Price War: Tanzanian Sugar Industry’s Bitter Battle for Survival Sparks Economic Turmoil
By Adonis Byemelwa
Tanzania’s annual sugar demand for domestic and industrial use exceeds 630,000 tons, while local production falls short, with only 342,000 tons produced in 2023. The country relies on five operational sugar factories: Tanganyika Planting Company Limited, Kilombero Sugar Company Limited, Kagera Sugar Company Limited, Mtibwa Sugar Estates Limited, and Bakhresa Sugar Limited.
Kagera Sugar Factory, primarily owned by Super Star Forwarders Company Limited and Superdoll Trailer Tanzania Manufacturing Company Limited, faced unique challenges during the 2023/2024 season.
Despite difficult weather conditions impacting many factories, Kagera Sugar achieved its goal, producing 131,000 tons of sugar.
However, the price of sugar in Tanzania spiked to Sh 5,000 per kilo before government intervention, benefiting the factory significantly. Unfortunately, external farmers saw little profit due to the weight-based payment system.
External cane farmers at Kagera Sugar Factory hoped for a price increase for the 2024/2025 season, from the previous season’s Sh of 75,500 per ton. However, during negotiations involving government officials, the factory proposed a reduction to Sh 65,000 per ton, a 14% decrease.
This proposal was shocking, especially since the usual annual price increase was under 3%. For example, the price rose from Sh 74,000 in the 2022/2023 season to Sh 75,500 in the 2023/2024 season, a mere 2% increase.
In response, leaders of the sugar cane farmers’ cooperatives, representing over 952 farmers with more than 150,000 tons of cane, refused to sign the harvesting contract for the 2024/2025 season. Consequently, harvesting by external farmers has not commenced since the season opened on May 26, 2024.
The factory’s justification for lowering the price is their concern over the government’s issuance of duty-free permits for sugar imports from countries like Brazil, India, Indonesia, and Uganda. These imports, produced at lower costs, make locally produced sugar less competitive in price.
The factory argues that this situation affects their sales, as consumers opt for cheaper imported sugar, and questions the government’s commitment to protecting domestic investors.
Martin Chitemi, an experienced sugar farmer from Kilombero, criticizes Kagera Sugar Factory’s approach of shifting the burden onto farmers, who are not the cause of the problem. Chitemi argues that the factory should present its concerns directly to the government rather than penalizing farmers.
Meanwhile, Kilombero and Mtibwa sugar factories, despite not meeting their production targets, have increased their cane prices for the 2024/2025 season to Sh 108,000 and Sh 74,000 per ton, respectively.
Minister of Agriculture, Hussein Bashe. Photo: File
The external farmers’ grievances have been formally submitted to the Minister of Agriculture, Hussein Bashe, on June 5, 2024, with responses still pending. The season’s target is to produce 150,000 tons of sugar, with favorable weather conditions for harvesting, despite infrastructure challenges.
The repercussions of these import permits are beginning to manifest, impacting Kagera’s external farmers and potentially affecting others in the industry.
Lower cane prices will lead to several adverse outcomes. High cultivation costs will result in financial losses and increased poverty among farmers.
Farmers may default on loans, damaging their creditworthiness and forcing asset sales to repay debts. Farmers’ morale for cane cultivation will decline, leading to a shift to other crops. National sugar production targets may not be met, affecting overall industry output.
Urgent action is needed to protect Kagera’s cane farmers. The government has emphasized that the recent surge in sugar prices will not recur, following debates during the Ministry of Finance’s budget session on June 4, 2024. Kisesa MP, Luhaga Mpina, warned that allowing sugar imports could devastate local industries.
Minister Bashe outlined government plans to prevent future price hikes by importing 410,000 tons of sugar by December. The government aims to balance protecting consumers, farmers, and the industry, ensuring no single entity monopolizes distribution.
Mpina highlighted the need to safeguard domestic industries, cautioning against permitting excessive imports. He urged the government to enforce the Sugar Act of 2020, which restricts sugar imports to producers only.
The unfolding situation underscores the urgent need for balanced policies that protect local farmers while ensuring fair market competition. Even recently, Agriculture Minister Hussein Bashe announced a ban on the importation of cooking oil to protect local industries and benefit farmers.
In response to mounting concerns over skyrocketing sugar prices reminiscent of past economic challenges, the Tanzanian government has taken swift and decisive action. Professor Kenneth Bengesi, Director-General of the Sugar Board of Tanzania (SBT), recently reassured the nation in an exclusive interview that measures are already underway to stabilize the market.
Professor Bengesi wasted no time in outlining the government’s bold move to increase sugar import allowances from 100,000 to 155,000 metric tonnes. This proactive step aims to swiftly address the recent price surge, with over 80% of authorized imports already secured and an additional 27,000 tonnes en route.
“The government is unwavering in its commitment to maintaining stable sugar prices,” emphasized Professor Bengesi. He assured Tanzanians that current prices, ranging between Sh2,800 and Sh3,200 per kilogram in most regions, are being closely monitored. While acknowledging the possibility of slightly higher prices in remote areas, he affirmed that measures are in place to prevent them from exceeding Sh3,200 per kilo.
Against the backdrop of concerns about the efficacy of protectionist measures and the delicate balance between local production and consumer affordability, Professor Bengesi highlighted the government’s dedication to sustainable economic strategies. By harmonizing these approaches, Tanzania aims to secure growth and prosperity for all its citizens.
The reassurance provided by Professor Bengesi reflects the government’s proactive stance in managing economic challenges. With ample sugar reserves and plans for ongoing assessment, Tanzanians can anticipate a smooth transition despite the planned production pause. This proactive approach underscores the government’s unwavering commitment to ensuring the well-being of its citizens and maintaining stability in the sugar market, setting a promising trajectory for the nation’s economic future.
