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Variable picture in EAC sugar sector with ongoing disputes escalating

15 April 2013

According to press reports, Ugandan sugar production in 2012 was 11.7% above the production achieved in 2011 (up to 289,665 from 259,413 tonnes), but 11.4% below forecast levels. Cane poaching, involving the harvesting of immature cane, and drought conditions were seen as the cause of lower than projected production. Calls have been made for regulatory reforms to drive improved cane production practices. Uganda currently consumes some 350,000 tonnes of raw sugar per annum, with consumption growing steadily. The government aims to expand production to 700,000 tonnes by 2030.

Licences for seven new sugar mills were issued in 2011, with the first scheduled for official opening in April 2013. The new facility has a target production of 60,000 tonnes of raw sugar and 12 MW of electricity, with 20,000 ha available for cane production.

Similarly, in neighbouring Burundi it has been reported that the monopoly sugar producer La Société Sucrière du Moso (SOSUMO) “has registered the highest production ever”, at 23,149 tonnes. This increased domestic production is seen as contributing to a more stable sugar market.

In Rwanda, negotiations are under way with Mauritian investors to expand sugar production, and with a Canadian sugar company to launch production of the sugar substitute stevia.

In Tanzania, it is reported that delayed use of sugar import licences has resulted in stockpiling of sugar in excess of available storage capacity. Illovo-owned Kilombero has been granted licences to export 10,000 tonnes of sugar to the EU, while the Kagera Sugar Company expects to export 9,500 tonnes to regional markets. In recent years, Kenyan imports of sugar from Uganda and Tanzania have been increasing. The Kenya National Bureau of Statistics reported that “in 2012, Uganda exported 30,299 tonnes of sugar to Kenya … while a year before, only 73 tonnes were exported”.

In Kenya, a shortage of cane continues to plague the sugar milling sector, with output dwindling “following erratic weather patterns and poor crop husbandry”. This comes against the background of a 9.25% decline in production in 2011 compared to 2010 (down to 475,061 from 523,470 tonnes).

The secretary-general of the Kenya Union of Sugar Plantation and Allied Workers has argued that the issue of cane supplies to mills “needs urgent attention before liberalisation” if Kenyan mill are not to “become relics of inefficiency”. Estimated current production costs are reportedly 138% higher than the most efficient COMESA suppliers. With growing demand from household consumers and industrial users, imports have been rising in recent years.

According to the Kenya Sugar Board, “massive dumping of duty-free sugar into the Kenyan market” is taking place. This has led the Kenyan authorities to block sugar imports from Tanzania, Uganda and, most recently, Zambia, This led to the imposition of retaliatory duties on Kenyan goods by the Zambian authorities. In line with this broadening of sugar-related disputes, the Ugandan National Chamber of Commerce and Industry has called for an investigation into Kenya’s alleged violation of trade agreement commitments through the use of non-tariff measures.

Editorial comment

Sugar remains a sensitive product within both EAC and COMESA trade arrangements. Differential national treatment of sugar imports within the EAC Customs Union has recently given rise to trade disputes, unexpected surpluses and extra-regional exports, despite an intra-regional sugar shortage.

While production is expanding in some EAC members and further investments in the sugar/sweetener sector are being mobilised, the slow pace of sugar sector reforms in Kenya is ensuring that the intra-regional sugar trade is subject to regular disruptions.

While this currently harms both consumers and producers, it could also potentially undermine efforts to mobilise investment to meet the region’s growing demand for sugar. Freer intra-regional trade in sugar could potentially encourage investment in improved production and processing, and support a virtuous cycle of yield and productivity improvements across the EAC.

By contrast, the maintenance of the status quo could leave the EAC sugar sector triggering escalating trade conflicts and facing an uncertain future, despite growing interest in investment from competitive sugar companies (see Agritrade article ‘ Second Mauritian sugar company looking to expand in Eastern Africa’, 18 February 2013).

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