Sugar has lately become the hottest political issue following a sharp increase in the price of the commodity reported over the past three weeks. The abnormal rise in the price of sugar has brought a fast reaction from the government which on Friday August 6th announced a 100% waiver of all taxes on sugar imports.
Retail sugar prices have in the past month increased from about 2,600 shillings to 6,000 shillings while in some upcountry places, a kilo of sugar is going for as much as 10,000 Uganda shillings. At many shops and supermarkets, traders are rationing sugar, with no one allowed to buy more than two kilograms at once, while sugar queues have been reported at many supermarkets.
The price of a bag of sugar has increased from 125,000 to between 220,000 -310,000 due to inability of the country’s sugar producers to provide enough sugar as demanded by Ugandans. Uganda has three sugar producing companies, Kakira Sugar works (owned by the Mahdvani group), Kinyara Sugar Works (owned by Rai Group and Uganda government) and SCOUL (Sugar Corporation of Lugazi) owned by the Mehta group.
Many Ugandans are wondering whether they can afford sugar especially in this hard time when most of the other commodities including food items are coming at high prices. The country is witnessing the highest inflation in 10 years, currently standing at 18% according to the Uganda National Bureau of Statistics monthly report on inflation for July 2011.
Government swings into action
After a two day cabinet meeting, President Yoweri Museveni announced that the government would allow “controlled sugar imports of up to 40,000 tons for six months to address the current sugar scarcity”. To facilitate this, the government announced a 100% waiver of sugar import taxes.
Mayur Madhvani, the Managing Director of Kakira Sugar Works, Uganda’s leading sugar manufacturer accounting for 50%) said President Museveni has allowed them to import 25,000 tons of sugar for six months while the rest will be imported by Ligazi and Kinyara.
According to Mahdvani, the imports are expected to see a kilogram of sugar costing between 3,500 and 4,000 Uganda shillings. This might calm down some people but it will leave sugar unaffordable or too expensive for many people.
The president had also announced a ban on exportation of sugar which some were blaming for the shortage of the commodity on the local market, but the government backtracked a day later with Trade minister Amelia Kyambadde saying the government has not banned sugar exports, but will undertake “more regulation of the sugar export and import market to ensure adequate supply of sugar in the country”.
Why the sugar shortage?
The first official statements from government indicated that sugar production in Uganda had reduced because of a halt in production at two of the sugar producing factories as they undertake routine maintenance of their sugar production mills.
The sugar producers additionally blame the sugar shortage on the drought experienced in sugar growing areas with some reporting less supplies from sugarcane out growers. But at Kinyara Sugar factory, production has also been affected by the workers strike who burnt more than 10 acres of sugarcane last month.
However, some of the sugar producers are claiming that the high sugar prices are worsened by traders who are hoarding the sugar in order to sell it at high prices. This is a line many government officials including President Museveni and Trade Minister Amelia Kyambadde have also bought, with the President on Friday making every kind of threats against such traders.
In a televised address on Friday, the President threatened arrest to such traders, and later said his NRM will consider setting up a private company to compete with such traders who want to make abnormal profits at the expense of Ugandan consumers.
However, the management of Lugazi and Kakira Sugar works told President Museveni who inspected their factories on Friday that their factory prices have not increased, with Lugazi saying they are selling a kilogram at2, 248 shillings, while Kakira says they are selling a kilogram of sugar at 2,240 shillings.
Sugar export and production capacity issues
But even before these problems, the Minister of industry James Shinyambulo Mutende says that sugar factories in Uganda were producing less sugar than is currently demanded in the local market. “They can only produce about 160,000 metric tons of sugar yet the local market demand stands at 200,000 metric tons creating a deficit of about 40,000 metric tons per year,” he says. Yet the sugar companies are free to export some of the sugar to more lucrative markets in neighbouring countries.
As a matter of fact, some traders in Kampala say the continued exportation of sugar to neighboring countries especially South Sudan by these companies which are protected to produce affordable sugar for Uganda is the main cause of this current sugar shortage.
