PARLIAMENT OF UGANDA

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PARLIAMENT OF UGANDA

REPORT OF THE COMMITTEE ON TOURISM, TRADE AND INDUSTRY ON

THE SUGAR BILL,ZOIg

aPRrL,2019
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LIST OF ABBREVIATIONS
CSR Corporate Social Responsibility
ENA Extra Neutral Alcohol
USMA Uganda Sugar Manufacturers Association
URA Uganda Revenue Authority
UIA Uganda Investments Authority
MWH Mega watt Hour
ERA Electricity Regulatory Authority

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REPORT OF COMMITTEE OF TRADE TOUSRISM AND INDUSTRY ON THE
SUGAR BILL, 2019

BACKGROUND
cabinet approved the national sugar policy in August 2010 with a vision "to
have a sustainable, diversilied, harmonized, modern and competitive sector".
Subsequently the Sugar Bill, 2016 was approved by Cabinet'

A11 this was because the existing Sugar control Act 1938 is obsolete and can
no longer effectively regulate the sector. Currently in Uganda there are 27
registered investors in the sugar sector.

Parliament of Uganda on t}:,e 22nd November 2018 passed the S ugar Bill 2016
with amendments and submitted to H.E the President for assent. \

The president did not ascent to the sugar Bill and he returned it to Parliament
on lst March 2019 in a letter to speaker attached and Marked "A"'

The letter was subsequently forwarded to the committee by the Rt. Hon
Speaker of Parliament and gave the committee two weeks hence this report.

ISSUES RAISED BY H.E THE PRESIDENT THAT CALLED FOR

RECONSIDERATION
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The President substantially raised the following ISStles aS ISSl]eS of hi
objection to the ascent:-
1) Sugar cane zoning o
2) Licensing of sugar mills
3) Sugar Industry agreements
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4) Provision on Regulations
5) Smuggling and money laundering in the sugar industry
6) Concerns on drop in sugar Production for kakira alone from 180,000 tons in
2OI4 to 125,000 tons in 2017.
7) Encouragement of medium and large scale farmers to grow cane and to
enhance house hold income.

METHODOLOGY
The committee met the Ministry of Trade Industry and Cooperatives. Further
the committee studied all the documents attached by the two previous
committee reports. The committee also got data from Uganda Revenue
Authority, Uganda Investment Authority, Uganda Sugar Manufacturers
Association and Electricity Regulatory Authority (ERA).

THE COMMITTEE FINDINGS

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The committee during its work found out the followings:
a) Cane Poaching:
Rampant cane poaching due to proximity of mills as there was so much
pressure by jaggeries and small millers on the farmers. This has lead to
farmers selling canes that are less than 18 months old to get quick money.

The committee established that Kakira Sugar ltd operating out grower schemes
don't buy cane from farmers that are under 18 months and they have a
mechanism and record of tracking farmers from initial stages to harvesting.
This ensures higher yield per hectare.

bf Low yields: @-
Because of pressure to sell immature canes, there was low yield which in turn
reduced the tonnage of sugar produced per acre.
In Uganda as a whole there was a drop in sugar Production from 438, 0
in 2Ol4 to 365,45 tons in 2017 [
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 cl Loss of tax revenue:
According the Ministry and Uganda Revenue Authority, there has been a
steady decline in tax revenue.
For example according usMA figures Kakira and lugazi resulted in a loss to
Ministry of Finance of Ushs 144 billion.

Kakira alone, the committee established from URA that in 2017 t},e anticipated
taxes were 214.54 billion however they paid 165.91 creating a shortfall of
48.63 bi11ion.

The smaller millers in all pay tax of 5 billion a year and they are elusive on
taxes and don't have any csR or any Nuclear estate and therefore afford to
deceptively offer slightly higher prices.

d) Pressure on land;
The same pressure arising out of the small m lers has caused a lot of pressure
on land so smal1 farmers are renting their land to big growers and secondly
there is no land being left for subsistence and other crops production
[source
ERAI.

el Electrlcity supply;
ln 2ol4 Kakira 296,881 in 2or7, the committee established that kakira alone
they was producing 215,738 MWH recording a decrine of 81,143 MWH actual
.with maximum cane production it can produce 391,680MWH national grid
which alone can light Kampala city however due to drop in supply of cane
there is drop in electricity supply to the National Grid [Source ERA].

f)
W
Extra Neutral Alcohol (ENA!
With a reduction in cane there reduction in E A which will
cause loss of revenue.

