Atiak Sugar Factory struggles despite Shs550 billion investment

With a little over Shs720 billion having been sunk into the project, Shs554 billion of which has been courtesy of government subventions authorised by Parliament, a section of lawmakers this past week headed to northern Uganda for an on-site inspection.

“As investors, you have injected your money here. The taxpayer has injected money here. But on our end, we are frustrated on behalf of the taxpayer because of all the challenges that are happening […] there's no production happening,” Mr Joel Ssenyonyi, the Leader of Opposition in Parliament (LoP), told the top brass of Horyal Investment Ltd who besides having a 60 percent stake in the factory have sunk Shs169 billion into the project.

“The factory is saying that they need more support from the government. The government has put in so far Shs553.8 billion as an investment, but the investor is saying they need more. They have to prove that the investment is valuable. There should be value for money. Otherwise, we are worried that if we continue putting in money, nothing is coming out. We will be wasting time,” LoP Ssenyonyi later told journalists. 

Ms Amina Hersi works as the factory’s managing director alongside her son, Mr Mohamoud Abdi Ahmed, who is the company’s director for agriculture and planning. 

“Where we have gone wrong, I asked for forgiveness. And if we have ‘eaten money’, I think you can sell the whole investment and also take me because even my homes are mortgaged everywhere, even my properties in Kampala, among others. I just asked for forgiveness,” Ms Hersi told the lawmakers on Monday.

The narrative that the lawmakers maintained throughout the dialogue was that the sugar factory is the very embodiment of a white elephant.

Ms Manjeri Kyebakutika, the Jinja City Woman representative, went a notch further when she alleged that “this project is being used […] to steal the taxpayers' money”.

Deafening silence

When the machines at the factory first started roaring over a decade ago, its senior management pledged to turn the venture into “an engine for development to support the livelihoods of vulnerable populations”. 

Fast forward to 2024, Mr Patrick Polly Okin Ojara, the Chua West County lawmaker, says his constituents feel shortchanged by the project in which the government has a 40 percent stake via the Uganda Development Corporation (UDC).

“We have not been very happy as leaders of this sub-region because [there is nothing tangible to show] since the factory started,” he said.

In many respects, the factory remains a work in progress. 

The water reservoir site of 323.4 million cubic metres falls under phase one of its irrigation project. 

Currently standing at 75 percent progress, a beehive of activities, including rock blasting and earth movements, envelope the site.

In its neighbourhood, water conveyance infrastructure or pipelines are being connected to pivots. Up to 82 kilometres of the pipes have been procured to convey water. Of these, 21 kilometres of the pipes have been tested and laid thus far. 

Elsewhere, 49 out of the 62 centre pivot irrigation systems—covering 4,150 hectares—have been installed. Farther afield, up to 610 kilometres of farm roads have to date been cleared to ease access throughout the farm. 

During their on-site inspection, lawmakers saw that several heavy-duty machinery, including Case IH Patriot 3230 (monster sprayer), billet planters, and the Case Austoft 9000 series sugarcane harvester machine, had been deployed to perform their respective tasks.

One of the centre pivot irrigation facilities was in fact used to demonstrate its efficiency to irrigate the plantation. 

Back inside the factory, however, only crickets could be heard chirping as the factory’s equipment continued to lie idle inside the 25-metre-high roofed facility. 

Adjacent to it stands the powerhouse of the factory where, the management told the lawmakers, up to 6MW of electricity was being produced until the back-end of 2022 when the factory closed down operations. 

A generator still runs to keep the electrical components and turbines of the powerhouse alive. Consuming 200 litres of fuel each day, the generator sets the factory back Shs1m each day

“The moment you turn it off, you will destroy almost the entire cabling system of the factory,” Mr Ahmed, the company’s director for agriculture and planning, told lawmakers on Monday. 

Bottlenecks

Whereas Atiak Sugar Factory paid Shs4 billion to Uganda Revenue Authority (URA) in taxes throughout the 19 months of production, it only managed to sell 25-kg bags of sugar totalling 261,174. Those internal sales worked to about Shs15.942 billion

The factory also pocketed Shs6.064 billion when 50-kg bags of sugar totalling 50,938 were sold internally. Exports of brown sugar to Kenya and South Sudan totalling 5,802.7 tonnes brought in Shs12.181 billion. The company also sold 11,383 tonnes of molasses worth Shs2.294 billion.

This is hardly the cost-benefit analysis the factory hoped for when President Museveni—with then Parliament Speaker Jacob Oulanyah in tow—cut the ribbon at its premises when the first sugar bags were put out in October 2020.

The production spell spanned only 19 months before the machines went silent in April 2022. A biting sugarcane shortage was widely cited following rampant fires on the plantations. 

