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Rwanda Blames Sugar Shortage on Region's Hefty Import Tariff
Kigali says the EAC's common external tariff (CET) of 25 per cent and VAT of 18 per cent on sugar from outside the region has crippled the capacity of its sugar traders to create the commercial relationships in the global sugar market that are needed to access extremely competitive sugar stocks.

Mid last year, Kigali was granted a waiver of duty on imported sugar for six months to allow it to import 50,000 metric tonnes from outside the region, however, only 4899 metric tonnes have entered the country so far.

The government is now requesting the extension of the waiver. The waiver was granted to avert a potential shortage of around 20,000 metric tonnes of sugar following a regional sugar crisis last year.

"The EAC import duty led to our traders losing their supply networks, it has been difficult for them to find sugar because they had no commercial relationship with suppliers outside the region," Rwanda's Trade Minister Francois Kanimba told The East African last week.

"We had to start from zero, which is why the sugar prices have not come down as expected. The sugar is not yet sufficient enough to lower prices," he added.

Mr Kanimba said that due to supply constraints, the retail price of sugar has not reduced to $1.3 as initially expected at the beginning of this year. Retail prices rose early last year, with the price of imported sugar going up to $2 from $1.6 per kilogramme, while locally produced sugar increased from $1.3 to $1.6.

The price increases were partially attributed to a shortfall in supply as well as the temporary shutdown of Kabuye Sugar Works -- the country's sole sugar producer -- in addition to regional shortages due to floods and increased demand.

Currently, the country largely imports its sugar from within the EAC or from Comesa member states, in particular within the Free Trade Area that allows sugar to come in zero rated.

Sugar consumption is currently estimated at 40,000 metric tonnes per year. "Our importers still find it difficult to find sugar... particularly within a global framework where the sugar industry is undergoing a crisis," Mr Kanimba said, adding that large suppliers in the global market give priority to big orders.

However, Mr Kanimba said the government is reconsidering refurbishing Kabuye Sugar Works to increase local production in the long term.

It is also considering a request by investors, including Algeria's biggest sugar producer Civital Group, to provide 20,000 hectares of land to grow sugar cane to supply a sugar milling plant with an annual capacity of 200 metric tonnes.

Tanzania, Uganda, Rwanda and Kenya together consume more than 1.5 million tonnes of sugar per annum.

Globally, consumption has been forecasted to grow at a rate of 2.19 per cent to 165 million tonnes of raw sugar this year.

However, world sugar production has been revised downwards in the recent past (2008/2009) to 149.3 million tonnes raw value.

This represents a 12 per cent decrease on 2007/2008 mainly due to the fact that the sugar cane growing area is being reduced and taken up for biofuel production.


By: Berna Namata
The East African
8 January 2012