BUSINESS: Why sugar price is going up

Government in search for answers  

In search for answers to sugar price hikes, The Independent has been told that the ministry of trade, early this month wrote to sugar manufacturers under the USMA umbrella to explain why the price of sugar was going up.  USMA top officials outlined the above problems – drought, exchange rate depreciation and rising cost of inputs and high taxes.

The other important cause, USMA reportedly told the ministry had to do with shortage of sugarcane due to drought and crazy dealers harvesting immature sugarcane who sell it to small and unregulated millers. Mubiru said harvesting immature cane is a big problem and is likely to cause more trouble to the supply of sugar in Uganda in the short to medium term if not checked.

“Due to the lack of implementation of zoning policy which USMA has constantly urged the ministry to consider, small mills have continued to be established in close proximity of the old mills. These new mills, without making any investment in outgrower schemes are offering various incentives to farmers thus leading to harvesting of immature cane. This has led to the current experience of the extremely low recoveries and loss of production/output,” Mubiru wrote to us in an email conversation.   

 By April 21, the Ministry of Trade had not written back to USMA, according to a source.

When The Independent contacted the Minister of Trade, Amelia Kyambadde on April 21 to explain the position of government on this matter, she seemed not to have short term solutions. She said that the sugar industry would be managed well using the sugar act.

“The Sugar Bill is at Committee stage in parliament and we expect it to be tabled for debate by end of May,” Kyambadde said on phone.

Similarly, her junior staff, Julius Onen, the permanent secretary told The Independent that the position of the ministry on matters sugar is that once the sugar bill is passed into law and well implemented, the current problems related to zoning and general trading will be dealt with. It is not clear whether weather conditions will be favorable this year to warrant more supply of cane to millers. Amid other economic challenges, government’s regulatory hands appear to be tied with elements of liberalisation which leaves consumer prices at the mercy of manufacturers and ‘greedy’ traders.

Ibra Kasirye, the principle research fellow at the economic policy research centre based at Makerere University told The Independent on April 22 that “we are in a funny situation” where sugar manufacturers could have increased prices after seeing other commodity prices going up largely due to drought experienced last year.

Kasirye said: “I know very well that the nature of their farming requires them to use irrigation farming in addition to heavily depending on out growers for inputs like sugarcane. I also understand that the number of sugar manufacturers has increased over time. The depreciation of the shilling has not been that much of late…that leaves a lot of questions on whether the increase in factory price and in the retail markets is justifiable.”

Going forward, Kasirye suggested that, sugar being more of a necessity to many Ugandans today than years before, government could manage prices by issuing import licenses to boost supply on the market.

“I know this has been fought by local producers before but it can be done in times of scarcity to stabilise prices and check speculators,” Kasirye said.

Kasirye’s argument could also mean restricting exports of sugar to neighboring countries and beyond estimated to be in the region of 25% of total production per annum.

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editor@independent.co.ug