Does Uganda have a sugar surplus? What the numbers show

Uganda sugar exports to Kenya are double their surplus production, the latest Kenya import data reveals.

A Nation Newsplex investigation has found that the country exported 40,188 tonnes of sugar to Kenya last year while its recorded surplus was 26,034.

According to the Uganda Sugar Manufacturers Association, Uganda produced 426,000 tonnes of sugar and consumed 403,874 tonnes, resulting in a surplus of 22,126 tonnes during the 2013-2014 financial year. The surplus increased by nearly 20 per cent to reach 26,034 tonnes in 2014/2015, and appears set to grow.

Industry players attribute the poor yields to inadequate and untimely application of fertilisers, harvesting of young, premature cane, and low cane management standards.

From January to July this year Kenya imported 20,969 tonnes from Uganda. If the imports continue at this rate for the rest of the year the country will again export to Kenya double its surplus.

Kenya also needs to lower its cost of producing sugar by almost 40 per cent if it is to be competitive with other Comesa countries. Kenya produces sugar at Sh45,750 per tonne on average, making its sugar more expensive than sugar from Sudan, Egypt, Swaziland, Zambia, Malawi, Tanzania and Uganda, according to the Kenya Sugar Board (now Sugar Directorate).

In contrast, Kenya produces about 600,000 tonnes of sugar annually against a requirement of 800,000 tonnes. Last year the country produced 165,000 more tonnes of sugar than Uganda. The country produced 591,658 tonnes of sugar, which represented a 1.4 per cent decline from the record harvest of 600,179 tonnes in 2013. 

POOREST YIELDS AT MUMIAS

If the existing sugar factories were run more efficiently, they could produce 883,691 tonnes of sugar a year, turning Kenya into a surplus-producing country.  Currently, statistics from the Kenya Sugar Board (KSB) show, the average factory capacity utilisation is 56.3 per cent.  The three factories using the most capacity in Kenya, namely Butali, Kibos and West Kenya, are privately owned. But their share of the sugar market is small.

Yields are also dropping. Figures from the Cane Census carried out by the KSB show that average industry yields dropped from 65.5 tonnes cane per hectare (TCH) in 2012 to 60.54 TCH in 2014, a 7.6 per cent drop over the two years.

Trans Mara had the best yields at around 71 tonnes of cane per hectare (TCH), followed by Sony Sugar with 66TCH and Sukari with 63TCH. The poorest industry yields were to be found in Mumias, which reported 57 TCH.  The census attributed the decrease in the area under cane to farmers’ disillusionment and a decision by farmers to grow other crops, especially in the Mumias zone

In the first five months of 2015, the country imported 120,752 metric tonnes of sugar. If sugar were imported into Kenya for the rest of the year at a similar rate, about 290,000 metric tonnes of sugar would be imported.

From 2013 to 2014, the amount of sugar imported into Kenya declined from 238,000 tonnes to 192,000 tonnes respectively, partly due to the extension of special safeguards on imports of duty-free sugar from the Common Market for Eastern and Southern Africa (Comesa).

THREE MILLS OUT OF EIGHT

In 2014, Kenya's sugar imports were about one-third of production, a drop from 2013, when imports were 40 per cent of production. The year was also a drop from 2010 and 2012, when sugar imports were almost half of annual production. Some of the sugar imported was of special quality, specifically meant for manufacturing purposes.

The Newsplex investigation also reveals that the cost of producing sugar in Kenya is more than 60 per cent higher than it is in Uganda and Tanzania, and 50 per cent higher than it is in Zambia. While producing one tonne of sugarcane in Kenya costs between Sh41,500 and Sh50,000, the same quantity of sugarcane can be produced in Uganda for between Sh14,000 and Sh18,000.

Whereas the norm around the world is for 70 per cent of sugar produced to be consumed within the producing country, Zambia produces more than double what it consumes.

According to the Kenya Sugar Board the cost of production in Kenya needs to drop by at least 39 per cent to be in line with Comesa levels. However, the Kenya Sugar Industry Strategic Plan (2010-2014) argues that such a drop in less than three years is drastic and requires major cost reduction strategies for the industry.

The report indicates that of the eight sugar mills in production, only three — namely, West Kenya, Mumias and Kibos and Allied Industries, which are equipped with modern facilities that can process sugarcane more efficiently — would survive if the Comesa safeguards were to be lifted.

Sugar millers in Kenya also have to contend with decreasing land being devoted to sugarcane and poor cane yields. Provisional 2014 data from the Economic Survey shows that the land area of cane harvested last year, excluding land from non-contracted farmers, was about 34 per cent of the total amount of land under sugarcane.   

STATE-OWNED MILLERS

This represented a drop of six percentage points from 2013, when the proportion was 40 per cent, and a drop of 16 percentage points from 2010, when the proportion was 50 per cent.

During the same five-year period, from 2010 to 2014, sugar production decreased by three per cent while the area harvested declined by more than 15 per cent. Average yield increased 14 per cent.   

Statistics from the United Nations Food and Agricultural Organization (FAO) reveal that Kenya’s sugarcane yield (hectogram per hectare) is lower than Uganda’s and other Comesa countries like Zambia and Malawi.

Industry players attribute the poor yields to inadequate and untimely application of fertilisers, harvesting of young, premature cane, and low cane management standards.

Kenya has sought protective measures for its sugar industry in the past, arguing that the country needed time to restructure the industry and become globally competitive.

The safeguards were first granted for a year in 2002 and then extended for another year. When the deal lapsed, Kenya successfully negotiated another four-year extension, which upon expiry in 2008 was extended several times. In March this year, a one-year extension of the sugar safeguards was again granted to Kenya.

Part of the restructuring process involved passing a Privatisation Act and setting up a Privatisation Commission, which has approved the sale of five state-owned millers.

A combined 34 per cent of market share in Kenya is held by Nzoia, Sony, Chemelil and Muhoroni, which are state-owned. The government of Kenya also owns a minority share (20 per cent) of Mumias, which is the industry leader, with a market share of 20 per cent.

On the other hand, West Kenya, Butali, Kibos and Allied Works, Sukari and Soin are private companies whose combined market share is 46 per cent. 

In Uganda, the government owns a minority share (30 per cent) in only one factory, Kinyara Sugar Works Limited. The remaining five large factories and seven small ones are privately owned.

Sugar import statistics from the Kenya Sugar Directorate from 2006 to 2015 shows that Uganda did not feature on the top 10 list of countries that export sugar to Kenya until two years ago, when it made an appearance at position seven for exporting 9,998 tonnes of sugar to Kenya, which was equivalent to 25 per cent of what it exported last year.

See a map of Kenya's sugar millers here.