The move by Kabuye Sugar Works, Rwanda’s only sugar manufacturer to cut down supply by 50 per cent has caused an acute shortage of the commodity on the market leading to instability in prices.
Rwanda is experiencing a shortfall in sugar output and supply, which has led to high prices even as government and traders agreed to fix the retail price at Rwf800 per kilogram, down from Rwf1,200.
“Right now, although some traders are not adhering to the agreed price, it is advisable that the market forces do not be interfered with until the supply issues are sorted out,” François Kanimba, the Minister of Trade and Industry told Business Times in a phone interview.
Sugar traders must register with Kabuye to receive only one sack of 50 kilograms everyday at Rwf30,500 while the rest have to import from Tanzania at Rwf40,800 to offset the deficit.
The General Manager of Kabuye Sugar Works, Rao Mahakali, attributed the company’s decision to a shortage of raw materials, which halted production.
The supply shortage is likely to ease after the EAC Council of Minister approved a request by Rwanda to waive the region’s Common External Tariff (CET) imposed on sugar imported outside the block to increase supply and stabilise prices in the local market.
This is a short term move, though, which will last for a period of six months and is not set for the long run, meaning that government must find a lasting solution
The action is projected to lower the costs of sugar importation to East Africa and subsequently lower its market price for consumers.
“The market currently relies on importation; now that tariffs on sugar importation have been removed, we encourage traders to import from countries that produce a lot of sugar, like Brazil,” Mahakali said.
However, traders in Kigali decry the inconsistent supply of sugar from Kabuye, which, they say, makes it difficult for them to maintain the set price cap of Rwf800.
“I only get one sack of Kabuye sugar a day when I am lucky. Yet, I need to make a profit. If I sell at Rwf800, I will not recover my money,” Suleiman Kabuye, the owner of a retail shop in Nyabugogo said. He sells a kilogram of Kabuye manufactured sugar at Rwf900.
“Some customers come looking for Kabuye sugar because it is what they were used to; when we have run out of it, some of them cannot afford the imported sugar that we sell at Rwf110,” he said.
In an attempt to earn better margins, traders mix Kabuye sugar with the imported one and sell it at Rwf1,100, the set price for imported sugar.
Although Mahakali condemned the practice, he noted that it was difficult to eradicate the vice under the prevailing circumstances.