Mabira: No storm in Mehta’s tea cup

By Mubatsi Asinja Habati

Demand for sugar to hit 700,000 tonnes in 10 years. Only 350,000 tonnes are being produced today.

If President Yoweri Museveni gets his way, one-third of the 30,000 hectare Mabira rainforest will be mowed down to give way for the Mehta Group to plant sugarcane.

If that happens, the environmental, political, and economic arguments apart, one of the most inefficient companies in the world will have been handed one of the most prized pieces of real estate.

The association of Uganda Sugar industrialists says that although Uganda has the lowest consumption of sugar per person in the region, by 2030 the estimated demand for sugar will have hit 700,000 metric tonnes per annum.

Most people in the world consume an average 2kg of sugar per month but each Ugandan consumes about 10 kg of sugar per year, just about a kilo per month. The average is 15kgs per year per person for the Common Market for Eastern and Southern Africa (COMESA) region.

In Swaziland, each person consumes up to 10kg of sugar per month. The low consumption in Uganda is mainly due to poverty and the high prices which put sugar out of reach of most households. The Mehta Group’s Sugar Corporation of Uganda Ltd (SCOUL) has the highest factory sugar prices at Shs 120,000 for a 50kg bag, Kakira Sugar Works, which is the biggest producer, charges Shs 112,400.

Consumption, however, is on an increasing trend as the population grows. It has gone up by 2% per year over the last 10 years – hitting a total demand of 370,000 tonnes in 2011. Unfortunately, as a result of a maze of complications like low production, import, and re-export of sugar, there is already a huge deficit of 50,000 metric tonnes, according to the Uganda Sugarcane Technologists Association figures.

The question, therefore, is not whether the country needs more sugar or not. The question is how to get more sugar. One solution lies with producing more by planting more sugarcane. That is the one favoured by Museveni. But other options include, either importing more sugar or producing more sugar locally more efficiently. Several experts have said sugar productivity per hectare and ton of raw cane in Uganda can be improved by planting better varieties and employing better technologies.

Industrialists say sugar is more expensive to make in Uganda than it is in other parts of the world because the raw cane quality, soils, and climatic conditions are bad. Kinyara, which has the best output of the major producers, has a sugar recovery on cane of 9.8%. Kakira and Lugazi report recovery of 9.5% and 8.3% respectively. In other countries, such as Swaziland, it is as high as 14%. According to a Food and Agriculture Organisation report, sugar companies in Uganda produce 10 times less per unit area than their counterparts in Malawi.

“In other words a Ugandan mill has to process 56% more cane than the Swaziland mill does to make the same amount of sugar,” says a September 24, 2010 letter by Uganda Sugarcane Technologists Association to EAC. They were justifying the Uganda government’s protectionist policies and protesting Kenya’s move to allow tax-free COMESA sugar into the region.

To protect the three major sugar producers, the government banned importation of sugar into the country. Last year these sugar factories produced 292,051 metric tonnes of sugar, 8.2% below the projected 318,000 metric tonnes. Annual sugar consumption in Uganda is about 340,700 tonnes -13% of which is imported.

So how does giving the Mehta Group 7,000 hectares of eco-diversity rich rainforest fit into this grey forecast?

The proposal

In 2006, Mehta Group wrote to Museveni asking for land to expand their 11, 000 hectares of sugarcane plantation.  They asked for 7100 hectares of land nearby their Lugazi-based Sugar Corporation Uganda Limited (SCOUL) to increase sugar production from, they said, 55,000 tonnes per year to 110,000 tonnes of sugar.

Uganda has three main sugar factories, each run on an estate model with a factory, surrounded by own-plantation, and out-grower crop. Only SCOUL is government-owned although the amount of shareholding is deliberately kept vague by Mehta and the government. The most believable figure has government holding 51% shares and Mehta Group 49%. Other figures give the government 23% and Mehta 77% while others say, SCOUL has since 2010 been wholly owned by Mehta Group. In any case, the strategic plan of the Mehta Group, which is the manager under a 1982 agreement, is to get full ownership of SCOUL. But first, they must get more free land.

In its proposal to Museveni, SCOUL argued that if given more land they would increase their sugar production from 55,000 tonnes to 110,000 tonnes per annum, create 3500 jobs with an earning of Shs 3billion annually, and generate electricity using sugar by-products. It argued that the increased sugar production would save foreign exchange of between US$20 million and US$25 million per year, produce 10 to 12 MW of electricity which would be sold to the government, create 3500 jobs with an annual earning of Shs 3 billion, build schools, hospitals, and houses worth Shs 3.5 million, construct 300 km of roads on the estate valued at Shs 2 billion, and generate Shs 11.5 billion in taxes for the government annually.

Nice promises; unfortunately this is not the first time the Mehta Group is making them and failing to deliver. Since they returned to Uganda in 1982, Mehta have used similar gimmicks to get similar concession for all their business entities like TransAfrica Assurance Ltd, TransAfrica Commerce Ltd, SCOUL, UGMA Engineering Corporation Ltd, Cable Corporation Ltd, and Uganda Horttech Ltd.

Failed promises

In 1982, for example, the government of Uganda secured a loan of Shs 45 billion from the African Development Bank (ADB) for the Mehta Group to rehabilitate the sugar factory. The Mehtas promised that if the government built them a new factory and other infrastructure, they would restore sugar production to the 1972 rate of 60,000 tonnes per year.

The government gave them the money but by the time the project was appraised by ADB in 1993, they were producing an erratic 20,000 tonnes per year, making losses throughout, and asking for more money? To this day, 30 years after the agreement, SCOUL has never hit the 1982 target of 60,000 tonnes of sugar per year. In 2010, they managed their highest production ever, of 54,000 tonnes. This is about the same amount as the 50,000 tonnes the Lugazi sugar plant was producing at independence in 1962. So what is going on?

