Uganda's unsold sugar affects industry growth

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“I think the major problem that Uganda has been experiencing is that South Sudan has traditionally been one of its main export areas. Taking close to 44 per cent of its exports and everyone knows there has been a civil war in South Sudan and that has [slowed] the amount of sugar the country is importing,” Dexter Mahachi, Analyst at Imara Securities told CNBC Africa.

Fighting broke out in South Sudan’s capital, Juba in December last year. Uganda is said to have lost 15 per cent of its export market which includes beverages, food products, sugar, cooking oil and construction materials that translate to over 30 million US dollars per month as a result of the war.

(READ MORE: Sub-Saharan Africa at the sweet spot of sugar production)

Under the East African Community Customs Union, Uganda qualifies to export sugar to Kenya, Tanzania, Rwanda and Burundi. However, attempts to exploit this opportunity have faced non-tariff barriers in the Kenya market and the country is struggling to open export markets in Rwanda as well.

“The big problem around sugar has always been a case of political interference. To some extent the politicians in Kenya have been pushed to postpone reforms in the sugar sector and what this means is that the sugar [industry] itself has not been intensified to change and the end results is that other neighbouring countries such as Uganda are in a situation whereby some of their exports to Kenya have been lowered,” Mahachi said.

Uganda recently joined the Common Market for Eastern and Southern Africa, a free trade area. The country expects its export earnings to grow by at least 15 per cent in 2014. In 2013 the East African nation exports rose marginally to 2.89 billion US dollars by 3.2 per cent.

According to the Uganda Sugar Manufacturers Association, Uganda’s sugar output is estimated to grow to 425,000 tonnes an increase of 13.4 per cent from 2013. This increase can offer the industry a surplus of 75,000 tonnes for exports. Currently, Uganda’s consumption is estimated at 350,000 tonnes annually.