The rise in sweets jeopardizes the future of the industry

In December last year, members of the Kenya Sugarcane Growers Association called for an audit of the country’s sugar deficit. The call was precipitated by the fact that an increase in the number of sugar factories had not translated into an increase in production and a reduction in the deficit.

“When we only had five sugar mills in Kenya, the shortfall was 200,000 metric tons. We are just asking why with 10 factories crushing cane the deficit is the same? Mr. Richard Ogendo, the general secretary of the association, told the Business Daily.

The demand for such an audit might not have arisen if they had looked across their western border where sugar production is in decline despite the increase in the number of sugar factories.
Annual sugar production figures for the period between 2011 and 2014 show growth. Uganda produced 266,910 metric tons of sugar in 2011; 297,732 tonnes in 2012; 334,040 tonnes in 2013; and 438,000 tons in 2014. Most of the sugar came from the country’s three largest sugar mills – Kakira Sugar, Kinyara Sugar and the Sugar Corporation of Uganda Lugazi (Scoul).

Kinyara produced 88,725 metric tons of sugar in 2011; 97,062 tonnes in 2012; 99,533 tonnes in 2013; and 122,000 metric tons in 2014.

Kakira, then Uganda’s largest sugar refinery, produced 132,679 tons in 2011; 149,340 tonnes in 2012; 152,204 tonnes in 2013 and 180,000 tonnes in 2014. Elsewhere, Scoul produced 38,006 tonnes in 2011; 43,830 tons in 2012; 46,803 tonnes in 2013 and; 83,000 tons in 2014.

Decline in production
In 2015, the industry began to experience reversals. Annual sugar production increased from 438,000 tonnes in 2014 to 418,882 tonnes. It fell further to 392,115 tonnes in 2016 and 329,500 tonnes in 2017.
All factories have recorded production cuts. Kinyara was the least affected with figures of 107,187 metric tons of sugar in 2015; 113,604 tonnes in 2016 and 110,000 tonnes in 2017.
Kakira and Scoul fared much worse. Production at Kakira increased from 180,000 tons in 2014 to 153,303 tons in 2015; 152,842 tonnes in 2016 and 130,000 tonnes in 2017.

At Scoul, production increased from 83,000 tonnes in 2014 to 81,393 in 2015; fell further to 65,069 in 2016 and 52,000 tonnes in 2017.

The decline in production coincided with an increase in sugar mills from three to seven. Statistics from the Uganda Sugar Manufacturers Association (USMA) indicate that while Uganda has 14 operational sugar mills in August 2022, sugar production n has not increased. On the contrary, the production of Kakira and Scoul is down.

Mrs. Evelyn Anite, Minister of State for Privatization and Investment, believes this is because demand exceeds supply for sugar.

“At the recent Turkish Investment Summit, we had a request for more than 500,000 tons of sugar to export to Turkey, but we couldn’t get a factory that could meet the demand. They have not been able to meet this external demand,” Ms Anite said. Saturday monitor.

Dwindling cane
Mr. Mwine Jim Kabeho, President of USMA, says the situation has been precipitated by the lack of adequate cane to power Kakira and Scoul’s operations, an argument supported by the latter’s Managing Director, Mr. Anil Kumar.
“We are operating at 80% of our installed crushing capacity due to shortages of raw cane sugar, but hopefully things will improve,” Kumar told Saturday Monitor in a recent interview.

Ms Anite, however, disagrees, saying some of the biggest factories are simply playing ‘politics’.
“I know farmers who have sugar cane, but no factory buys from them or wants to buy from them because they (the factories) want to fix the prices. They just want to create an artificial problem,” she revealed, adding, “If there’s a factory that’s telling me right now that they don’t have a cane to crush, raise your hand. , we go there and we help them to select the raw materials, just as we helped the farmers to find the market for their export sugar. »

growing choir
Initially, it was only Kakira who complained after GM Sugar and Mayuge Sugar were allowed to operate in Buikwe and Mayuge in 2004 and 2005 respectively. Kakira feared that the two did not have their own nuclear parks to power their crushing operations and were allowed to operate within a radius of less than 20 kilometers from their own homes.

Kakira then proposed zoning on the grounds that sustainable sugar production required a stable environment and long-term planning due to the long gestation period of sugar cane. This, they argued, puts extremely high pressure on the available cane.

GM Sugar and other “small millers” whose first reading of Kakira’s initial calls for regulation had been that it sought a monopoly have since joined the chorus of calls for regulation. Mr. Milan Dobaria, the Managing Director of GM Sugar, has since joined the chorus of those calling for strict enforcement of the provisions of the Sugar Law.

The sugar law, which President Museveni approved on April 23, 2020, provides for the creation of a sugar council to authorize new factories. Despite the fact that the Sugar Board never obtained a license, the Ministry of Commerce and Industry continued to issue permits, a development which Mr. Dobaria said is catastrophic for the sugar industry.

“The problem is that there is a shortage of sugar cane, but new players are getting licenses to operate in Busoga, a [sub-]region already saturated with sugar factories. This will affect Busoga factories and long-term production in Uganda,” says Mr. Dobaria.

More licenses
Given the production figures and the protests of some producers, it is surprising, even worrying, that the Ministry of Trade and Industry has continued to issue licenses to other players to enter the sugar industry.

According to the USMA, there were 14 operational sugar mills as of August 2022. Three more factories are expected to come into operation over the next year. Seven have been lined up to operate in 2024.
So why are more factories allowed if there is no evidence to suggest they will lead to increased production? Why are more licenses granted when there are no raw materials for everyone?

Ms. Anite defends the department’s actions on the grounds that its operations complied with the provisions of the Sugar Act. Ms Anite adds factories are necessary for ‘job creation’
She adds: “If we have challenges or commodity issues, then it is our responsibility as government to encourage more growth and a surplus.”

Experts, however, argue that a seemingly unplanned increase in the number of factories is likely to lead, among other things, to job losses caused by reduced productivity.

At the height of the sugar price crisis that hit the county in December 2016, Mr. Mayur Madhvani, co-CEO of Kakira, warned of the ramifications including loss of jobs due to the possibility of curtailment manpower for the factories that will be forced to operate. below capacity.

Mr Madhvani warned that reduced sugar production will lead to lower local revenue collection; lower or no exports, which means zero or reduced foreign exchange earnings; reduced benefits from regional markets; and loss of income for smallholders due to miners’ cane harvesting.

Rachel J. Bradford