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Sugar Manufacturers Explain Price Hikes

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Uganda Sugar Manufacturers Association USMA says the increase in prices has been prompted by the increase in cost of production and the deprecating shilling against major currencies.
Kakira Sugar bought at 4800 Shillings from a Kampala Supermarket.
Uganda Sugar Manufacturers Association (USMA) says the increase in prices has been prompted by the increase in cost of production and the deprecating shilling against major currencies.

The Association's Chairperson, Jim Kabeho says sugar millers were forced to announce what he called a paltry 4% increase on each 50-kilogramme bag on ex-factory price.

The increase according to Kabeho saw the bag of sugar trading at 185,000 shillings up from 170,000 shillings.

Kabeho, in a letter dated 10th April 2017, was responding to a letter by Trade, Industry and Cooperatives Minister Amelia Kyambadde demanding an explanation why there has been an increase in ex-factory and retail prices of sugar. 

Sugar prices have since mid-March been on the increase. In some part of the country a kilogramme of sugar is going for up to five thousand shillings.

This is the second time a kilo of Sugar has hit the 5000 shillings mark. In 2011, a rise in sugar prices was one of the reasons for the opposition Walk-to-Work protests.

Kabeho says some wholesale traders have started adding on a margin of 20,000/- per bag as compared to a routine margin of 2,000/- per bag thus pushing up re-sale price to 200,000 shillings per bag.

He says supermarkets like Shoprite, Game and Nakumatt that deal in branded sugar are selling at 4,500/-per kg.

Uganda Radio Network has however found that they were actually selling a kilo of sugar at 4800 shillings. In Kampala, small retail shops were selling non-branded sugar at 4,500 shillings per kilo.

Meanwhile the Uganda Sugar Manufactures' Association which comprises of big sugar players like Kakira Sugar, Kinyara Sugar and Sugar Corporation Lugazi, says there is cane shortage in areas where they operate.

Kabeho explains that sugar production is below half of their capacities thus increasing the cost per unit for those factories.

Uganda Sugar Manufacturers Association or the so-called “big players” in the sugar industry are trying to fight off competition from over twenty small players within their zones. The biggest fight has been over sugarcane, the biggest raw material in sugar manufacturing. 

The association says due to lack of implementation of zoning policy, small mills have established in close proximity of the old mills.

These new mills, according to Kabeho, without any investment in out-grower schemes, started offering various incentives to farmers and this led to harvesting of immature cane hence the current experience of the extremely low recoveries and loss of production/output.

Kabeho does not rule out the possibility of speculation saying the general increase in the prices of sugar both in the region and on the world market and this will definitely make people speculate, and increase the price.

In Kenya, there is debate over the need to protect some of the big sugar millers like Mumias and Nzoia that have virtually collapsed due to competition from small millers.

Meanwhile a source at the Ministry of Trade, Industry and Cooperatives who asked for anonymity says the Ministry suspects that the big players like Kakira could have decided not sell its sugar to the market so as to increase production at its ethanol plant. 

Minister Kyambadde could not be reached on her mobile to respond. The Association has been pushing her ministry to establish the Uganda Sugar Board to provide a regulatory framework for the industry.

The Bill for establishment of Sugar Board was approved by Cabinet last year but is yet to be considered by Parliament.