Ugandan sugar companies acrimoniously compete for cane outgrowers

Uganda's Ministry of Tourism, Trade and Industry has drafted a bill to cool the simmering bad relationship between sugar companies and sugar cane out growers.

Kakira Sugar Works Ltd and the Sugar Corporation of Uganda Ltd (Scoul) complain that out growers now sell sugar cane to small-scale sugar dealers despite having received agricultural inputs to facilitate their farming from the sugar companies. The two are also accusing GM, a new sugar firm, of poaching sugarcane from their sponsored out-growers.

The two established companies want the government to table a bill in Parliament to zone off competitors. State Minister for Trade Nelson Gagawala, said the bill is before cabinet and will soon be tabled. The contents of the bill were not readily available, but if Kakira and Scoul get their way, it will spell the death of jaggaries (small sugar harvesting and milling operations), the relocation of GM and create a monopoly of the two giants.

Kakira Sugar Works gives registered farmers tractor services, seeds and other inputs like fertilisers payable in three instalments in a period of five years, on condition that Kakira has exclusive rights to buy sugar cane from them.

However, in what Kakira sees as 'betrayal' the farmers are selling their sugar cane to jaggeries. "Jaggery is unhealthy and disruptive. They do not even pay taxes to government and nobody regulates its operations," said Kakira Sugar Works General manager Richard Orr. "Kakira is not able to plan for production as a result of them," he said.

Orr said Kakira lost more than 600,000 tonnes of cane since 2004, causing a financial loss of about $25 million due to the activities of jaggaries. "Government and the investment authority should do zoning and planning for new projects to protect the established sugar companies," he said.

According to Orr, the bill will harmonise the relationship between sugar companies, out-growers and any other investors who wish to enter into the market.

Kakira Sugar Works estimates there are about 102 jaggeries operating within a company radius of 30km. Of these, 92 are manual or oxen driven and the rest are motorised. Between 2003 and 2007, at least 50 cases of out-growers selling cane to jaggery operators were recorded at Kakira Sugar Works, with some being taken to court. Kakira, the biggest employer with about 7,500 workers, has over 4,500 out-growers.

Jaggery operators crush cane for distilling local gin, Waragi. The increase in the number of jaggeries at the borders of Kakira sugarcane plantation is attributed to the peace in northern Uganda and the banana wilt disease that destroyed bananas in western Uganda.

Jaggery operators interviewed said they are not bothered about Kakira's complaints. "This is business and if their out-growers opt to buy from us they should stand the pressure," Musa Maka said. He said the jaggeries pay cash to farmers and their operations employ hundreds of youths.

Cane grower Joshua Bamuleke said the jaggaries offer a better deal than the established sugar companies. "At least by selling to them I am paid cash and I don't
struggle cutting and transporting the cane," he said. He said for lack of transport, most farmers find it hard to deal with Kakira and those not registered can only sell to the sugar company through registered farmers.

In the meantime, GM is trying hard to keep its fight with Kakira and Scoul as limited as possible. Located along the Jinja-Kampala Highway, GM is strategically located to tap into out-growers along the way. According to the Uganda Sugar Cane Technologists Association annual report for 2006, Kakira, Scoul and Kinyara Sugar Works in Masindi asked the ministry of Trade to have GM Sugar Factory relocated.

"They do not have registered out-growers. What they do is to buy from the farmers we have invested in," Kakira's Orr said. GM's General Manager, Shaileshkumar Parekh, dismissed the claim, saying right from the start Kakira and Scoul never welcomed them.

He said GM buys cane from independent farmers with the approval of local officials. "Without an authorising letter from the officials, we are not accepting cane from farmers," Parekh said, adding that a number of independent farmers have applied to supply the factory. He said competition in the sugar industry is healthy because it benefits the farmers. He also said GM is in the process of registering its own farmers.

The Monitor