Tirupati’s plan to set up a $40 million sugar processing plant in Nakasongola is a strong indication that there is more space for investors to venture into one of Uganda’s most tangled and conservative sectors, and that it is about time someone broke the hold that three sugar firms – Kakira, Kinyara, and SCOUL – have on the entire industry.
The ministry of Trade, Industry and Cooperatives last week blessed Tirupati’s new business avenue, calling on the firm to move quickly and ease the high sugar prices, which a large section of the public blames on the capitalist beliefs of the existing sugar companies, and not regional trade dynamics per se.
Miraj Barot, the Marketing Director of Tirupati Development Uganda, said that sugar production is expected to start next year with the capacity of 2,500 tons per day. Kakira, Uganda’s largest sugar company, produces 150,000 tonnes per day. Barot also estimated that up to 30,000 jobs will be created. He promised to engage modern sugarcane growing mechanisms like irrigation.
Amelia Kyambadde, the minister of Trade, Industry and Cooperatives, called on investors to exploit government incentives. She said that government will offer land and also channel electricity supply to large factories. Kyambadde applauded Tirupati’s move, saying it will generate revenue. Already, the sugar industry is the fifth largest taxpayer in Uganda, after the breweries, petroleum, telecom, and banking sectors.
Also, sugar industries are crucial in generating electricity. Kakira sugar industry supplies about 12MW to the national grid while Kinyara also generates its own power. The choice of Nakasongola means development initiatives will spread out to another part of the country – the central region. Government continues to look at Nakasongola as the area to bridge development between the more developed central region and the north.
Nakasongola made the shortlist of areas to host Uganda’s oil refinery, although it lost out to Kabale in Hoima. Barot said that over 9,000 hactares of land have been secured in Nakasongola district for growing sugarcane. He added that they are also going to engage sugarcane outgrowers.
The entry of Tirupati could be the game-changer in Uganda’s sugar industry. There has been a lot of tension within the sugar industry, with outgrowers complaining against the price at which the factories buy their cane. To the consumers, the story of sugar has lately been bitter.
For some vague reason, sugar prices have had steep fluctuations, going up from Shs 3,000 a kilo to more than Shs 8,000. Even when they have retreated back, it has only been to around Shs 5,000, still the highest in more than 10 years. Sugar companies say the reason is regional, and anyone has to look to neighbouring Rwanda for clear answers.
Rwanda also experienced a spike in the price of sugar, although theirs was not as high as Uganda’s. But cynics say the sugar story is a well-crafted plot by sugar companies, who have created a shortage in order to make up for the increased costs of production. The argument is further expanded to note that sugar companies have had it easy with weak regulation that has seen many of them fail to prop up their reserves.
Also, others argue Ugandan firms have instead decided to produce for markets like South Sudan, Democratic Republic of Congo where the demand is high, and the people there are willing to pay a higher price. Ugandans question why Uganda cannot follow in Tanzania’s footsteps to ban exports of essential foods in times of shortage.
Uganda reiterates its position that it can not intervene in the market since the economy is fully liberalized. Tirupati is venturing into unfamiliar waters as it is better known as an estate developer. The firm is behind such posh complexes like Ovino market and Mazima mall. Tirupati also plans to build a recreation park in Jinja.
The company’s entry further raises the profile of the industry, and could attract other players. Already, a number of firms have shown intention of boosting sugar production. Information available at the ministry of Trade, Industry and Cooperatives shows that over eight minor sugar milling companies have been licensed to establish sugar milling plants in the country and some are expected to start sugar production next year.
They include: Bugiri Sugar company, Anyanya sugar works in Kamuli, Sango Bay located in Rakai, Amuru Sugar limited, Allied Industries in Kaliro district, Mukwano sugar in Masindi, and lastly the Uganda crop industries, which will start producing sugar next month with a capacity of 400 tons per day.
Kyambadde said government intends to intensify its effort in boosting sugar production due to the country’s advantage. “We are targeting the sugar sector as we have discovered that Uganda has comparative advantage of producing more sugar compared to other countries in the East African Community,” she said.