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 COMMITTEE OBSERVATIONS

1f Impact on non cane zoning

i) The committee observes that there is loss to outgrowers due to lower yields
as cutting under age cane results into loss of 5 tons per hector (harvesting
young cane leads to less sugar recovery decline from 9o/o to 6.So/o)

ii) Loss to manufactures due to less crashing machines remaining redundant

and yet fixed and overhead cost continues to run.
iii) Loss of export earnings
IV) Loss of employment due to downsizing of companies.
The committee observed that in Tanzania the zoning policy is being enforced at
80Km radius. From Kilembero, matibwa ,kagera, arushachini and latest in
bagamoyo the mil1s are more than 80 km from each other.

The lack of zoning led the collapse of Sugar industry in Kenya (mumias sugar
),
some states in India and in Mauritius that government decided to consolidate
the mi11s for economies of scale.
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2f Misconception of cane zorrirrg
The committee established that because of local politics in the sugar growing
areas there is a general misconception that zoning is meant to create
monopolies.

This provision of zoning will not stop out growers from selling their cane to
whoever they want so out-growers are free to sell to whoever they want. zonlng
is onlg meant to regulate sugar Jactorles to operate ln a
olable manner. No zonlng for larrzrers but for mlllers.

4) Licensing
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 The committee established that Uganda Investment Authority (UIA) at the
"Investors confidence building breakfast conference,, in 2001 issued paper
licenses to encourage investors. They did not envisage that they were creating a
problem. These licenses should all be reca,lled and the ministry prior to
licensing should ensure a-11 applicants must fulfill the conditions of minimum
nuclear estate 200o hectares, 25km zoning requirement and protecting out
growers food crop land.

5l Cost of relocation
The committee established that since government had already licensed millers
it would conservatively cost 50Bn Ugx to relocate the factories outside the 25
km radius. This cost would cover civil works, dismantling and re-erecting,
transportation and commissioning (usMA). This cost can be recovered in less
than 2 years from the gain in taxes by the major players and would be a lesser
cost compared to a loss of 1448n Ugx in tax revenue in a year.

If the zoning area is enforced then the cost of relocation can be covered in one
financial year of increased taxes [Source USMA].
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COMMITTEE RECOMMENDATIONS
1' The committee recommends that a 2s KM radius be stipulated in the
sugar bill as minimum distance between millers

2. That the factories that fa1l within the radius be re located at a cost met
by the government that had earlier issued the license

3. Encouragement of medium and rarge scale farmers to grow cane and to

enhance house hold income. The committee recommends that 67% of th
land acreage of each framer be used for cane and the balan o
s tence production. This should through the regulatio
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4. The committee recommends that all new licenses issued after 2004
should all be recalled and the ministry prior to licensing should ensure all
applicants must fulfill the conditions of minimum nuclear estate of 2,000
hectors, 25km zoning requirement and protecting out growers food crop land.

5' The committee recommends that government makes a decision on cost of

relocation of existing mills since its an acceptable principle that he who issues
a license can revoke it at any one time and report within 6 months

6. Nuclear 2000 hectares - This will ensure that there is a minimum sugar
cane supply to enable the sugar mills continue in operation should the out-
grower farmers fail to supply cane for any reason.

7. The committee strongly recommends that government takes deliberate

steps to support out-grower farmers in forming cooperatives to protect them
from bad commercia-l practices of unscrupulous sugar mills.

CONCLUSION
In conclusively, the committee supports the propositions by H.E the president
and recommends that they be adopted with the amendment that sma1l growers
are not completely blocked out economic participation in the Country.

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 PROPOSED AMENDMENTS

t Amendment of interpretation clause

a) Replace the definition of the word "out-growel' with the following definition:

"out-growef' meons o person who hos o sugor cone farm in a zone ond hos o
controct to supply the sugor cane grown on the form;

bl lnsert the definition of the phrase "sugor mill'immediately after the phrase "Sugar
cane".

"sugar mill" meons a foctory equipped for the monufocture of sugor from sugor
cane and licensed os such under this Act;

Justification:

To ensure thatthe definition of out-grower is specific in terms of the zoning

req u irement

2. New Clause after clause 21

lnsert a new clause immediately after clause 21 to read as follows:

22. Sugar mills to be ceftoin distonces opaft

(1) ln licensing sugor mills, the Boord sholl ensure that there is only one mill
in o zone,

(2) For the avoidance of doubt, the Board shdll not license more thdn one
sugor mill in a zone.

(j) ln this section, o

"zone" medns on oreo of a rddius of twenty five
kilometres meosureid from one mill to onother.

(4) Sub-Section (1) sholl apply to a sugor mill thot come into existence after
the year 2004.

