Uganda Sugar Exports Curbed by Wars, Regional Trade Barriers

Jul 14, 2014 1:42 am ET

(Updates with sugar price in final paragraph.)

July 14 (Bloomberg) -- Ugandan sugar processors are holding 50,000 metric tons of unsold stock as exporters of the sweetener face obstacles in East African markets ranging from wars to duties, the head of the industry association said.

“We are stuck with big volumes of sugar,” Uganda Sugar Manufacturers’ Association Chairman Jim Kabeho said on July 11 by phone. “This is affecting our expansion programs. We are threatened with closure.”

Efforts to market sugar in Rwanda are hampered by the abundance of cheaper imports from outside East Africa, while exporters to Kenya face barriers such as duties and red tape, said Kabeho. Conflicts in South Sudan and eastern Democratic Republic of Congo have also curbed the trade, he said.

Uganda is set to produce a surplus of sugar this year, according to the association. Production may climb to 442,500 tons from 334,040 tons last year. Domestic demand is about 320,000 tons annually. The landlocked nation usually imports sugar from India and Brazil and exports to nations that border it: Rwanda, Kenya, South Sudan and Congo.

Uganda belongs to the five-nation East African Community common market, which includes Kenya, Tanzania, Rwanda and Burundi. The EAC this year gave Rwanda a six-month extension to import duty-free sugar from outside the region to address supply shortages, the Nairobi-based East African newspaper reported in January, citing Rwandan Trade Minister Francois Kanimba.

Export Markets

“Opening up export markets is the major problem at the moment especially to the EAC partner states like Rwanda and Kenya,” Wilberforce Mubiru, the association’s secretariat manager, said in an e-mailed response to questions. “Exports to the EU are almost impossible at the moment due to a large supply of sugar on the world market” from countries including India and Brazil, he said.

Members of Uganda’s manufacturing association include Kakira Sugar Works Ltd., owned by the Madhvani Group of Uganda, and Mauritius-based Rai Group’s Kinyara Sugar Ltd. Others include Sugar Corporation of Uganda Ltd., owned by the India- based Mehta Group, and Kaliro Sugar Ltd., part of Alam Group of Uganda. Kabeho declined to give this year’s sales figures.

Cyprian Batala, Uganda’s assistant commissioner in the Trade Ministry in charge of the sugar industry, declined to comment by phone.

Raw sugar for October delivery closed at 17.07 cents a pound on ICE Futures U.S. in New York on July 11, 4 percent higher this year. The commodity lost 16 percent in 2013, retreating for a third year in the longest run of annual declines since 1992.