No Access | 2024-04-12

Trade prospects and challenges of absorbing surplus sugar produced in Uganda.

Authors/Editors: Swaibu Mbowa (PhD) ,  Aida Kibirige Nattabi ,  Medard Kakuru

Abstract:

This policy note uses data from secondary sources (i.e., FAOSTAT; ITC Trade map; Ministry of Trade, Industry and Cooperatives MTIC, and Observatory of Economic Complexity (OEC)) to document some essential but critical information on trade prospects and challenges for Ugandan sugar. The objective is to provide information enabling policy decision-makers to understand the emerging trends in cane and sugar production and trade opportunities and challenges in the domestic and export markets. By leveraging such opportunities through policy processes, policy decision-makers can create room for market stability, which is crucial in steering the industry towards a steady growth path. The note reveals that over time, Uganda has steadily built capacity in the production and processing of brown sugar (from 334,000 MT in 2013 to 822,000 MT in 2022). Importantly, import protection of brown sugar by the East African Customs Union - Common External Tariff (CET) has created a lucrative domestic market which used to consume 93 percent of brown sugar in 2013. However, by 2022 with increased processing capacity and limited growth in local consumption, only 46 percent can be consumed locally creating a surplus of about 442,000MT. This lucrative market has also tempted the importation of cheap brown sugar. With surplus brown sugar in the domestic market, local manufacturers have attempted to export to EAC member countries and ventured into manufacturing higher value-added refined sugar. However, the EAC export market for brown sugar has been irregular because member states opt to import cheaper brown sugar from Brazil, Thailand, and Egypt. Venturing into higher value-added refined sugar has not been easy because the industrialists (producers of soft drinks and other beverages) continue to import relatively cheaper and deemed high-quality refined sugar. This is undermining further value-addition efforts and the government’s import substitution strategy. The government plans to increase the import tax on refined sugar from 10 percent to 25 percent-partially to protect domestic producers. The proposal to increase the tax starting FY 2023/24 is timely. Likewise, there is an urgent need for R&D intervention to cut the cost of sugarcane production, which accounts for about 70 percent of the total cost of producing sugar through productivity enhancement initiatives.