the economic valuation of the proposed ... - Nature Uganda

4.3. COST OF PRODUCTION AND THE
DETERMINANTS OF THE COMPETITIVENESS OF
THE SUGAR SECTOR IN UGANDA
Brazil has the lowest sugar production costs,
approximately US$ 150/ mts of sugar. In Africa,
Southern African Development Community countries
such as Zimbabwe (US$ 160/mts), Zambia (US$ 180/
mts), and South Africa (US$ 220/mts) have the lowest
sugar production costs (Malzbender, 2003). Yet Zambia
is a landlocked country like Uganda. Additional, by-
products reduce input costs: for example, bagasse is
burned to achieve energy self-sufficiency in mills and
filter press mud from mills is spread on fields to reduce
inorganic fertiliser use. There is potential to generate
additional value from current production. Uganda
22
has one of the highest sugar production costs in the
Eastern and Southern African region (UNCTAD, 2005).
The county’s average sugar production cost (Table
10) is more that two times higher than the average
production cost of Zambia, three-times as high as the
sugar production cost in Sudan. Indeed, only Tanzania,
Uganda’s neighbour to the south, has a comparable but
slightly lower sugar production cost. As such, one would
expect that Uganda’s sugar industry still has options for
improvements in productivity and production leading
to a reduction in the average sugar production costs.
The higher costs for the sugar factories in Uganda are
attributed to: (i) high operational costs; and (ii) the high
costs of out-growers cane if the distance goes beyond
20-30km;
Table 11: Sugar production costs in selected Least Developing Countries
Country
Estimation of costs US$/
tonne
Ethiopia 375 56.8
Bangladesh 550 83.3
Tanzania 600 91.0
Uganda 660 --
Madagascar 550 83.3
Source: adapted from UNCTAD (2005)
However, the cost of producing sugar in Uganda is already
much higher than regional producers. In addition, the
Ugandan sugar industry maintains a production cycle
which subsidises out-grower sugarcane farmers and a
fixed sugarcane rate.
Provision of extension services aimed at ensuring
that a good quality cane is available to the factory is a
necessary input on the part of sugar factories. However,
there are no direct incentives for farmers to expand on
Average sugar production cost as a percentage
of Uganda’s production cost
their areas or for other farmers, engaged in production
of other crops, to switch from these crops if they can
earn better prices producing sugar cane.
However, the SCOUL has stated that the production
costs are quite high (Box 3.3). Similarly, when the price
rose in 2006 (New Vision, 4 th October, 2005), the General
Manager Kakira Sugar Works attributed the higher price
to a power shortage, which lead to increased investment
in the factories to keep them running.
The Economic Valuation of the Proposed Degazettement of Mabira CFR | 2011