Politics of sugar: First toughest test Magufuli govt to face head on

Sunday May 29 2016
sugar pic

Prevention and Combating of Corruption Bureau acting director of Investigation Leonard Mtalai (Left) speaks to Mpendazoe MP and Al-Naeem representative Salim Turky after the authority impounded containers laden with sugar at Dar es Salaam Port recently. PHOTO | FILE

Dar es Salaam. The ongoing shortage of sugar in the country has taken a new twist following stakeholders’ comments that the situation has been compounded by some big fishes who want the government to bow and uplift the import ban it slapped on the commodity.

For over month now, sugar shortage has been reported in various parts of the country with prices shooting up few days after President John Magufuli announced the sugar import ban.

The government though gave an indicative prices of not more than Sh1,800 per kilogramme, they kept on increasing, as the shortage of the crucial commodity intensified in various parts of the country.

According to The Citizen on Sunday survey, so far sugar prices range between Sh2,000 and Sh4,000 per kilogramme, contrary to the capped price of at most Sh1,800 per kilogramme.

Some business analysts and the commodity stakeholders, who spoke to The Citizen on Sunday, said ‘sugar politics’ was so difficult to pursue and that the government needed to be prepared for bowing to the pressure dealers were piling up.

One of the officials with local sugar factories, who did not like his name to appear in the newspaper, said the situation had taken a new twist, as some traders were optimistic the government’s bid of protecting local sugar producers would fail. “It’s obvious the situation is very tense, there are people in this business who want to fail the government by hoarding sugar and spreading wrong information through the media,” he said.

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The sugar shortage might either be genuine or artificial, they said, stressing that much as most sugar importers wanted to make super profit from the business, it was difficult to trust what they say. “The government does not trust most of the sugar importers. We’re witnessing a vigorous crackdown on the commodity hoarded in various warehouses because these people had a trend of hiding sugar to artificially create scarcity and cause tension among consumers,” he said.


Why the sugar importation ban

In February, this year, President Magufuli announced the sugar import ban, saying he would be the only person to issue permits.

He pointed an accusing finger at some corrupt officials he blamed for issuing permits even when the country had enough sugar stocks. The Sugar Board of Tanzania (SBT) coordinated the permits.

The Head of State said some officers were issued permits when local producers had sufficient sugar for consumers countrywide.

President Magufuli added that apart from weakening local producers, some of the imported sugar was of low quality and that it could cause health hazards to the consumers.

However, Section 14(1) of the Sugar Industry Act, 2001, states that the SBT shall have powers to issue sugar import licences and prescribe procedures and regulations for the same.

Subsection (3) states that before relevant licences are issued under subsection (1), the SBT shall take into account levels of local sugar production and sugar import or export requirements at the particular time.

According to the analysts, some SBT officials have been not adhering to subSection (3) of the said Act and thus the President’s intervention aimed at safeguarding local producers. “There are a lot of issues behind the sugar politics curtain, and President Magufuli is facing a big challenge to address the situation,” the anonymous source said.

According to the SBT importation records, there have been an increase of sugar importation in the country in the past three years.

In 2012/13, at least 41,858 tonnes of domestic sugar was imported in the country. Also 131,651 tonnes of industrial sugar was imported in the same year.

In 2011/12, 182,845 tonnes of domestic sugar and 101,528 tonnes of industrial sugar were imported. Moreover, in 2010/11, 37,799 tonnes of domestic sugar and 66,979 tonnes of industrial sugar were brought into the country.

However, the SBT records also show that 98,950 tonnes of sugar were exported from Tanzania to neighbouring countries between 2011 and 2013.

University of Mzumbe Professor Honest Ngowi told The Citizen on Sunday that there had been reports on importation of sugar by the government to bridge the gap. He said importation of sugar was costly to the economy no matter who is entitled to the process.