“We realised one mistake we made in the past was to work collectively through the cooperative group members. This collective activity is what failed that first system. Because each farmer relies on another person to do the work, each farmer relies on the cooperative to do the work. So, it was very easy to pass the blame to another party while sugarcane production kept limping,” Mr Ahmed told lawmakers on Monday.

In planting sugarcane, a manually intensive crop, the company expected participation from the farmers who controlled the production of the raw materials. 

Unfortunately, the cooperatives had members who did not want to work. With nearly 3,000 farmers at the plantation, the company also struggled with accommodating them. 

The heaviest blow faced was in hiring machines to do land preparations when the National Agricultural Advisory Services (Naads) withdrew its machines. 

“The machines we were hiring are from the open market. Every time the price is going up, fuel goes up, you're renting constantly. So, you're doing 60,000 acres at the contract price for an acre at Shs323,000. When the government took away its machines, we rented at Shs500,000,” Mr Ahmed disclosed. 

Fightback

At the time Atiak Sugar Factory kicked off production, UDC contracted a local company to build a multi-billion bridge. The bridge was intended to link the factory to Ayualali Cooperative Society in Amuru’s neighbourhood, Lamwo District where another 15,000 acres of sugarcane plantation were ready.

“It would take 36 kilometres from Lamwo to access the factory. But because the bridge was not built, farmers had to go 280 kilometres through Kitgum, Pader Gulu to Atiak and the sugar would take so long to reach, while the quality depreciated,” Mr Ahmed revealed. 

 “So if you don’t have constant sugarcane, you are making losses because the recovery is lower because you are not running operations. And every week you have to restart the process. So, we said, until we have constant canes coming to the factory, this project is not sustainable,” he added. 

With the plantations around the factory already devastated and depleted by fires and Lamwo sugar getting done despite the ruinous distance, the government gave the factory a Shs16 billion transport subsidy

This was to enable it to transport sugarcanes worth Shs10 billion from the Busoga Sub-region between August 2021 and April 2022 before closing. 

“The government spent Shs16 billion as a subsidy on transport to bring the sugarcane here from Busoga. Horyal Investment Ltd paid a total of Shs10 billion, but this subsidy model was not tenable,” Mr Ahmed explained.

“Because people have to bring the sugar from far distances, during that period, the sugar content goes down. And once the sugar content goes down, you are also not able to operate and bring high-quality sugar but you are keeping your staff, because the factory when it works, it has to run for 24 hours consecutively,” he added.

 Workers operate in three shifts

Mr Ahmed noted: “When production starts, and because you have canes that can only run for one day, that sugar will get stalled in the proce­­­ssing unit until the next seven days until you pool enough sugarcane to start before the crystals can form.” 

Faced with those steep challenges, the project managers sought President Museveni’s intervention. 

“We discussed and requested mechanisation, for which Parliament later the same year granted a Shs108 billion supplementary budget to enable the company to mechanise sugarcane growing for sustained sugar production,” Mr Ahmed said.

Costly venture?

Before delivering the machinery, the suppliers took the company staff to do a benchmark in Tanzania where they supplied similar equipment. This was to enable them to appreciate that the equipment would not make meaning without a proper irrigation system. 

This is because, unlike the common tractors of less than 100 horsepower, 95 percent of them are of capacities of more than 700 horsepower. This renders them redundant in the rainy seasons because they get stuck due to their heavy weight. 

“They explained to us that during the height of the rainy season, the equipment would corrugate and make the gardens worse and that we needed to invest in irrigation, thus our irrigation project came in because of mechanisation,” Mr Ahmed stated. 

The lawmakers were also told that, whereas up to 65 percent of the procured equipment has been received, only 10 percent of the associated implements have arrived at the factory. 

More than a year ago, the government appropriated Shs108 billion to the sugar plant to aid in mechanising sugarcane production. 

The government has so far injected up to Shs553.7 billion into Atiak Sugar Works Ltd. Of this, Shs483 billion is a direct investment. The transport subsidy that was intended to move sugarcane from other parts of the country to run the plant a couple of years ago as well as land compensation account for the remaining Shs77 billion.

Restarting

For production to restart, the government has to accomplish two more activities. These include setting up the water pipeline system from the River Nile to the factory through a 22-kilometre distance and also ensuring that all the remaining equipment is delivered to boost cane production.

“It will take, even with great contractors, a year and a half to do. So, the quicker that the government can set that up, it will be able to jump-start and move the sugar cane,” Mr Ahmed said. 

While the factory requires 25,000 acres of ready canes before restarting, only 2,800 acres have been planted after the mechanisation.

