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New sugar firms threaten old ones

By Vision Reporter

Added 14th November 2007 03:00 AM

MARKET INTELLIGENCE

THE old sugar companies are opposed to the location of two new sugar firms near them, saying they will woo their outgrowers, labourers and undercut prices.

MARKET INTELLIGENCE

THE old sugar companies are opposed to the location of two new sugar firms near them, saying they will woo their outgrowers, labourers and undercut prices.

MARKET INTELLIGENCE

By Ibrahim Kasita

THE old sugar companies are opposed to the location of two new sugar firms near them, saying they will woo their outgrowers, labourers and undercut prices.

Mayuge Sugar Industries is located in Jinja, 20 miles (35km) from Kakira Sugar Works, while GM Sugar Works is in Nakibizzi, Lugazi, near the Sugar Corporation of Uganda (SCOUL).

Some of the outgrowers who had contractual obligations to supply sugarcane to Kakira and SCOUL, are now taking the cane to the new firms because they pay more.

Richard Orr, the chairman of the Uganda Sugar Cane Technologists’ Association and also the general manager for Kakira, said the new factories are welcome “but their locations are ill-conceived and done without consulting the industry.”

Orr said the new investors had not developed any sugarcane supply chain and would ‘poach’ sugarcane from farmers contracted to supply to Kakira or SCOUL.

“The Government needs to plan correctly so that sugarcane supply security is not distorted. These firms should go to other rural areas, develop them and improve the quality of the people living there since Uganda is blessed with quality soil and reliable climate for sugarcane,” he said.

“We expect the Uganda Investment Authority (UIA) to insist that new investors consult transparently when new sugar projects are being considered.”

On October 29, Mayuge Sugar received a court injunction stopping it from further construction of a sugar factory and conducting activities related to sugar after Kakira sued.

However, Orr said: “We have no problems with more companies springing up because the population is growing as well as the economy, which means more consumption.”

In 2006, the three sugar firms produced 191,256 tonnes from an anticipated 210,936 tonnes, causing a shortage. The shortage led to an increase in the price of a kilogramme of sugar from sh1,400 to sh2,500 towards Christmas.

The three sugar companies are Kakira, SCOUL and Kinyara Sugar Works.

The firms promised to increase the amount of sugar produced by expanding their milling capacities.

“The local demand for sugar is estimated to grow to 750,000 tonnes by 2030 when the population is expected to be 50 million. The per capita consumption expected to rise from nine kilogrammes to 15 kilogrammes per annum,” Orr said.

Maggie Kigozi, the UIA boss, said: “We are in a liberalised economy, which welcomes any investor. Competition is healthy for farmers and the industry. UIA gives licences to investors because there is no monopoly and until there is any other law put in place apart from the Investment Code.”

New sugar firms threaten old ones

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