh of electricity to the national grid, which is generated through biogas from the bi-products of the cane.”

At this point, the plant was, according to Ms Hershi, only waiting for calibration by the International Organisation for Standardisation to ensure the quality, safety, and efficiency of products, services, and systems.

Two years later, however, Saturday Monitor has learnt that simultaneous incidents of fire outbreaks that ravaged hundreds of hectares of the plantation appear to cast a dark shadow on the potential of the factory.

Outgrowers and the factory’s management accounts have indicated that since 2017, wildfires have gutted hundreds of hectares of the sugar plantation in the dry season. The burnt portions were usually canes that were nearing harvest or ready for harvest. We also understand that the portions burnt by the fire were always those owned by the outgrowers. These were not insured against fire, damages, or any other risks.

Late last month, the proprietors of the factory said sugar production had been suspended after cane supply to the factory hit rock bottom. According to the company, the suspension comes in the aftermath of wildfires that have in previous months destroyed the sugarcane plantation.

Mr Mahmood Abdi Ahmed, the company’s director for plantation and agriculture, told Saturday Monitor that production had drastically slowed down. He, however, hastened to add that operations haven’t been suspended as a result of the acute shortage of canes.

“The biggest challenge we have had is the gaps in our structural planning relating to the sugarcane production, and this failure is blamed on all of us the stakeholders,” Mr Mahmood said in an interview, adding, “The land (customary) ownership setup in the Acholi area has served a really big disadvantage to sugarcane growing because you don’t see people growing sugarcane on subsistence basis as we see in other regions producing sugar.”

According to him, in areas such as Busoga and Bunyoro sub-regions, “you find people growing sugarcane everywhere because the land is not communally owned and individuals decide on their own whether to grow sugarcane. But the communal ownership disfavours this, and this is one challenge we did not foresee.”

He also said the lack of associated amenities such as roads and urban trading centres where interested labour (workers) can reside has exacerbated things.

“The road infrastructure in communities here is still poor to boost sugarcane production,” he said, adding, “Even if communities grew these canes, the road networks are still underdeveloped to ease transportation of the canes.”

 The company also lacks the infrastructure and human resources to deploy in sugarcane production. For example, Atiak Town Council or Elegu Town Council— the nearest trading centre—is 25km away from the factory, making transportation of the labour force over the distance a huge daily burden.

A fortnight ago, Ms Hersi told the media that the factory was temporarily suspending operations. According to her, the factory’s biggest problem was the lack of canes to supply the plant to produce sugar. She was, however, quick to add that the plantation would resume production once canes in Ayu-alali plantation in Palabek-kal Sub-county, Lamwo District, mature between July and August.

Sabotage galore

Ms Joyce Laker, the chairperson of Atiak Outgrowers Cooperative Society, however recently revealed that they were disappointed that Naads refused to pay their members.

During a public gathering at the factory, Ms Laker described the wildfires that swept across the plantations as deliberate sabotage. She also called for the government’s intervention after revealing that discontented cooperative members have openly threatened to continue burning down the sugar plantation until their grievances are settled.

“I will say it without shame…,” she stated. “…there are issues which the government has to come in and settle because at one point, in a meeting, some people said if these issues are not resolved, the sugarcane will continue getting burnt down.”

The longstanding dispute between the sugarcane outgrowers and the management of the sugar factory did not only delay the commencement of sugar production. Saturday Monitor also understands that the dispute has reportedly caused persistent and deliberate burning of the canes.

Ms Laker said the finger of blame can also be pointed elsewhere.

She referred specifically to the 2017 incident when Naads cut down more than 160 acres of sugarcane plantations belonging to Atiak Outgrowers and Gem-pachilo cooperative societies.

Saturday Monitor has established that the outgrowers are yet to be paid. We have also established that there are several instances of tension between the outgrowers, Horyal Investment Ltd and Naads over royalties and accumulated payments for canes cut and served to the factory.

Before President Museveni launched the factory in October 2020, the farm could not initialise sugar production for nearly eight months. This was due to the failure of the government to compensate two cooperatives for the sugarcane supplied to the factory.

Ms Grace Kwiyocwiny, the State Minister for Northern Uganda, told Saturday Monitor that roundtable talks between the leadership of the factory and the cooperative members are in the offing.

“We should protect all the little developments that are coming up in our region because all developments are supported by communities,” she said, adding, “I want to … come and meet with the leaders of the community because of the sugar [cane] that is continuously burning down.”

Earlier in March, when this newspaper visited the facility, the factory remained closed to production due to supply chain issues (shortage of cane). A perfect storm—including the pandemic, suspected arson attacks and insufficient production of canes by plantations in both Amuru and Lamwo districts—has contrived to create supply chain problems.

No respite from the east

In January 2021, Horyal Investment Ltd started sourcing its cane from the Busoga Sub-region. Sugarcane farmers in Busoga Sub-region, under the Greater Busoga Sugarcane Farmers’ Union (GBSGU), last month signed a memorandum of understanding with Atiak Sugar Factory to supply cane for six months. Under the arrangement, the government shall intervene by subsidising the transport costs and also avail fueled trucks to ferry the cane.

