Ugandan sugar manufacturers are facing an existential crisis after Kenya last week banned sugar imports, opting to solve challenges facing the country’s sugar industry.
The ban means that at least 35,000 tonnes of sugar exports from Uganda will be locked out of Kenya, which is expected to increase Uganda’s stockpile.
Uganda, according to Uganda Sugar Manufacturers Association, is currently grappling with stockpiles of about 150,000 tonnes with Tanzania, which had previously completely banned exports from Uganda, only allowing in about 20,000 tonnes.
Mr Jim Kabeho, the Uganda Sugar Manufacturers Association chairman yesterday told Daily Monitor the sector is in a crisis, which, unless urgently addressed by government and regional governments is expected to force out some manufacturers.
“We are in a crisis. Local sales are low and now exports [are being locked out]. It is a big problem. If we can’t sell then factories are going to close,” he said, noting the crisis is expected to spread out to farmers, who can nologer sell their cane and efforts to sell it to countries such as Kenya have also faced challenges.
Last week, Kenya closed out truckloads of cane from entering its territory for unexplained reasons.
Kenya bans imports
About two weeks ago, Kenya’s Agriculture Cabinet Secretary Peter Munya announced a ban on all sugar imports and subsequently revoked all sugar import permits, some of which were held by Uganda manufacturers and exporters.
Mr Munya had reasoned that the influx of imports in Kenya had negatively impacted sales of Kenyan sugar producers, leaving them with huge unsold stocks.
Kenya had previously allowed in sugar imports after one of the country’s largetst producers – Mumias – had experienced capacity challenges.
The ban, Mr Kabeho said, is expected to impact local prices as manufacturers struggle to reduce stockpiles that have been growing since the start of the year.
Sugar prices, he said, have been reducing since April with a 50-kilogramme bag now going for Shs130,000 from Shs150,000 yet manufacturers continue to grapple with an increase in the cost of production.
“We can’t manage the piling stock,” Mr Kabeho said, noting that manufacturers are managing losses as they seek to reduce the stockpile.
Uganda’s biggest sugar producer remain Kakira Sugar Works with an annual production of 180,000 tonnes while Kinyara Sugar Works produces 120,000 tonnes. Sugar Corporation of Uganda Limited produces about 100,000 toones.
According to Ministry of Trade, Uganda produces 510,000 tonnes of sugar out of which 360,000 tonnes are consumed locally.
The surplus, which has now grown to 170,000 tonnes, is exported within East Africa, Comesa and DR Congo.
However, much of the exports have been locked out with Tanzania and Rwanda, according to details captured in the East African Community gazette, seeking permission to import sugar outside East Africa in the 2020/21 financial year.
The move, if granted, will see substantial amounts of Uganda’s exports locked out of the two countries.
Uganda also exports sugar to DR Congo, South Sudan and Zambia.
According to Bank of Uganda data, Uganda earns an average of at least $98.92m (Shs370b) from sugar exports annually.
Growing sugar Export hiccups
Earlier, Kabeho told Daily Monitor that the increase in production was likely to create surplus yet there were hiccups in the export market.
The export hiccups, he said, would grow to about 170,000 tonnes with key export markets such as Tanzania and Rwanda locking out Uganda’s sugar. Other export destinations such as South Sudan and DR Congo, he said have challenges of infrastructure and insecurity which leaves Uganda with the challenge of managing its piling stock.
Uganda’s hopes of increasing her exports, in a bid to cut back on her sugar surplus, hang in balance as Kenya takes a move to ban all imports
Last year in March, President Museveni signed a deal with Kenyan President Uhuru Kenyatta, in which Uganda would increase its sugar exports to Kenya to between 36,000 and 90,000 tonnes. However, by the time of the ban, nothing had been achieved in this direction.
Kenya has been importing 350,000 tonnes from within the East African Community and the Common Market for Eastern and Southern Africa due to an increasingly widen deficit in the local market.