Justification:

1. To ensure that the zones are stipulated in the law

2. To prohibit up on commencement of this licensing of more than one mill in a

pa cular zone
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SIGNATURE SHEET FOR THE REPORT OF THE COMMITTEE ON
TOURISM, TRADE & INDUSTRY ON THE SUGAR BILL,2OI9

S/No, NAME SIGNATURE

'z?--
1 Hon. Kasule Robert Sebunya
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2 Hon, Mangusho Lawrence

Cherop

3 Hon. Dhamuzungu Ge offrey

4 Hon. Timuzigu Kamugisha

Michael

5 Hon. Kamugo Pamela Nasiyo

6 Hon. Lufafa Nelson

7 Hon. Lokii John Baptist

B Hon. Alupo Faith

9 Hon. Kabagenyi Rose

10. Hon. Kaahwa Tophace Byagira

11. Hon. Namoe Stella Nyomera

12. Hon. Makumbi Kamya Henry

13. Hon. Amoding Monica

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74. Hon. Khainza Justine

15. Hon. Kalule Ssengo Emmanuel

16. Hon. Ogama Alli Ismail

17.

18.
Hon. Onyango Gideon

Hon. Lukyamuzi David Kalwanga

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19. Hon. Andrew Kiiza Kaluya

20. Hon. Atim. Ogwal Cecilia Barbra

21. Hon. Odonga Otto Cz)

22 Hon. Babirye Mary Kabanda I

o2 Hon. Centenary Franco Robert

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 PARTIAMENT OF UGANDA

A MINORITY REPORT ON THE SUGAR BI[1, 20,'19

APRI[, 2019

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Toble of Contenls

I.0 lntroductlon 4

2.0 Mondote....... 4

3.0 Justificotion for Dissenting from the Moin report.

3.1 Zoning/ring fencing policy VS the Liberolisoiion Policy/Free Morket
Economy which wos odopted by government.....'.'....'.'.'... 5

3.2 Relocotion not feosible ond unottoinoble. '....'........... 7

4.0 Recommendotions......... 7

4.0 Conc|usion...................... 8

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IIST OF ACRONYMS AND ABBREVIATIONS

EAC Eost Africon Communily

HE His Excellency

HR Hour

RT Right

SME Smoll Medium Enterprises

UGX Ugondon Shilling

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'1.0 lnlroduclion

Porliomenl possed the Sugor Bill, 201 6, on 22na November, 20lB thot seeks to
regulote the industry bul rejecled governments proposol to provide operoting
zones for mills in the country, o "conlentious clouse in the originol blll"'

His Excellency, the President of the Republic of Ugondo declined to ossent to

the bill ond therefore returned it to Porlioment in o letler lo the Speoker urging
Porlioment to include the zoning clouse in the blll whilst emphoslzing thot foilure
to implement ihe zoning policy is olreody destroying the sugor industry.

2.O Mondote

We ovoil ourselves Porlioment's oversight role in promoting occountobility ond

tronsporency. To this end Rt. Hon Speoker, we ore moving under Rule 202 of
Porlioment's Rules of Procedure which provides thol;

1) Any Member or Members dissenting from the opinion of o mojority of o

Committee moy stote in writing the reosons for his or her or their dissent,
ond the stotements of reosons sholl be oppended to the reporl of the
Commlttee.

2) The Member dissenting from the opinion of the mojorily of the Committee
sholl be given time to presenl the minority report ot lhe time of the
considerotion of the Commitlee report.

3) ln preporing o minority report, o member sholl be offorded reosonoble

ossistonce by the Office of the Clerk.
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The Point of Dissent from the moin report is os listed below:

a Zoning (Ring Fencing Policy) controdicting the Liberolisotion Policy/Free

Morket Economy.

Relocotion not feosible ond unottoinoble

3.0 Justificotion for Dissenling from lhe Moin reporl.

3.1 Zoning/ring fencing policy VS lhe Liberqlisotion Policy/Free Morkel

Economy which wos odopted by governmenl.

The Sugor Bill,20l6 sought to provide for the development, regulotion ond
promotion of the sugor industry to ensure thol there is o sustoinoble, diversified,
hormonized, modern ond competilive sugor sector. So why encouroge
monopoly in o liberolized economy by protecting the big millers ond erose off
smoll millers, this spirit is noi pro SME growth ond yet most economies in the world
developed mojorly through good SME foundotions.

Zoning in the current circumstonces connot be foirly, effectively, ond

economicolly implemented os so wished by the Presidenl. Cunently, there ore
oreos with more lhon one mill in the rodius being proposed under lhe Sugor bill,
2Q19 for zoning. These mills were duly licensed by Government ond hove over
time heovily invested in the developmenl of their mills including building
copocity of oul growers.

