UGANDA – The duty-free sugar import window granted to some East African Community (EAC) member states has triggered a crisis in Uganda’s sugar industry, leading to a sharp drop in prices and significant losses for local millers and farmers.
At the beginning of the 2023/24 financial year, Rwanda, Tanzania, and Kenya were permitted by the EAC Secretariat to import tax-free sugar to address their domestic deficits.
However, this measure has severely impacted Uganda’s regional sugar export market, particularly in Kenya and Tanzania, where Uganda’s sugar exports are estimated at 110,000 tonnes annually.
Ugandan farmers are now grappling with the repercussions as cane prices have plummeted due to low demand at factories, fueled by the influx of imported sugar flooding the market.
Bank of Uganda statistics reveal a significant decline in sugar exports, from 229,723 tonnes in 2022 to 99,283 tonnes in 2023, resulting in a substantial loss of export market share for millers. The industrial earnings also witnessed a sharp decline during the same period, falling from 163.75 million to 75.79 million.
Jimmy Kabeho, chairman of Uganda Sugar Manufacturers Association, lamented, “Kenya, Uganda’s largest regional sugar export market, has shifted its preference to imported duty-free sugar.”
Combined, the market size for Uganda’s sugar in Kenya and Tanzania is estimated at 110,000 tonnes annually, with Kenya consuming the lion’s share of 90,000 tonnes.
Farmers are now feeling the heat after cane prices also dropped due to low demand at factories as a result of competition from imported sugar that has flooded the market.
He highlighted the smuggling of duty-free sugar into Uganda through porous border points near Malaba, Busia, and Lwakhakha, further distorting the market and driving down prices.
The situation has adversely affected domestic market sales, leading to a surplus in stock and prompting millers to reduce production. The decline in production has directly impacted cane farmers, who are now facing difficulties breaking even due to high production costs.
To cut costs, millers who used to pay Ush230,000 (US$59.2) for a tonne of sugarcane in February this year, are now buying it at Ush160,000 (US$41.2).
Commissioner of Customs at the Uganda Revenue Authority (URA), Abel Kagumire, acknowledged the issue but noted a lack of actionable information from sugar millers regarding smuggling activities.
Despite this, URA has intercepted smuggled goods from Kenya, including sugar, indicating ongoing illicit trade across the borders.
Liked this article? Subscribe to Food Business Africa News, our regular email newsletters with the latest news insights from Africa and the World’s food and agro industry. HERE
