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

to mature. Subsequently, conservation is superior to
agriculture; and converting 7,186 ha of Mabira CFR
into agriculture would result into a net loss of US$ 15.2
million to society. In fact, because sugarcane is a ratoon
crop the value of the cane lasts only the five years of the
ratoon and a new crop is replanted. Therefore, the true
value of a sugar crop is US$ 12.3 milion, which is US$
32.8 milion inferior to the conservation option.
• What if degazettement goes ahead?
The National Forestry and Tree Planting Act has provisions
for compensatory measures in case of degazettement
– that is, fair and equal value. Also, Uganda’s social
and environmental safeguard policies are clear on
compensation. Hence, despite the evidence that the
conservation is a superior alternative to sugarcane
growing, if other reasons compel the degazettement
of the 7186 ha of Mabira CFR, then the developer must
compensate for the values lost from the conservation
alternative. This total value is estimated at US$ 45.1
million, payable to the NFA for conservation activities in
general and Mabira in particular. However, before doing
so, the land use change should in addition be subjected
to the environmental impact assessment (EIA) process
to satisfy legal, and social and environmental safeguard
policies of GoU.
The pertinent question for SCOUL is whether paying
the US$ 45.1 million represents a cheaper alternative to
buying or leasing private land. An expenditure of US$
45.1 million would purchase 30,668 ha of land (at Ushs
2,500,000 per hectare assuming an exchange rate of
1US$ = Ushs 1,700) compared to the 7,186 ha at Mabira
CFR.
• Can SCOUL or the sugar industry
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meet the national requirements for
sugar?
An answer to the above question is a resounding ‘no’.
The reason is that even if the four sugar companies
can produce volumes of sugar equal to the national
requirement, imports will still be necessary. At the
moment the factories are unable to produce all grades
of sugar in sufficient quantities to meet the aggregate
national demand. The firms, therefore, need to first invest
in processing capacity for the different grades of sugar
before consideration can be given to self-sufficiency in
sugar production (assuming this is a socially desirable
goal).
• Is there a national sugar industry
strategy?
What one may call the ‘Mabira saga’ has over-shadowed
an important debate about the sugar industry. This is
wrong. Mabira is an issue because a single firm SCOUL,
and not the whole industry wants an access to some
of the CFR land. There are important industry issues
to be addressed. For example, is a strategy towards
self-sufficiency in sugar production desirable? Is it
efficient? Can Uganda produce all the grades of sugar
required by both household and industrial consumers?
If the GoU is fully satisfied that the country has a clear
and demonstrable comparative advantage in sugar
production, then why not produce as much sugar as
possible to satify both domestic and export demands?
Where should the incremental sugar production come
from? In other words, are there other parts of the
country where sugar can be produced competitively?
Can increased sugar production be used as one strategy
to promote poverty reduction and satisfy the ‘wealth for
all’ objective?
Answering the foregoing questions will require an
examination of the whole sugar industry and not just
the tribulations of SCOUL alone. By devoting exclusive
energy to the Mabira debate, an opportunity to examine
the whole sugar industry is lost and it forces GoU to make
some rather obscure ‘seat of the pants’ decisions. There is,
therefore, a need to re-direct the Mabira debate to focus
on the entire sugar industry and not just SCOUL alone
so as to come up with more comprehensive solutions to
the challenges facing, and the opportunities presented
by, the sugar industry.
The Economic Valuation of the Proposed Degazettement of Mabira CFR | 2011