There are also those who put the blame on the government restriction of the importation of sugar into the country with the aim of protecting the local sugar producing companies . Some people have been expressing concern that all sugar producing companies are not actually local as they are all owned by foreigners, save for Kinyara Sugar where the government has a minority stake.
How sugar prices affect consumers
Whatever the causes, the reality is that many people are now finding sugar unaffordable, or cutting deeper into their already lean disposable income. Other than some families who are now being forced to take less sugar or fore-go sugar completely, the high prices are also affecting a lot of other products and services which are made from raw material that include sugar.
Providers of fresh juice in different restaurants, as well as tea and coffee services earlier this week announced an almost double increase in prices of a glass of juice, cup of tea/coffee respectively. A glass of juice increased from 1,000 to 2000, a cup of plain tea from 400 to 600 shillings due to the hike in sugar prices.
Many of such small scale entrepreneurs complained that customers are no longer drinking their juice and tea, with many worrying of an unprepared journey back to their village because they can no longer make a living in Kampala.
Other products, especially bread that like sugar must be present at many dining tables for breakfast are also being affected since sugar is a key ingredient in baking bread. A bread of one-kilogramme commonly known as family bread is already going for 3, 200 from 2, 800 shillings while the price of half a kilogramme of bread has jumped from 1, 400 to 1, 600 shillings in most Kampala groceries and supermarkets.
But how many Ugandans consume sugar?
However there are those arguing that the increase in prices of sugar are not the most pressing need or issue government must attend to, with some arguing that there are few Ugandans who take sugar and there are more pressing economic and administrative issues the government needs to undertake to ensure the economy is not biting many Ugandans as it is currently.
“Honestly, why the fuss about sugar? Most of the peasants in Uganda or 80% of the population do not consume sugar because they cannot afford and this is since the early 70s. The current government move on sugar is all diversionary. The issue is the economy has been largely messed up by the powers that be,” says Wafula Ogutu, the Spokespeson of the Forum for Democratic Change.
“For years the middle and upper class of this nation, many of them involved in bleeding the country dry, thought they were cushioned from the results of their leeching. Now the chickens have come home to roost. It’s a nice picture seeing the well-to-do drive to Shopritte and queue for a kilo of sugar! There now comes the draw and hopefully it’ll bring a united voice to those calling for a change in the management of Uganda’s affairs,” says Jame Akiror, a teacher in Soroti.
MPs not impressed with government reaction to economic crisis
Several Members of Parliament including those from the ruling NRM Party have come out strongly on the rising prices of sugar and other essential commodities.
Lwemiyaga County Member of Parliament Theodore Sekikubo says that although the government action of removing taxes on sugar imports is welcome, it is not the solution to the current problems being experienced in the economy as whole.
“The gesture is welcome, but the government needs to take serious and sustainable economic strategies to reduce the cost of living for the ordinary poor Ugandan,” Ssekikubo says. He says the government must fight corruption which he (Sekikubo) blames for the high inflation in the country. He says many people (the corrupt) are getting money without producing any products or services, or working for the money, which creates imbalances in the economy.
Rwampara County Member of Parliament Vincent Kyamadidi says the government should in addition also reduce taxes on fuel, reasoning that high prices of fuel are the reason prices of several commodities and services are going up. “Goods have to be transported from one area to another, and people offering services also move to offer the services. Transport costs are now high because of rising fuel prices,” he says.
The Minister of Energy, Irene Muloni has however said the government is not considering reducing prices of fuel. She says scrapping any taxes on fuel will greatly affect government revenue collection and thus the government’s ability to offer social services.
Kyamadidi however says that government needs to refocus its expenditure patterns by putting more money in priority areas like agriculture instead of spending much on public administration.
The government however continues to dismiss such voices. President Museveni has refused to admit there is an economic problem in Uganda, saying the country’s economy is healthy and growing but a few instabilities being experienced are mainly occasioned by factors beyond Uganda’s control. But shouldn’t the government have some control over all issues that affect its citizens?
With the recent walk to work protests, the strikes by traders, teachers and taxi drivers all centered around hard economic times, there is enough warning for the government to look into the issues affecting the people. For now, only sugar has mattered to the politicians managing the country to warrant government intervention.
