February 23, 2017

Sugar refineries struggle with backward integration

Sugar refineries struggle with backward integration


By Franklin Alli

SUGAR manufacturers in the country are still struggling with their backward integration programme amidst likelihood that the massive drop in the volume of output three years ago may sustain upwards swing.

Output rose to 15,000 metric tonnes (MT) per annum in the latest report up to 2015 after a huge plunge three years ago from 35,000 MT they had recorded five years ago.

Top operators in the industry are Dangote Sugar, BUA Sugar and Golden Sugar, a subsidiary of Flour Mills.

Vanguard learned that the specific incentives government has put in place for investors in the industry includes zero per cent duty on machinery and spare parts imported, five years tax holiday for sugarcane value chain, outright ban on the importation of refined sugar in retail packs and 30 per cent tax credit on the cost of provision of critical infrastructure by sugar cane to sugar project investors.

Critical infrastructure

It was further gathered that under the National Sugar Master Plan (NSMP) the target is to produce on an annual basis 1, 8 million  tonnes of sugar; 161.2 million litres of ethanol, 4000MW of electricity, 1.6 million tonnes of animal feeds, 37,378 permanent jobs and 79,803 seasonal jobs; save  the economy $416 million (N68.6 billion) in foreign exchange over a ten year period.

However, a five – year data (2011-2015) obtained from the National Sugar Development Council, NSDC, revealed that local production which stood at 35,000 metric tonnes had dropped significantly to 15,000 metric tonnes in the years under review.

In 2011, production was 35,000 metric tonnes. It dropped to 10,843 metric tonnes (2012) and further down to 10,000 metric tonnes in 2013, picked to 12, 345 tonnes and 15,000 metric tonnes in 2015.

In a communiqué , stakeholders in the sector noted that  the risk   associated with investment in the sugarcane to sugar value-chain is very challenging and requires a  conscious partnership  with Nigeria Agricultural Insurance Corporation (NAIC) to reduce the loss due to natural disasters such as fire and flood.

The communiqué further called on lending institutions like Bank of Industry and Bank of Agriculture to create friendly financial support schemes that would address the challenges being faced by investors in terms of high interest rate, untimely release of funds and other associated bottlenecks that slow down farm and factory operations which are time specific.

In a statement, Mr. Samuel Kwabe, the Acting Executive Secretary of NSDC, said  “I can tell you that the two functional sugar companies we have- the Golden Sugar Company in Niger State and the Savannah Sugar  Company in Adamawa State –have provided jobs for about 13,000 Nigerians.

“I am happy to tell Nigerians that the Savannah Sugar, owned by Dangote Group, has been able to produce about 13,000 metric tonnes this year. The company is undergoing expansion. As a matter of fact, they are in the process of acquiring a brand new mill, which is about three times the size of the present one,” he said.