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Sugar prices may go up amid limited domestic production

Sugar prices in Uganda are likely to go further up as exports edge up amidst cries from producers that they are not meeting their full capacity.

Today sugar prices are hovering at Shs 5,500 to Shs 6,000 a kilogramme which is slightly below the Shs 6,500 it sold between April and May during the shortage.

Bank of Uganda annual report 2016/17 shows that increased earnings from exported sugar together with cotton and fish help reduce the country’s trade deficit. But as outside demand for Ugandan sugar intensifies, there are fears that domestic prices will push up.

Sugar bagging line at Kakira sugar 

This month, the local media reported that Kakira sugar, the biggest producers of the sweetener in the country, were planning to lay off 4,000 workers. This would effectively affect the company’s annual production.

In a letter quoted in Daily Monitor recently, Kakira Sugar general manager Christian Vinke said: “Our [Kakira’s] current plight of failing to break-even financially in our operations [will lead us] inevitability to lay off 4,000 employees”.

Analysts have said sugar prices in the country could go back to the highs of Shs 7,000 before the end of the year if big producers Kakira find the environment hard for them.

Today, Kakira produces 180,000 tonnes of sugar annually - more than two fifths of the country’s total annual production of 460,000 tonnes.

Kakira says this production is below capacity because of new sugar factories that have come up and are taking its outgrowers. The 2010 sugar policy says a new factory must be established at least 50km from an established one. It must have at least 500 hectares of nucleus estate.

The congestion of factories in close proximity in Busoga means none can have enough resources to produce at full capacity, which has seen the country’s sugar production not growing at rates it should be.

© 2016 Observer Media Ltd