Inside sources have, however, told Saturday Monitor that the arrangement looks to have fallen flat on its face. The cost the investor incurred in transporting a truckload of canes is six times higher than what it paid for canes alone. A source who did not want to be named said while a truckload of canes fetched approximately Shs200,000, it costs between Shs800,000 to Shs1m to transport the consignment.

“They failed to sustain that arrangement because it was very expensive and the company realised it was sinking in losses to that effect; although the costs were being shared between the investor and Naads,” our source revealed.

Mr Michael Lakony, the Amuru District chairperson, fears that the suspension of the sugar production will destroy livelihoods in the sub-region.

“Hundreds of workers, including young men and women from the district here have been rendered jobless,” he told us in an interview, adding, “If the company wants to gain from the factory, it should get serious other than politicking.”

Mr Lakony added that because the government was allegedly not serious about streamlining the impasse and ensuring that Horyal Investments Ltd respects its terms in dealing with the outgrowers, the investor could continue grappling with suspicious fires.

“The plantations keep getting burnt because it is owned by no one and that means nobody cares, and if nobody cares, no one takes interest in taking care of it, including the neighbours because benefits in terms of payments to the out-growers are not being met,” he said.

Mechanisation drive

To address the challenge of labour deficiency and lack of funds to establish low-cost housing facilities in the factory to accommodate workers, Mr Mahmood said they are moving towards mechanising production.

“We don’t have the financing to build accommodation facilities to house thousands of workers who we would need to work on the plantation daily,” he told Saturday Monitor, adding, “Instead, we are strategising to focus on mechanising our production using the limited resources at our disposal now.”

He further revealed that they have procured a new fleet of sugarcane planters, weeders and harvesters due to arrive at the back-end of this year.

“The machines, we believe, are more efficient and can do much more work compared to human labour and that will solve the puzzle,” he noted.

Although Mr Mahmood did not disclose the source of the funding, in a separate interview, Mr Lakony—the Amuru LC5 chairperson—said the company had been granted a Shs108 billion bailout by the government for mechanising production.

“We had a meeting with the management as a district and also shareholders and the latest update is that the government has allocated Shs108 billion to the company through UDC [Uganda Development Corporation],” Mr Lakony said, adding, “The plan is to leave rudimental and turn to mechanised production. Instead of using human labour, they want to use machines.”

A fraction of the same funds will also be used to establish an irrigation system on River Unyama that cuts through the sugar plantation to help in irrigating the canes during the dry season when immature and young canes dry and die out, Mr Lakony added.

Saturday Monitor understands the Shs108 billion is the same funding thrown out by Parliament’s Budget Committee last November. This was after the investor made a supplementary budget request to finance production. The request tabled by junior Trade minister David Bahati, and backed by the UDC’s top brass, failed to convince the lawmakers, who in turn sent them away.

The MPs declined to endorse Ms Hersi’s request to the government, reasoning that there was a need for proof that her investment was making a substantial contribution to the economy. The MPs instead demanded a forensic audit into how she has spent more than Shs120 billion received from the government. Similar financial requests were made by the Atiak Sugar leadership to the 10th Parliament, but most of them were rejected, although it later emerged that they were, nevertheless, granted.

Some of the fire incidents at Atiak Sugar project

In 2016, a fire caused an estimated loss of Shs150m after it gutted 150 acres of sugarcane plantation at the factory.

In December 2018, another mysterious fire destroyed an estimated 250 acres of sugarcane at the facility.

An estimated 600 acres of sugarcane at the plantation was then burnt down in February 2019.

And in January 2021, a fire that lasted for nearly a week destroyed nearly 60 percent of the plantation after the police fire brigade fought it with little success.

Eventually, more than 600 acres of sugarcane estimated at Shs3 billion were reported to have been destroyed in the fire.

In fact, that fire in January of 2021 was the worst to ever hit the plantation. The police attributed the rapid spread of the fire to narrow fire lines that do not allow fire trucks to move in fast.

Enter January of 2022, a similar fire burnt down an estimated 3,500 acres of the sugarcane plantation.

According to Mr David Ongom Mudong, the Aswa River Region police spokesperson, the fire razed down 14 huts belonging to a Uganda People’s Defence Forces (UPDF) detachment. The soldiers, who were supposed to stand as sentinels at the plantation, watched helplessly as 250 acres were burnt down.

Background

About the factory

Atiak Sugar Factory, located at Gem Village in Pachilo Parish in Atiak Sub-county in Amuru District, is jointly owned by the Uganda and Horyal Investment Holdings Company Ltd. The latter belongs to Ms Hersi.

The factory—located 17kms north of Atiak off the Gulu-Nimule Road—is the first major investment in the region.

Lawmakers have, however, continued to question why the government’s stakes in it have remained significantly low compared to that of Horyal Investments despite the huge capital portfolio injected in the past years into the venture.

Last September, Parliament’s Committee on Trade questioned why the government—the lowest shareholder in Atiak Sugar Limited—continues to invest the most money in the factory.

The government’s shareholding in the plant has remained static at 40 percent despite an injection of more than Shs120 billion.

In May 2018, when the government injected Shs20 billion, its shareholding stood at 10 percent. In the same year, it injected another Shs45 billion—raising its shares to 32 percent.

The committee also questioned the circumstances under which Naads contracted the company to clear, plant, and harvest sugar cane valued at Shs54 billion instead of working directly with the outgrowers.

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