Internationally sugar sector is governed by price formulae that determine the sharing of proceeds between millers and growers
Dr Michael Mugabira
Wednesday 21st November 2018 approx. 19:00 hrs, The Parliament of Uganda delivered a land mark victory by passing the Sugar Act to streamline the affairs of the sugar industry. The Sugar Bill 2016 had bitter clauses/areas and if were to be passed into law, the Ugandan cane farmer would have been rendered ‘a slave’ to the sugar barons. The contentious issues addressed are as follows:
Sugar Board Vs Advisory Sugar Council and Representation: Lack of leadership was being demonstrated by proposals for an Advisory Council instead of establishment of Sugar Board with Full Powers. The argument being advanced was that a Sugar Board will be expensive and bureaucratic to manage. As farmers before the Parliamentary Trade, Tourism & Industry Committee, we did object to the proposal of an Advisory Council as this would be subject to power abuse; i.e., ‘remote’ controlled by those intent to serve the interests of the Sugar barons.
Our argument was that putting a structure that doesn’t have full power, such as the proposed Advisory Council was actually an expensive option when we consider the real issue that we are attempting to address, such as inequitable distribution of value within the industry.
The Farmers argument was that such a body was unlikely to effectively represent the interests of the Ugandan sugar cane growers, which has the effect of perpetuating the current inequitable distribution of sugar cane value in favour of millers, while at the same time burdening the farmers with the huge cost and risk of growing sugar cane for two years before marketing.
We emphasized that this should be the real cost under consideration here, and not the cost of having an effective body such as the Sugar Board. We also recommended an equal representation with millers on the board on condition that the position of chairperson will be rotational between growers and millers and also government representatives will have no voting rights.
The Trade Committee generally upheld our position save maintaining government representative voting rights and an independent chairperson. The main Plenary addressed the issue of power imbalance by proposing that since government representatives tend to side with powerful millers, then the growers should be four (4) and millers three (3), and maintained that the Chairperson to be appointed from the private sector and non-aligned to the sugar industry.
Zoning: the most contentious bitter pill in the bill. The entire plenary (save a few ‘the prodigal sons/daughters’) quashed zoning arguing that Uganda is a liberalized economy, then why create monopolies to enrich a few ‘sugar barons’ and enslave own people through discriminatory clauses such as zoning, which are unconstitutional.
Price Sharing Formulae: as with zoning, this issue had been mis-interpreted by Hon. MPs as price setting and/or controls and therefore arguing for its deletion. As growers who were listening to the arguments from the gallery, our hearts started sinking because if removed then the Contracted growers (receiving inputs) from milers would be at the mercy of the millers with continued exploitation since they have contractual obligations.
For clarity, internationally sugar sector is governed by price formulae that determine the sharing of proceeds between millers and growers as a result sales of sugar and its by-products in the market for a whole year. The formula basically sets the minimum price for negotiations between the two parties.
In our Sugar Act, the formula for sugar cane is prescribed as (Pc = Ps x R x D) where Pc = Average price of sugarcane paid to farmers per tonne, Ps = Average price of raw sugar per tonne (for simplicity this is sugar sold to market at factory gate prices based on supply and demand market forces, for instance in the first quarter of year a bag can be sold at Ugx 150,000/-, second quarter can be Ugx 165,000/-, third quarter can be 185,000/- and last quarter say Ugx 160,000/-) at the end of year an average price is computed to determine Ps and therefore cane farmers receive a top-up payment i.e., at start of the year farmers receive interim or advance payment. R simply means quantity of sugar recovered per tonne of cane milled, i.e., simply this is a reflection of cane quality which is a result of cane maturity. Therefore, immature cane is discouraged as recovery from it is low.
For example, cane maturity of 18 months mainly gives a recovery of 90-110 kg raw sugar per tonne of cane compared to cane of 12 months which can give recovery of 60-70 kg raw sugar per tonne cane crushed. D = minimum percentage guiding negotiations between both parties and for the case of Uganda this has been set to be 50 percent of sugar sales and by-products. Worldwide most farmers earn in range of 50 to above 70 percent of the sugar industry proceeds and by-products i.e., molasses, power generation etc, (see World Association of Beet & Cane Growers Association, Report 2015).
Therefore, the 40% which had been set in the bill and so far based on mill sugar alone (exclusive of sugarcane other products) was implying that Ugandan farmers would be earning less than 40% of the sugarcane proceeds.
Therefore, on behalf of Uganda Sugarcane Growers we wish to extend our magnanimous appreciation to the Rt. Hon. Speaker of Parliament, Trade Committee Members (endorsed majority report), Hon. MPs in Plenary debate for re-shaping the ‘Bitter’ Sugar Bill 2016 transiting to the ‘Sweat’ Sugar Act, hence for the first time cane growers will test the sweetness of the sugar industry value chain.
Further, we are also humbled and yet exalted that H.E. Gen ‘Sabalwanyi’ Y.K. Museveni, put the Country First and we do Pray and Implore him to assent to The Sugar Bill to be The Sugar Act as a X-mas gift for his voters 2018 as this period coincides with the famous X-mas amended constitutional gift of last year 2017.
Writer is the coordinator, Uganda Sugarcane Growers Associations