Uganda’s decision to add another sugar mill to an industry already producing a sizeable surplus reflects the country’s broader push to turn agriculture into a source of industrial growth, jobs and export earnings.
The US$20mn Shakti Sugar Factory, whose construction has begun in Busaana Town Council, Kayunga District, will initially process 1,500 tonnes of sugarcane a day. The investment is expected to rise to US$40mn as the company expands its farming and processing operations.
The investment comes as the country’s sugar industry is already producing more than the domestic market consumes, creating an export surplus even as the government pushes to expand agro-processing and move the economy towards higher-value agricultural production.
According to the Ministry of Trade, Industry and Cooperatives, Uganda has 14 operational sugar factories, which together crush about 8mn tonnes of sugarcane a year and produce between 650,000 and 700,000 tonnes of sugar.
Domestic consumption is estimated at about 450,000 tonnes, leaving between 200,000 and 250,000 tonnes for export, mainly within the East African Community.
The challenge for new investors is therefore less about proving that Uganda needs sugar than about building a business capable of competing for cane, operating efficiently and finding profitable markets for additional production.
A market built on farmers
Shakti plans to work with more than 5,000 commercial sugarcane farmers through an outgrower scheme, providing the factory with a local supply of raw material while giving farmers a guaranteed industrial market.
That model is already central to Uganda’s sugar industry. Most of the cane processed by the country’s existing factories is supplied by outgrowers, making the relationship between mills and farmers one of the industry's most important economic links.
The new factory could therefore have an impact well beyond its own production. Sugarcane creates demand for transport, agricultural inputs, machinery and other services, while sugar processing generates tax revenue and employment across the value chain.
Speaking during the groundbreaking ceremony on September 30, the Minister for Local Government, Balaam Barugahara, said the project would create more than 3,000 jobs, as well as strengthen commercial agriculture in the area.
“My interest here is for the young people. The factory shall employ over 3,000 people while fostering local agricultural growth through sugarcane outgrower schemes,” he said.
Elizabeth Mbeiza, a member of Shakti’s management, said the company would pay farmers in cash after they delivered their cane.
“At Shakti, outgrowers will be paid cash after delivery of their canes at the factory,” she said.
For the farmers, the arrival of another mill could increase the number of buyers for their produce. But it also raises a question about the availability of sufficient cane to keep Uganda’s growing number of factories operating at economic capacity.
More than sugar
Uganda’s government sees agro-processing as an important part of its industrialisation strategy because it allows more value to be captured domestically from agricultural production.
Sugar is a particularly visible example. The crop supports large numbers of farmers while the mills create industrial jobs and generate demand for logistics, engineering, energy and other services.
The sector also contributes to government revenue through taxes and statutory payments generated by factories, employees and businesses across the value chain.
Shakti plans to extract more value from its own production by using sugar-processing waste to generate electricity. It is also considering paper and nanomaterial production from some of the waste.
Such diversification could become increasingly important as manufacturers seek to improve efficiency and reduce the cost of disposing of industrial by-products.
Minister of State for Planning Amos Lugoloobi said improvements in electricity, water and roads had helped make Kayunga more attractive to investors.
“Without water or power, investors wouldn’t have been attracted to Kayunga to build the factory,” he said.
The food-security question
But the expansion of sugarcane also carries a social and agricultural trade-off.
Barugahara has warned farmers against putting too much of their land into sugarcane, arguing that households should retain enough acreage for food production while diversifying their incomes through crops such as coffee and activities such as livestock farming.
The government is also proposing legislation that would restrict farmers with less than four acres from growing sugarcane, tobacco, and cotton.