Rt.Hon Speoker, ony oltempt to relocote esloblished mills which ore cunenlly
within o 25km rodius will certoinly be o disoster to the notionol economy ond
imoge especiolly in this ero of liberolizotion. It will equolly erode investor
confidence if the olreody licensed bonofide investors connot be protected by
the very government thot licensed their operolions legolly ond os o resull, it will

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tontomount to the government of Ugondo overstepping ils mondote ond
exposing itself to legol bottles ond heovy compensotion to the offected citizens

Rt.Hon speoker, currently, in Busogo region there is excess cone thot is not being
crushed, the big millers ore not buying the cone becouse they ore not willing to
poy formers of lhe current morket price, driven by competition ond more
efficiency. lndeed, formers ore ferrying sugorcone oll the woy from Bunyoro to
Busogo in seorch of higher prices. This meons thot if sugorcone is being ferried
from Bunyoro to Busogo, then cone is ovoiloble ond the osserlion by the big
millers of unulilized instolled copocity, low production ond revenue losses needs
to be thoroughly investigoted.

Rt. Hon speoker, with regord lo restricted zones. whot will the big millers do if
formers/out growers chose to supply their cone out of their zone soy Bunyoro in
the seorch for higher prices in Busogo? Also with restricted zoning. q situotion
moy orise where o sugor mill is incopocitoted 1o buy sugorcone ol l6 months for
the second crop ond l8 months for the first crop, ond moy creote disoster
where formers with sugorcone woy over the moturity oge ore not ovoiled
horvesting permils just becouse their supply is restricted to o porliculor zone.

othewise, if it wos not for o liberolized economy, o siluotion where chinese

howkers( reod investors) hove esloblished kiosks ond ore selling sondols ond
poncokes in close proximity of olreody estoblished koding centres ond yet
slowly pushing Ugondon citizens out of business moreover without work permils
ond inveslor licenses should not hqve been encouroged.

As o Porlioment, we must be seen to odhere to the highest stondord of legollty

ond Consiitutionolism shorl of which we will be legisloting in voin' lt's therefore
the considered view of the oulhors of this minority report thot, Porlioment should
no t be drown into selfish motives of individuols lhot ore ogoins e freedom of

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economic development of the economy of Ugondo through octivilies of
upcoming Smoll Medium Scole Enierprises.

3.2 Relocqlion nol feosible ond unotloinoble.

Whereos the Committee, in its reporl recommends thot smoll millers be

relocoted ond compensoled by government for feor of loss due to heovy
investments estoblished lherein, there is no cleor budget source for such
compensotion. Procticolly it is nol possible to quontify the omount of losses thot
will be incurred in terms of income, plont, mochinery, unemployment ond lond
thot is likely to result from ony form of relocotion. The rough estimolion of UGX
50bn os proposed by the commiltee to compensote oll the smoll mills within o
25 km rodius connot be proven scienlificolly ond systemoticolly, ond therefore
logicolly, one connot just merely guess the omount of money to be
compensoted on such huge investments.

4.0 Recommendolions

a Government is olreody highly indebted with o public debt totoling to

oboul UGX 42 lrillion, the country does not hove the copocity to mobilize
domestic resources to finonce its own onnuol budgets, thus o very cleor
indicotion thot government moy not be in posilion obly compensote the
smoll millers in cose of ony relocotion. In order to creote effective SME
growth ond development ond further boost investor confidence, the initiol
position in the bill, clouse 22(5) which reods thot section 22(1)does not
opply to o sugor mill existing immediolely before commencement of this
Act should be mointoined.

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 a Zoning ought not to protect inefficient millers of the expense of out
growers to the extent thot where signols of inefficiency ot the mill ore
opporent, out growers should be given on outside option.

a Pooching or theft of cone con be eosily oboted through troceobility ot

out grower sugorcone, hoving their cleor conlroctuol ogreements
between millers ond out growers in ploce ond lhrough ossistonce of locol
odministrotion.

4.0 Conclusion

lhe foct thot government

Rt.Hon Speoker, poor plonning is very disostrous ond
did not corry out due diligence on the proximity of mills before issuing out
licences to smoll millers ofter 2004 is highly regrettoble, the most offected will be
the smoll millers ond oul growers ond if this motter is not hondled very corefully
for the benefit of oll Ugondons, history will repeot ilself where Ugondons will be
subjecled to perpetuol slovery in lhe honds of foreigners in the nome of investors
ond increosed perpetuoled lox revenue to Ugondo's economy'

I BEG TO MOVE

MOVER: HON BARBIRYE MARY KABANDA

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SECONDER: HON. ROBERT CENTENARY

SECONDER: HON. ANDREW KALUYA

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ENDORSEMENT OF THE MINORITY REPORT ON THE SUGAR BItL, 20I9.

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