“So we have planted 10 percent. But in the dry season alone, every month I can plant 2,500 acres. Because with the six planters, you're doing 100 acres a day with 25 days exclusive of Sundays. If we had the irrigation, you would be planting in the dry season, which is best,” Mr Ahmed said. 

The company management also asked the government through the lawmakers to support them with another $43 million (Shs157.1 billion) to build a pipe water system from the River Nile to boost its production. 

The current irrigation system it is establishing is deficient in guaranteeing maximal sugarcane growing and production in the dry season, Atiak Sugar Factory reasoned. 

Management of the sugar factory, with a capacity to consume about 1.1 million tonnes of sugarcane per year, wants the government to help it tap water from the River Nile, located 23km away from the plantation, before it can fully resume operations. The factory was the beneficiary of a Shs108 billion supplementary budget in 2022. 

With several pieces of equipment arriving at the factory in December 2023, between April and October 2024, up to 2,800 acres of sugarcane have so far been planted. Despite this, the project requires up to 25,000 acres of ready plantation to start running optimally. 

Irrigation

Sunday Monitor understands that this is the last week the factory will cease sugarcane planting in the absence of a properly established irrigation system. This is because it takes two months for the cuttings to germinate and clutch their roots together. 

“Anything that you plant after this week will now go to waste. But if we had the irrigation, you would be planting in the dry season, which is best,” Dr Paul Ayela, the director for irrigation development at the factory, said in an interview.

Dr Ayela further explained that the decision to go for the Nile River waters resulted from a realisation that a planned upstream dam, to be established by the Ministry of Water and Environment near the factory, will significantly affect the quantity of water that comes to the plantation. 

“We designed the system, but what happened subsequently after our feasibility study was that the Ministry of Water planned an upstream dam which would limit the quantity of water on this side. With the growing city of Gulu, which is also upstream, it will limit the quantity of water which comes here,” Dr Ayela said. 

“We need sustained production of canes in the fields, which means we don’t want to take chances with climate change and the growth of cities upstream. We did the hydrological survey and learnt that we would take only 0.01 percent of the Nile waters,” he stated. “It is only 23 kilometres away and it is highly feasible to have us connect and transfer water from the Nile to connect to our dams to irrigate both phase one and phase two, which will make us have a crushing capacity of 4000 tonnes of cane per day.” 

Ms Santa Okot, a member of the Parliament’s Committee on Agriculture, said unclear accountability and a lack of feasibility studies during the project initialisation has birthed the current uncertainties about the project. 

Ms Okot opined that the factory can only merit another supplementary budget once sugar production resumes. 

“My question is whether these investors did a thorough feasibility study before starting this project. If they did that, they would ably foresee the challenges ahead and find mitigation measures. Their next request for supplementary budget should be rejected at Parliament,” Ms Okot opined. 

LoP Ssenyonyi agreed, adding that the project has “got to show that it is valuable.” 

Responding to the government’s lack of influence in the company’s management, the company explained that UDC injected funds into the project but deliberately abandoned its management to them. 

“They have left all programmes. You look at the one in Soroti Fruit Factory. All of them, and they have no participation. But they cannot tell us to step aside and see white people being hired as managers. This is what UDC wants. Even in the beginning, they wanted white people to do management,” Mr Ahmed said, adding, “This is a real problem, and, as Parliament, please work to fix it. Because you cannot be an owner of a business, invest in it, and also don't come to visit your project and participate in its management.

Sugar deficit 

To address the sugar deficit that was being experienced in the country, the government, in November 2011, licensed several new sugar factories, including Atiak Sugar Works Ltd and Amuru Sugar Works Ltd (both in Amuru District), Bugiri Sugar Factory, Buikwe Sugar Works Ltd, Busia Sugar Ltd, Hoima Sugar Ltd, and Kamuli Sugar Ltd, among others. 

While all these sugar factories are said to be already in production, with Amuru Sugar Works Ltd not yet established, it is only Atiak Sugar Works Ltd, the most expensive plant, currently struggling to raise the cherished crystals. 

The Atiak Sugar Project is being implemented under a public-private-community partnership between Naads, participating farmer cooperatives, and the respective local governments of Amuru, Lamwo, and Horyal Investment Ltd. 

Under the partnership, the community under Atiak Outgrowers and Gem-pachilo cooperative societies are to plant cane on the land and weed the plantations. Once the cane is ready, the plantation—apportioned to the outgrowers by Naads—is supposed to be harvested and sold to the factory. At its inception, the project targeted to cover 13,841 acres at the main plantation at Atiak in Amuru District. 

An expansion of 15,000 acres was later made in Ayualali, Palabek Kal sub-county, Lamwo District, in 2020. A further expansion of 31,159 acres is planned and is being established in Palabek-ogili, Lamwo District, bringing the total acreage.