Inside the Kilombero Sugar warehouse. Picture: Leonard Magomba
Tanzania has suspended sugar exports to the European Union member states in the wake of market reforms there that negatively affect prices offered to Africa, Caribbean and Pacific countries.
This decision affects the roughly 20,000 metric tonnes of sugar that Tanzania exports annually to the EU market.
Ironically, Tanzania secured a total of $6.494 million from the EU recently as part of a support programme to help sugar producers adjust to the new price regime.
The support programme aims at developing the country’s sugar sector to a point where it can compete globally. The country expects to receive another $2.846 million to raise efficiency and reduce production costs — or to diversify from simple sugar production.
Dr Cyril Chami, Deputy Minister for Industries, Trade and Marketing, said last week in Moshi that the decision to suspend the exports aims at satisfying the expanding domestic market.
He said concentrating on the domestic market would help stabilise the price of sugar and nurture domestic industries.
The country will, therefore, skip the opportunity to export unlimited quantities of sugar duty-free and quota-free to the EU when the Everything But Arms scheme is extended to sugar from October this year.
Sudan, Zambia and Mozambique are expected to benefit from the EU market and to fill more than 60 per cent of the projected export growth.
Mathew Kombe, managing director of the Sugar Board of Tanzania, said in Dar es Salaam that Tanzania would withhold sugar exports because the prices have declined from $754 a metric tonne to $477.
Mr Kombe said that with an average production of 300,000 metric tones annually, Tanzania would like to harness the production capacity of its local industries before venturing into the EU market.
He said the EU funding has already been put to use in various areas to improve the country’s sugar sector. Tenders worth about $2 million are to be awarded this September for construction of roads to cane growing areas.
“Accepting the EU funds and halting sugar exports do not necessarily conflict. The European Commission in Tanzania will with the Sugar Board to make the country one of major exporters to the EU,” he said.
Local sugar demand, which exceeds the combined production capacity of the country’s four factories, has for long been supplemented by imports.
The fund is part of the $234 million issued by the EU to assist 18 countries in Africa, Caribbean and the Pacific bloc from 2007 to 2017 to mitigate against the impact of lower sugar prices in the market.
The International Sugar Organisation recently cautioned high cost producers, including Tanzania, to cut their production costs so as to benefit from the EU market.
Last week, the organisation said reform of the EU sugar policy had resulted in a major shift in the balance of global trade.
Beginning this year, the EU has become the world’s leading sugar net-importer, with annual imports of about 4.5 million metric tonnes. This is against the average for the past five years of about 3 million metric tonnes.
In 2008, the East African region consumed 1.2 million metric tonnes against a total production of just one million.
The region is currently implementing a project to modernise sugar production to achieve high yields through use of low-cost cane varieties to be imported in the next five years.
The project, which started in 2007, is worth about $4.2 million, out of which $2.3 million was granted by the Common Fund for Commodities.
The rest, about $1.9 million, was raised by East African partner states — Kenya, Tanzania and Uganda.
The project involves training sugar stakeholders and importing about 900 cane varieties for tests on environment suitability, yield, resistance to disease and production costs.
