Prime
Government needs to protect sugarcane outgrowers
What the small producers are doing is ensuring express payments with farmers receiving their money as soon as they deliver their cane. FILE PHOTO
What you need to know:
- Falsehoods peddled. Sugar production has dropped from 438,000 metric tonnes in 2014 to 392,115 metric tonnes in 2016 yet Uganda had more sugar factories in 2016 than in 2014. These are the issues that the Bill should seek to address. Whereas the Sugar Bill is a welcome development, the Bill in its current form only seeks to make the situation worse by pushing out small scale millers.
The sugar debate in the country has been ongoing with sector players mooting for the Sugar Bill, which among other things, seeks to regulate the operations of the sugar industry. Since 2006, the sugar industry in the country has witnessed an inflow of millers from four millers that is Kakira Sugar Ltd, Kinyara Sugar Ltd, Sugar Corporation of Uganda Ltd and Sango Bay Estates Ltd, with more than six more millers coming on board and many more with licences, but are yet to set up shop.
This in turn has led to an increase in capacity installation, which in addition to the increase in the number of millers has contributed to a jump in sugar production from 193,769 metric tonnes in 2004 to more than 500,000 MT in 2015.
These millers employ people in the regions where they operate. And most importantly, they are a source of livelihood for thousands of outgrowers. The Sugar Bill is proposing relocating these factories to a 50km radius from the existing older factories. Such a move would have economic consequences on the people in the cane growing areas as the presence of multiple factories in the area has diverse socio-economic benefits.
In Busoga region alone, there are more than 13,500 households benefiting from cane growing, which has changed their livelihoods tremendously. With the growth of the industry and with more investors, a lot of dynamics have set in. One of them is that the farmers no longer have to wait for 90 days (three months) to receive their money.
What the small producers are doing is ensuring express payments with farmers receiving their money as soon as they deliver their cane. This helps parties in planning and has improved the incomes of the farmers.
The game has changed and the traditional/larger scale millers are not happy as they can no longer bully the farmers like they did in the past where they dictated payment terms, conditions as well as prices. Now, they must compete. And they are not happy with the situation they find themselves in. It is business unusual.
The rift between the two sides has not been helped by the fact that the small millers are also increasing capacity that is exerting more pressure on demand for cane. All this works in favour of the farmers.
Prices for cane have gone up, farmers are getting farm inputs, instant cash on delivery and such other benefits. Increased competition for sugarcane supply from outgrowers has led to an increase in outgrower sugarcane prices from Shs73,000 per MT in 2014 to Shs110,000 per MT in 2016 and currently going for at least Shs165,000 per MT in Busoga region.
The supply for the cane is reportedly not consistent with the demand despite the fact that the outgrower prices have increased. As such, millers are operating at under capacity. This means that there is still space to be filled? So who is getting uncomfortable?
This competition is the reason for the big players to silently push for enacting of the Sugar Bill 2016 to provide protection for their territories. Why should the big millers want to use Parliament to make a law that stifles competition? Who benefits from this? Obviously not the farmers. In other countries, millers exist even in smaller radius than what we have today. The two can co-exist provided they share economies of scale.
The Sugar Bill is meant to, among other, redefine the procedures that Uganda Investment Authority and the Ministry of Trade should follow in licensing new players in the sector. It shouldn’t be to legislate some businesses out of the market. The law can’t be enacted retrospectively. The Bill should also determine where new operators can set up base rather than disrupt the operations of existing players.
Sugar production has dropped from 438,000 metric tonnes in 2014 to 392,115 metric tonnes in 2016 yet Uganda had more sugar factories in 2016 than in 2014. These are the issues that the Bill should seek to address.
Whereas the Sugar Bill is a welcome development, the Bill in its current form only seeks to make the situation worse by pushing out small scale millers and creating territorial monopolies.
