Atiak sugar factory faces double trouble: Fire hazards and infrastructure delays

Fire outbreaks, delays in government procurement of machinery, the construction of the Aswa bridge, and ongoing financial distress are adversely affecting the operations of Atiak Sugar Factory, according to information obtained by The Observer.

Situated 17 km from the Gulu–Nimule road in Amuru district, Atiak Sugar Factory is a subsidiary of Horyal Investments Holding Company Limited. The factory was commissioned in October 2020 and has an annual production capacity of 66,000 tonnes.

The company has been financially strained since the closure of Crane bank in 2017, one of its key creditors. After the bank was sold to Dfcu, the company couldn’t restructure its debt until the Ugandan government stepped in as an equity partner. In May 2018, the government, through the Uganda Development Corporation (UDC), acquired 10.1% of shares worth Shs 20 billion to help complete the factory.

In July of the same year, an additional Shs 45 billion was invested, raising the govern- ment’s stake to 32%. By April 2019, the company requested another Shs 24 billion from the government for the construction of staff houses and offices, which increased the government’s share to 40%.

Mohamud Ahmed, the director of Planning and Business department at Atiak Sugar Factory, stated that the first capital injection comprised ordinary shares. The government has spent a total of Shs 80 billion through UDC, securing them 40% ownership in the company. Ahmed clarified that no additional resources from UDC were needed to complete the factory; rather, extra funds were allocated for sustainability measures, such as irrigation and housing for workers.

Despite the capital investments, the company has been criticized by several legislators for failing to produce sugar. They have called for an audit to scrutinize the funds invested in the company. As for equipment, the government allocated Shs 108 billion in 2022 for the purchase of agricultural mechanization tools under a finance lease arrangement.

Benson Ongom, director of Corporate Affairs and Public Relations at Atiak Sugar, stated that they have received 48% of the equipment from UDC, which includes graders, wheel loaders, excavators, chop harvesters, track sprayers, and seeding machines.

“We expect to receive the rest of the equipment by January. However, we aim to have sufficient machinery by the end of November to commence logistical work and planting activities,” Ongom said.

In 2019, President Museveni commissioned the upgrade of the Bibia-Nyimur road and the construction of the Aswa bridge over River Aswa. The infrastructure was meant to facilitate the transportation of sugarcane from Lamwo district to Atiak Sugar Factory.

However, The Observer’s visit to the site revealed that construction of both the road and the bridge has not yet commenced, despite funds being released to contractors in October 2020. A 30% advance payment has already been made, but no progress is evident on the ground.
Sobetra Otada Joint Venture, the company contracted to build the bridge, briefly set up temporary structures before abandoning the site.

The undisclosed company tasked with upgrading the road has yet to appear. When questioned, Allan Sempebwa, spokesperson for the Uganda National Roads Authority (UNRA), stated that the bridge had been completed long ago but promised to double-check the information.

Horyal Investments Holding Company Limited established a 15,000-acre farm in Lamwo district, 5,240 acres of which have been cultivated.

“It’s crucial for the government to inform us about delays, especially when public funds are involved,” said Mohamud Ahmed.

The stalled projects have led to financial losses for farmers, who now must travel 280 kilometers instead of 52 kilometers to deliver their produce. In December 2021, a fire destroyed 1,900 hectares of the sugarcane plantation, resulting in a Shs 19.1 billion loss and disrupting production.

Since then, 350 hectares have been revived for use. Bunty Seeruttun, the director of Agriculture, noted that fires often start during the dry season for various cultural and situational reasons. Fire prevention is a key focus moving forward, with four fire trucks and fire lines established around the plantation.

Despite a slow start due to limited sugarcane availability, Mohamud Ahmed emphasized that the factory has an original capacity of 3,500 tonnes per day, requiring 140 acres of sugarcane. Currently, production is limited to 50kg and 25kg bags primarily sold to Kenya, South Sudan, and within the sub-region.

The company aims to resume full-scale production by late 2024 and has decided not to sell its products in Kampala due to high transport costs.

“In the sugar industry, we agree on sugarcane and sugar prices annually. The biggest variable affecting our prices is transportation,” Mohamud concluded.