“Imports imply parting with the rather scarce foreign currency, the action which has many negative results. It also implies exporting jobs, incomes and government revenues. As a short term solution however, this may be necessary for correcting the market failures,” said Prof Ngowi.

Prof said Ngowi said sugar importation may be bad for the economy especially at this period when the government is focusing on improving and developing local industries.

“There have been reports that sugar can be imported and sold in Tanzania at a price of below Sh1,000 per kilogramme. If this is true, it’s good news to consumers, but very bad one to domestic producers, especially those seeing the indicative price of Sh1,800 a kilogramme too low for them to make profit,” he said.

On hiding sugar for the purpose of creating an scarcity, the don said the practice may be artificial with the purpose of making higher profit from the business.

He said, the hoarding of sugar can be a result of a number of factors. One being the indicative prices. If a sugar indicative price is in reality below the production cost of the existing stock, then it can be among economic explanatory factors for hoarding.

 He added that hoarding could also be caused by speculations in anticipation of higher prices in the future. “Before blaming and searching for those hoarding sugar, one needs to consider these economic realities, however uncomfortable they may look. Emotional reactions and search for cheap popularity without considering the basic economic realities may not fix what has been broken,” Prof Ngowi cautioned.

In recent days, some government officials’ names and photos have been covered in various media as they search and seize sugar consignments from various warehouses in different regions.

Mr Zitto Kabwe (Kigoma Urban - ACT-Wazalendo) said sugar importation has been causing complaints from various stakeholders and that measures need to be taken to save employment opportunities for over 30,000 wananchi in the sector.

He said when he was a PAC chairman, the committee visited Kilombero sugar factory and that they realised many challenges in the sector.

He said there had been a trend in the country of importing sugar without paying, a situation that weakened local producers. He said between 2009 and 2012 the government had incurred a loss of Sh462 billion in the sugar sector.

“The importation of sugar has led to the decrease of sugarcane price among farmers from Sh69,000 to Sh55,000 per tonne,” said Mr Kabwe, adding that the government needed to amend the Sugar Industry Act, 2001 for the SBT to become regulatory authority and provide indicative prices for sugarcane and sugar so as to protect local farmers.

He added that the government must also enable wananchi to establish small-scale sugar production factories so that they could boost local sugar production.

Prof Richard Mshomba of La Salle University, US, told The Citizen on Sunday that from an economic point of view, a price ceiling and restrictions on imports are a contradiction.

He said a price ceiling set below the equilibrium price created a shortage, adding that  in a bid to prevent such a shortage from occurring, supply can be increased by subsidising domestic producers or by eliminating barriers on imports.  

“Of course, subsidizing domestic producers would not increase the supply of sugar immediately.  Trade barriers limit supply.  Whatever the justification for trade barriers might be, they make the shortage situation even worse,” he said.  

According to Prof Mshomba, price ceiling is rarely an effective solution to the problem, although it is not clear why market forces are not allowed to set the price of sugar. “Trying to contain market forces with a price ceiling without a corresponding increase in supply is like trying to control rapid water flows with leaves,” the don said.

Price ceilings also increase administrative costs associated with monitoring the adherence to the price control and the rationing of the little amount that is available.

In addition, a price ceiling on sugar increases transaction costs for consumers as they spend many hours looking for it. 

The don said removing the price ceiling was the starting point to solve the current problem while a more sustainable solution for increasing the supply of sugar is being worked out.

Some ordinary wananchi, who spoke to The Citizen on Sunday, said the sugar crisis was the first toughest test to President Magufuli. 

“ Almost all Tanzanians consume sugar, thus the scarcity of the product means every mwananchi is affected. The Head of State must do everything in his powers to resolve the problem,” said a trader at Ubungo, Mr James Mwandwi.

Another Dar es Salaam resident, Ms Amina Abdallah, said there was no doubt some big traders were sabotaging President Magufuli’s efforts to promote local sugar industries.

She said the Head of State and other wananchi must firmly stand for him to promote local sugar factories.