Rwanda’s sugar shortage could worsen with the closure of Kabuye Sugar Works, the country’s sole miller.
The miller closed the factory, citing shortage of sugarcane, the raw material for sugar manufacturing. Over half of the sugarcane plantations in Nyabarongo swamp were flooded when River Nyabarongo recently burst its banks, following heavy rains that started last year.
The factory’s plantation is made up of 1,500 hectares but the floods destroyed over 800 hectares and supply from outgrowers has not been consistent.
Following the floods, according to the Kabuye management, the sugarcane ended up rotting in the field, denying the factory raw material for processing.
The closure of the factory over the past four months has resulted in a price hike for both locally produced and imported sugar.
“When the sugar prices started going up, we were told it was due to the scarcity of the dollar and the weakening of the franc. But now that the situation has normalised, sugar prices keep going up,” said Odette Gahungu, a trader in Nyarugenge market.
Retailers raised the price of a 50kg bag of sugar by Rwf4,500 ($7). The price has increased from $46 to $53 within one month. It is not only the consumers paying the price, but employees too. With the temporary closure of the factory, over 500 permanent employees have gone on rotational unpaid leave, while over 25,000 non-permanent workers have lost their jobs.
“The company could not afford to keep paying salaries because there was no production to generate revenues. But they will return when we reopen,” said Anselme Habimana, the administration manager of Kabuye Sugar Works.
Struggling to meet demand
The company has also started counting its losses. Management says that as a result of the floods, the factory has made losses amounting to Rwf500 million ($781,312). Kabuye Sugar Works, which is owned by East African conglomerate Madhvani Group, produces only 30 per cent of the market’s demand.
Kabuye is struggling to satisfy a growing demand for sugar, which has increased to 50,000 tonnes a year from 14,000 tonnes in 2010. To produce such an amount, the factory requires 8,000 hectares of land.
“We have suffered unprecedented losses this year in terms of both money and sugarcane. This is the longest period we have been out of production,” said Mr Habimana.
Rwanda has consistently lacked sufficient sugar to meet local demand, even after the government waived all import taxes on the commodity as a means of encouraging more imports. The factory is planning to reopen in June.
However, Nakumatt Supermarket, a leading retailer, has not been affected by the crisis at Kabuye, even though it gets all its sugar locally.
“We have stocked enough to last us a long period. The prices vary with suppliers, but we do not see a major problem with sugar, although the general retail business is low at the moment,” said Adan Ramata, Nakumatt’s country manager.
Erratic supply
The Madhvani Group finally secured the go ahead, last week, to acquire more land to grow sugarcane, after the government gave in to more than a decade of pressure from the investor. The Madhvani Group bought the factory from the government at $1.5 million in 1997.
With the decision by the government and the planned application of high yield and disease resistant canes, national sugar output is expected to double to 28,000 tonnes annually.
Madhvani’s appeal for more land stems from the fact that a sizeable part of its sugar plantations lie in wetlands like Nyabugogo and Nyabarongo river swamps, which are prone to floods. The firm said that this leads to erratic supplies of cane and by extension, sugar output.
Out of the 3,148 hectares allocated to the company, 1,700 are under the sugarcane crop, while a further 1,448 hectares are permanently under water, translating into a loss of Rwf1.9 billion ($3 million) in potential revenues each year.
The Dutch government has provided a grant of eight million euros to drain the floodwater and reclaim 2,000 hectares in the Nyabarongo swamp.
Madhvani Group is expected to contribute 30-40 per cent of the total project cost.
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