MAA 2020
BusinessMarketsProfit & Loss

Uganda’s fall in exports forces sugar prices to drop

A reduction in the export volume of sugar has led to a significant drop in sugarcane and sugar prices from Shs128,000 to Shs120,000, which is a 6.7% drop per tonne.

Each 50-kilogramme-bag of sugar has dropped from Shs185,000 in March 2018 to the current Shs131,000, which is a 41% drop.

The retail price of sugar in some parts of Jinja District has also reduced to Shs3,000 from Shs3, 500 (16% drop) per kilogramme during the same period.

According to the chairperson of Uganda Sugar Manufacturers Association (USMA), Mr Jim Mwine Kabeho, they are currently experiencing challenges in exporting sugar to the neighbouring countries such as Rwanda as a result of the continued closure of the Ugandan-Rwanda border.

The border has remained closed since February 2019

Mr Kabeho said, in a telephone interview at the weekend, this has also blocked sugar, which is destined to neighbouring countries such as Burundi and Democratic Republic of Congo. South Sudan on the other hand continues to be plagued by insecurity and this has affected importation of Uganda’s sugar in the country.

Tanzania, he said for example, has an annual gap requirement of 150,000 tonnes of sugar per year and permits are usually issued between May and June of every year.

But this year, they have preferred to import most of their gap sugar from South African Development Community (SADC) member states instead of the East African bloc and specifically Uganda which has surplus sugar.

“Our last trip to Dar es Salaam this month revealed that only permits worth 36,000 metric tonnes has been divided among their four companies for importation this year. These companies are also not looking at Ugandan sugar because the Tanzanian government has imposed a 25% Import Duty on our sugar,’’ he said.

Mr Kabeho added that they have continued to export sugar to Kenya but the permits given to them are few and take long to be approved.

“Uganda is likely to have a surplus of at least 150,000 metric tonnes of sugar for export if the markets are not opened and accessed. This may pose serious repercussions to the entire sugar industry,” he warned.

The Gatuna border was in February closed in what was initially perceived as a result of a row between Uganda and Rwanda.

There are reports that following the closure of the border, Uganda’s export earnings from Rwanda have fallen by 85%, while the Rwanda-Burundi border remains closed for months after a standoff between the two countries.

Mr Kabeho has also attributed the drop in sugar prices to illegal imports of sugar into the domestic market.

“We continue to get sugar in bonds declared as ‘on transit’, leaking into our domestic market at unbelievable prices since they don’t pay the due taxes. This is especially common in central and northern Uganda hence affected our sales and sugar prices,’’ he said.

Mr Kabeho conversely attributed the dip in sugarcane prices to a drop in the prices of sugar.

“Once the prices of sugar go down, the prices of cane reduce. If you reduce the price of sugar, you also reduce that of sugarcane,’’ he said.

Farmers unhappy

This development has, however, left sugarcane farmers in Busoga Sub-region counting losses, with the chairperson of Busoga Outgrowers Association, Mr Isa Budhugo, saying they unanimously agreed not to supply sugarcane to sugar millers in the sub-region if prices remain low.

“As farmers, we incur a lot of expenses in production of sugarcanes. With effect from July 1, should they fail to revise their prices, we shall stop supplying them with cane,’’ he said, warning that they are considering exporting their raw sugarcane to Kenya where prices are fair.

The prices have dropped at a time when Parliament is yet to resume debate on the Sugar Bill that was re-introduced on the floor of the House by government after President Museveni refused to assent to it in April on grounds that “it does not favour concerns of the big manufacturers”.

In early 2017, a tonne of sugarcane was at Shs175,000 and by December, the same year had gradually reduced to Shs155,000.

From 2018, millers have been buying a tonne of sugarcane at Shs128,000, which has now dropped to Shs120,000.

Statistics obtained from USMA indicate that Uganda exported 66,000 and 30,900 metric tonnes in 2016 and 2017, respectively.

The statistics also show that more than 800,000 50-kilogramme bags worth US$25 million is being held in stock of sugar at different companies which has accumulated over a six-month period.