What started off as a few small-scale industries trying to cut a niche in the established sugar producing industry has grown, in contravention of established policy, to the point that the existence of Uganda’s sugar industry is in danger of total collapse in a few years if nothing is done.
"A sign of things to come was the announcement at the end of last year of Kakira Sugar Works , the country’s biggest producer announcing plans to lay off 4,000 of its 9,400 workforce...
Writing to the National Union Plantation and Allied Workers (NUPAW) In October last year Kakira Sugar Works general manager Chrisitian Vincke reported,
“As you are no doubt aware, this serious situation has been allowed to happen because of the rampant licensing of new sugar factories in our area in complete disregard of the sugar zoning policy…. These new factories have been allowed to install large capcities in spite of the fact they do not have their own nucleus estate.”
In 2010 in response to the creeping expansion of the “jaggeries”, government approved a sugar policy that would not only protect existing investments but ensure the long term sustainability of the industry and maintain their competitiveness in order to export sugar to the region.
"Among safeguards in the policy that no new mills should be licensed with a radius of 25 km from existing mills, new sugar factories should have a nucleus plantation of at least 500 hectares and that jaggeries or open pan mills can only be licensed outside the cane growing areas...
Industry players have not been alone in complaining that the policy is being flaunted with impunity.
President Yoweri Museveni has written on three separate occasions first in July 2013 and the last time being last year in June, to Trade minister Amelia Kyambade directing that the policy should be implemented to the letter.
He lamented that the because of the delay in the implementation of the sugar policy small factories had mushroomed in the Busoga sugarcane growing areas affecting sugar production in the area.
The effects of this have begun to tell.
Because of the increased competition for sugar cane, with no additional fields planted, the ensuing shortage of cane to the factories has led to a drop in production.
In July Kakira reported that its factory was working at 47 percent capacity, it was only supplying 8.6 MW of power to grid compared to 34 MW in the past and ethanol production was down to by half.
The amount of sugarcane crushed by Kakira has fallen from 2.1 million tons in 2014/15 and is projected to be 1.55 million tons this season, the continuation of a downward trend. Last year 1.71 million tons were crashed.
Sugar production has followed a similar trend. This year it is projected that 130,000 tons will be produced down from 145,888 tons last year and 180,000 tons in 2014/15.
However the guerrilla producers have not restricted their underhand practices to the Busoga region.
Last year Kinyara Sugar Ltd complained that in a repetition of the trend in Busoga “Over 50 portable illegal jiggery mills have also migrated from Busoga settling in Masindi for the making of alcohol from stolen sugarcane,” they said in a concept note.
“In the last ten months Kinyara has recorded a loss of 3,200 hectares of cane to the vice.”
The western Uganda sugar producer also reported that a new crime of cane fires has erupted, allegedly fuelled by middle men who can then bargain for the burnt cane at a lower price.
Kinyara estimates that the loss to the treasury amounts to about sh27.5b and an additional loss of sh32.85b in unrealised taxable revenue as the cane that is diverted is not subject to tax.
However it’s not only the established sugar factories that are suffering.
In an attempt to cash in quickly farmers are now selling immature sugar cane.
“Currently farmers in Busoga region are harvesting 13 to 14 months old cane. This is extremely dangerous. With early harvesting that is prevailing in Busoga, farmers are losing approximately five tons of additional cane every month. This results in farmers losing approximately sh3.5million per hectare annually,” Kakira Sugar Works reported.
In Busoga sugar cane is harvested after 18 to 20 months. Harvesting it earlier will mean less sugar per ton of cane.
"The net effect of the current developments in the sector, “Leaves the contractor unpaid, farmers underpaid, the miller indebted lacking raw material, introduces new crime waves, creates unemployment and leaves our national tax revenue depleted,” Kinyara concluded...
As a way to redress the issue the trade ministry has started the process of enacting the Sugar Bill Act 2016. The bill was approved by cabinet in January 2016 and the first reading was done in parliament a year later in January 2017.
However some new amendments were proposed after consultation, minister Kyambade said in a letter to the president, which would delay the law’s enactment even further.
The lack of urgency on the government’s side – it has almost been a decade since the sugar policy was adopted, lends itself to speculation that licensing of sugar mills in the traditional sugar growing areas is being supported by powerful officials and raises the real fear that the industry may very well collapse in a few years’ time.
“The reason these pirates are stealing cane is because the bigger investment is in setting up the plantations, both nucleus and out growers, if the big companies go under you think these small players will fork out the cash?” an industry player said.
The current players between themselves have invested just under a trillion shillings over the last three decades to maintain and expand their operations.
According to the National Organisation of Trade Unions (NOTU) at least 25,000 of their members are employed in the sugar industry but the industry is not big to fail given the hostile operating environment they are working in now.
Across the border in Kenya the shutdown of Mumias Sugar works in western Kenya was the culmination of developments as are happening in Uganda today, where the Kenya government folded its arms as illegal millers raided the heartland of sugar growing.
At its peak Mumias would crush 7,000 tons of cane daily or about 2.6million tons a year and it accounted for 60 percent of Kenya’s sugar production. Shut down for most of last year for lack of cane to crush it made a tentative return to the market in November but industry observers are not hopeful it will survive.
In recent years the Kenya government has channeled up to Kshs2b (sh70b) to try and resuscitate the ailing giant but to no avail. Reports last month were that an additional Kshs4b would be required to rescue Mumias, with arrears to farmers at about sh600m (sh21b).
"To bridge the gap the Kenyans have imported 950,000 tons against local demand of 800,000 tons with the surplus expected to filter across the border to Uganda...
The industry is already feeling it. There about 600,000 bags of local production that currently remain unsold.
“We are joking in Uganda. We either are selfishly pursuing our own gain at the expenses of tens of thousands of employees and farmers or we have no concept of how devastating a collapse on the industry wold have on the economy,” one industry player said.