MPS concerned by delayed set up of sugar factories

Members of Parliament on the Committee of Tourism, Trade and Industry have learnt that some sugar millers acquired licenses to establish factories but have not adhered to this, contrary to the Sugar Act, 2020.

According to Section 21(7) of the Act, a company granted a license shall commence business within three years.

The legislators made the discovery during an oversight visit to consider a petition by the Uganda Sugar Manufacturers Association (USMA) against new millers in Busoga and Buganda sub regions.

The petitioners state that the Ministry of Trade, Industries and Cooperatives licensed new millers who have not adhered to the Sugar Policy which puts a restriction of a 25KM radius.

Lawmakers however, faulted companies under USMA including Sugar Corporation of Uganda Limited (SCOUL) and Madhvani Group for acquiring licenses 10 years ago in Kayunga District to operate factories, and yet this has not been done.

The MPs visited Mehta II sugar, a subsidiary of SCOUL and Kakira Sugar, a subsidiary of Madhvani, and found that the companies have nucleus farms and out growers but the cane is instead transported to their factories in Lugazi and Jinja, respectively.

Hon. Richard Gafabusa (NRM, Bwamba County) questioned the motive behind securing licenses to plant sugarcane for 10 years without factories.
“You do not need a license to plant sugarcane. Why didn’t you first plant then apply for license when you were ready to start the factory?” he asked.

Hoima District Woman MP, Hon. Harriet Busingye  said that by so doing, the companies are denying other players in the sugar industry the opportunity to invest.
“You were supposed to start mills but instead you have set up satellite farms and denied others the opportunity,” she said.

The Regional Director SCOUL, Suresh Sharma said that they have not denied other players the opportunity but are concerned about the failure to adhere to the 25KM radius.

He cited the new miller, Shakti sugar, saying the company has not adhered to the 25KM radius and is likely to poach cane from Mehta’s out growers, since Shakti’s crushing capacity is still low.
“Once the 25KM radius requirement is adhered to, there will be no complaints. The Ministry of Trade should always verify the radius before licensing new millers,” said Sharma.

The Chairperson, USMA and Director Madhvani group, Jim Kabeho justified the delay in establishing the factory in Kayunga saying that the crushing capacity in Jinja is still low.
“The cost of production is high. Existing mills are running at half capacity and that is why we are not getting a new factory yet,” said Kabeho.

He also called for expeditious setting up of a Sugar Board as established under the Sugar Act whose responsibility is to license millers.
“The delay in putting up a regulator is what is causing this confusion,” he said.

Legislators also met some of the new millers, including Kidera Sugar company in Buyende District, Kikajjo Sugar Company and CN Sugar Company both in Namayingo District.

It was discovered that all the new millers lack capacity to operate factories, citing CN licensed in 2022 but has only 200 acres of land, against a target of 20,000 acres.

Hon. David Kalwanga (NUP, Busujju County) questioned where the company will get sugarcane from, based on the available land.
“Are you not the root cause of poaching allegations since you found some farmers here. You got a license and not yet in production,” he said.

The Director CN, Nimit Patel however, denied accusations of poaching and violating the 25KM radius, saying that the Ministry of Trade inspected the area before the factory was established.
“Our first location was seven kilometres from Bugiri sugar and we were asked to get a new location,” he said.

Committee Vice Chairperson, Hon. Catherine Lamwaka said that the committee will also meet the Ministry of Trade to ensure that policy gaps are addressed.
“There are issues to do with regulation that the ministry should have done to stop this confusion. We need to provide regulations that are fair to all players,” she said.

USMA petitioned Parliament on 17 July 2023 complaining about the new sugar mills that were licensed by the Ministry of Trade and those that had commenced construction of their factories including Shakti and CN.

The petitioners argue that the operational mills are fighting for less available sugarcane, leading to crushing of underage cane and leading to losses to the out-grower farmers, companies and government since immature cane contains less sucrose.