Sugar |
In recent years, sugar production in the country has not matched supply which has in turn had an impact on the trade deficit.
For instance
Kabuye Sugar Works, the largest producer has a capacity of about 14000
tonnes annually against a demand of an estimated 80,000 metric tonnes
annually.
Madhvani Group,
which owns the plant say that they are undertaking an expansion drive
which will see the plant increase production capacity.
Farhan Nakhooda's group project director's Excerpt:on the expansion, projections and insights into agricultural investments in Rwanda.
Last year,
you expressed interest to expand your operations in Kabuye Sugar Works
to increase production capacity. How far with the expansion?
The first phase of
the expansion will end in the course of this year. The second phase
begins mid this year and will run for 3 to 4 years.
The design work for
Phase 2 is going to be very different, for Phase 3 which we are already
exploring and have asked for additional land, we have commissioned a
survey on who is currently using the land and what scheme of development
we will propose for it.
Till that survey is
completed, it is difficult to draw complete timelines because that will
depend on the timelines, terrain, and irrigation required.
What will be the capacity of the plant following the expansion in the various phases?
The capacity of the
plant will increase to 21,000 tonnes of sugar at the end of Phase 1. We
are currently producing 14,000 and we will go up to 21,000.
You might not see
it immediately because at the end of Phase 1, the land will be ready for
planting, then it will take another 18 months or so to mature.
So while the
project work will be complete at the end of 2017, we will need about 18
months before the cane is ready to have the sugar out. From phase 2 we
will get to 28,000 tonnes by an additional 7 000 tonnes.
The country
currently has a demand of about 80,000 tonnes of sugar per year, what
are your projections on how much imports could be reduced?
This will reduce
the quantity of imports but it will not eliminate them. For that
additional land has to be made available for cultivation. Our intention
with the land that we have and what we have requested for is local
consumption.
In the country, you mostly use a Public Private Partnership (PPP) model, have you found this to be effective?
We have found the
PPP model very useful in the case, the land we have been allocated is
not a contiguous parcel, we have farmers land, then our land. We have to work jointly with local farmers to do it.
To get the full
participation of the farmers through the assistance of local
administration and the Ministry of Agriculture makes a big difference.
By doing it as PPP we ensure that farmers benefit, cooperate and
participate.
We have formed nine
cooperatives in the last 2 years and we have formed seven water
management associations. The system we have designed has drains which
run through our land and farmers land.
If the farmers do
not maintain their portion, the system will not work, the responsibility
of the associations is to make sure that the farmers maintain the part
of drain that runs through their land wherever there are flood gates
which are slightly higher technology so we maintain the flood gates. Farmers are willing to pay to the associations a small fee so that the system works.
Have you had any efforts to help farmers living around your plants to do better in terms of output?
We certainly help improve lives of people who are living around the plant.
In phase 2 we are
looking at slightly different technology for transportation along the
Nyabarongo River by barges, right now cane is transported on wooden
canoes but we plan to have large steel mechanised barges.
So that will greatly improve the rural access infrastructure that can be used by the surrounding communities.
While the barge can
be used one way to transport cane, on the return journey, it comes back
empty, if that community needs to transport produce or inputs, they can
use that empty capacity of the barge. It should directly benefit the
community.
What is the profitability and viability of such ventures in Rwanda and the region based on your experience?
These are long
gestation projects; they are viable in the long run. They are viable for
investors who are not looking for returns tomorrow. In Uganda, we have
been in business for about 100 years, we have a different appetite for
risk and we look at long time gains.
Over the years, the projects are viable and you contribute to the economic gains of countries you are working in. I would say the same for the rest of the region.
In your
initial proposal, there were plans to produce about 12 megawatts which
would be added to the national grid. Is that still the plan?
We are meeting the
Ministry of Infrastructure and we are talking to them about the
government's willingness to buy power that we generate. There is capital
investment in putting up the plant.
If there is no
guarantee in finding a buyer, we will put up a smaller plant. If the
ministry and the Rwanda Energy Group say that they will buy from us, we
will be ready to make a higher capital investment and supply the power.
In your close to 20 years of working with the government, how can you rate them as partners?
We have seen that
the government is very supportive and is receptive to new technologies
and there is genuine commitment to improve lives of the common Rwandan.
That encourages us
that if we are investing in projects such as this one that have benefits
to ordinary Rwandans, it is sustainable. We are not only investing in a
project to reduce sugar imports and benefit farmers as well.
Do the global prices of commodities worry you considering it's at a time when you are increasing your capacity in the country?
Actually in the
last one year, sugar prices have gone up by at least 50 per cent,
commodity prices have gone down are largely for oil and metals, which
are imported by large economies such as China and India.
Those have gone
down. But the sugar industry is very cyclical. Right now we are in a
state where the demand exceeds supply and therefore the prices have gone
up, there is a steady increase in demand per year globally but
production capacity has not gone up.
That is why we are seeing an increase in price.
As a player in the sector, what is your observation of the regional sugar sector?
The community does
need to invest in increasing sugar prices. If you look at Africa as a
zone, North Africa imports, East Africa Imports, West Africa imports, it
is only Southern Africa that exports.
If you add up all
this, Africa as a whole is a net importer, till we address this as a
bloc by increasing production, the trend of deficit could continue. There is a potential for expansion for the sugar industry.
The industry also
generates large volumes of employment; it gives small farmers economic
activities to do and has other benefits which crops do not have.
How can regional governments change the status quo?
The governments
need to have a good sugar import policy. What happens is that
international companies dump sugar when they have a surplus, they sell
the extra at marginal costs.
That world market
of sugar is determined essentially by marginal costs not the actual
costs of production. In the community (EAC) there is a tariff regime,
whereby there is a certain import duty applied so that we are protected
from this dumping.
Dumping provides revenue to farmers outside not the local market. We need a policy which will encourage local production.
Quite often, you work with smaller holder farmers, is it inconveniencing?
It is always a
challenge to work with small farmers but the main benefit is that there
is a lot of self-fulfillment when you see the value that you are adding
to a community.
It has really
developed our project and we have taken very concrete steps to improve
relationships with farmers. Some of our farmers have gained a lot and
have become trainers for others and have improved yields.
Does the technology use in sugar production affect the levels of produce and what new technologies are you set to adopt?
The basic sugar
production technology has not changed, when you add on power, it
requires more modern technology to be able to supply to the grid. That
improves the value addition to the process.
Similarly if you
are going to make alcohol from the molasses that is left behind. Our
plant will incorporate new technology both for power generation and
alcohol production.
Previously there
was a lot of manual work, now there is a lot of automation. But when you
do automation it is important to ensure a balance so as not to reduce
employment.
We want to balance both.
Thanks for give me this information really this product is very effective.
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