SCOUL produces the least sugar of the three main sugar companies in the country per acreage. With 11,000 hectares of land SCOUL produced 46,819 tonnes of sugar in 2004, which dropped to 44,137 tonnes in 2005, and to 38,178 tonnes in 2006. For four consecutive years SCOUL was producing sugar below the 2004 annual production. It only increased to 48, 334 tonnes in 2009 and 54,000 tonnes in 2010.

But in the proposal to President Museveni written in 2006, SCOUL said it was producing 55,000 tonnes of sugar which it promised to double if given 7,100 hectares of Mabira. Over the same period, the biggest producer, Kakira Sugar Works has raised its output from 88,000 tonnes in 2004, to 158,000 tonnes in 2009. Kinyara Sugar produced 65,000 tonnes in 2004 and 76,000 tonnes in 2009.

Part of the Mehta problem is their failure to increase the contribution of out-growers. Comparatively, in the East African region, Kenya which has 160,232 hectares of sugar plantation, has up 228, 889 out-growers on 145,232 hectares. Only 15,000 hectares of cane plantations in Kenya is factory owned. Tanzania has 23,000 hectares estate-owned and 20,000 hectares out-grower owned.

Uganda has 26,000 hectares estate-owned and 25,000 out-grower owned. Uganda has the least out-growers at 8,000. Uganda sugar factories also offer cane out-growers the lowest prices at Shs 34,000. On a factory land of 10,000 hectares and 19,000 hectares of out growers, Kakira Sugar Works Ltd, Uganda’s largest sugar producer, managed to mill 1.6 million tonnes of sugarcane to produce 152,623 tonnes of sugar in 2009.

President Yoweri Museveni has this information. So why is he opening another front when he has more pressing problems like an 18.7% inflation, the highest in 18 years, rising cost of living as seen in high commodity prices, a badly weakening shilling, and economic strikes: walk-to-work, taxi drivers, traders, teachers, doctors striking?

Some observers claim Museveni’s insistence on giving away Mabira is diversionary. But Museveni claims opposition politicians and activists who thwarted the Mabira giveaway in 2007 are to blame for the current sugar scarcity.

He told a meeting of district leaders on Aug. 13 that since Mehta Group was stopped from expanding into Mabira forest to grow sugarcane, the country is short of sugar and is to import.

“How can Uganda import sugar? This indiscipline should stop. We have defeated armed terrorists, we cannot accept to be defeated by unarmed terrorists. Even Kinyara Sugar works should be given a (Ninsimba) prison land to grow more sugarcane,”

“Lugazi Sugar should expand by getting part of the Mabira Forest reserve which they had asked for. They were stopped by riots which were led by Beatrice Anywar,” Museveni said.

Environment junior minister, Betty Bigombe, told The Independent that while government is committed to protecting the environment it also has to ensure development.

“It’s a conscious choice we have to make,” she said, “Government is giving away the degraded part of Mabira forest not the whole forest.”

However, as we have shown, the Mehta Group cannot solve the sugar scarcity problem.

Environment disaster

Instead, giving the Mehta Group Mabira forest to destroy will cause more problems. Already, pollution from the SCOUL alcohol distillery has polluted a major water source, the Musamya River, in Mabira forest.

Environmentalists say the revenue loss to government by giving away part of Mabira for sugar growing in terms of carbon credit is estimated at US$316m. The value of the land is estimated at about $5m and the value of the wood at another US$568m. That means the Ugandan public stands to lose almost $890m (about 1.5 trillion shillings, equivalent to 25% of the 2011/12 national budget) as a result of the Government’s plan to degazette part of the forest, according to the NGO, Environmental Alert.

But Stephen Nsita, the Director of Natural Forests at the National Forestry Authority says the role of Mabira should be seen beyond trees and timber because the sheltered part of Mabira also acts as a catchment area for lakes Victoria and Kyoga and rivers Nile, Musamya, and Sezibwa.

Mabira forest is described by conservationists as home to 300 bird species, including the endangered Nahan’s Francolin and the Papyrus Gonolek and nine rare species not found anywhere else in the world.

Conservationists insist that Mabira is the only remaining large natural forest on the northern shores of Lake Victoria after encroachers destroyed South Busoga forest. According to Nature Uganda, Mabira Forest reserve is the largest block of moist semi-deciduous forest remaining in the central region of Uganda.

Uganda has 4.9 million hectares of forests and woodlands cover, according to the NFA. Of this 1.92 hectares are classified as Central Forest Reserves that include Mabira. They are categorised into production and protection sections. Production forests are meant to provide timber products while protection forests like Mabira are for safeguarding watersheds and catchments, biodiversity, eco-systems and landscapes. If such a forest is degraded it would take not less than 6o years to restore its semblance. The World Bank, NFA, and an inter-ministerial in 2007 advised against the forest giveaway.

In 1992, when the Museveni’s government evicted encroachers on Mabira forest to protect the forest from destruction, it made these arguments. It is not clear what has changed.  But after 20 years, it is backtracking and proposing to give away the forest to a sugarcane planter.

Part of the reason could be because the Mehta Group is powerful chain of businesses worldwide.  It has cement factories and electricity power plants in India, plastics factories in Canada, banks and financial consultancy firms in the USA. By positioning itself in the industrial manufacturing sectors for cement, textiles, plastics, sugar, and agrochemical products, the Mehta Group can easily induce favourable deals in poor African countries like Uganda.  Riots over the proposed giveaway of Mabira to Mehta in 2007 left three people dead and led to a boycott of Mehta produced sugar.