According to Uganda Sugar Cane Technologists Association (USCTA) annual report of 2006, the sugar sector contributes 217 billion shillings to Uganda’s Growth Domestic Product (GDP) thus saving the country of over US Dollars 132 million ($132m) of foreign exchange outflow. This figure is expected to rise up to 350 billion Uganda shillings by 2011. The Sugar sector also contributes over 54 billion shillings in revenue to Government through the VAT and Exercise duty tax regime. The sector employs 20,000 persons directly and 50,000 persons indirectly in the outgrowers farms. The foregoing underlines the importance and centrality of sugar cane sector in Uganda. Despite the impressive figures stated above, outgrowers (farmers) are at the tail in the value and benefit sharing trajectory with a share of only 25%. The main players in the sugar cane economy who are the Millers (Kakira, Kinyara and SCOUL) take 46% before other net gains through undertaking co-generation programmes for energy production (secondary derivative of cane) from baggase are computed.
To understand the dilema of cane out growers (farmers) we need to look at the chain of stakeholders and examine revenue share in the sugar value chain. The key actors in the sugar sector are farmers, millers, governmnet and consumers. The farmer among all the listed stake holders in the value chain takes the longest time (600 days) handling and producing sugar but earns only 25% gross earnings. The Miller who takes the shortest time (only 36 hours) and uses half the resources the farmer uses in producing a tone of sugar earns the biggest proportion of 46% of the over all consumer sugar value! The central government charges value added tax (VAT) of 18% on the Ex factory price of sugar per tonne, and Exercise duty of 50shs per Kg of sugar while local governments in sugar growing districts collect 1500shs per tone of sugar.
As of August 2009, the price of sugar per tonne Ex factory was 1,136,017shs. Out of the foregoing figure, a farmer was paid only 25% of the sugar value as price per tone of uncrushed sugarcane was and is still only 35783shs. The renderment or the percentage of sugar recovered from sugar cane is only 9% in Uganda. The situation is made worse because the miller pays the farmer in two parts; Interim payment which is 90% of the previous final year price at 32,600ushs per tone and the final balance is paid after final averages of the price and renderment of sugar are got which actually means that by retaining farmers revenue, the Miller is earning interest on farmers revenue! Price of sugar to the consumer is 1,600,000shs per tonne.
Sugar cane growers are disturbed by the diabolic and outdated formula used by millers to determine sugarcane price. The formula goes as follows; Pc=Ps X R X35%, Where Pc = Price of Sugar per tone, Ps = Average annual price of sugar per tone (factory gate price) and R = Renderment or Average annual Sugar recovery from sugarcane (Usually between minimum of 9% to maximum of 10.5%). First of all, this formula was made with out involvment of growers or their bodies the Uganda National Association of Sugar Cane Growers(UNASGO) and the Uganda National Farmers Federation. Secondly, the formula does not provide for renumeration of the cane grower as a result of other sugar cane derivatives such as molasses, power generation from baggasse, for which the Miller earns and saves sizable expenses, the formula ignores breakeven analysis as a basis for making price decision and does not reward quality production from more serious farmers because of the use of averages of the renderment and prices in the year. This colonial and contemptuous exploitation of farmers must stop.
Yet compared to Kenya and Tanzania, the situation of sugar cane farmers in Uganda is gloomy. A Ugandan farmer is paid far less. While a farmer in Kinyara in Uganda is paid 32,600Ugshs per tone of sugarcane supplied to the factory, the farmer at Kilombero in Tanzania recieves 49,000 Ugshs per tone and the Kenyan farmer gets an equivalent of 63,000 Uganda shillings! Yet again in the region it is only Uganda that does not have a sugar Act and a Sugar policy to guide sugar sector activities. This situation has denied cane growers an oportunity to achieve their full potential and subsequent prosperity. Sugar is a strategic crop like coffee, cotton, tea and diary for the country yet unlike the mentioned strategic crops, Sugar has no regulatory frameworks to oversee its sectoral operations.
Government and Millers must treat Sugarcane outgrowers fairly through ensuring uniform cane prices by all millers, subsidising infrastructure and farmworks in outgrowers plantations, putting in place a fevourable formula for determining cane price, subsidy for aquisition of small mills for value addition, reaserch and extension services for sugarcane and a importantaly, a Sugar Cane Policy.
Resident Consultant and Manager, Policy Research and Advocacy
Uganda National Farmers Federation