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Algeria’s biggest sugar producer Civital Group seeks 20,000 hectares in Rwanda

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KIGALI, RWANDA – Algeria's biggest sugar producer Civital Group has tasked the Rwandan Government to provide 20,000Ha of land to grow sugarcane as a pre-condition to set up a sugar milling plant in Rwanda with the capacity to produce 200 Metric Tonnes( MT) annually.

The plant is only a portion of about US$250m the group has earmarked to invest in Rwanda in agro-processing focusing mainly on sugar production, tea processing as well as grains and cereals processing for both internal and external markets.

Rwanda, whose more than 80% population derives livelihood from agriculture, which represents 35% of GDP and generates 60% of commodity export revenue, could find it challenging to meet Civital's land condition.

According to the Head of Agriculture Development at Rwanda Development Board (RDB), a public agency charged with wooing and facilitating investors, Mr Tony Roberto Nsanganira Civital's condition could not be easy to meet. "It will not be easy because 20,000 hectares of land is a big portion and currently we have 1.5 million of cultivable land," Nsanganira, who has held talks with Civital said in an interview.

Sugar prices in Rwanda have gone up dramatically since August this year and officials cite insufficient supply behind the price increase.

Rwanda has one sugar processing plant -Kabuye Sugar Works (KSW), which produces 30% of the local market demand and the remaining portion, is imported from Uganda, Tanzania and other countries.

Due to drought that hit sugar plantations in East African countries such as Uganda and Tanzania reducing production beginning August this year, Rwanda has not been able to import enough sugar to satisfy the local demand. This has pushed prices up and the highest was Rf1300 per kilogram.

Meanwhile, the EAC countries, which tax 100% sugar imports from outside the bloc, late this year approved Rwanda and Uganda's request to import 50,000 tons of sugar and 40,000 tons each tax free to avert the sugar crisis and bring down the prices. Sugar price has now gone down in Rwanda to Rf1000 per kilogram.

However, importing sugar, though it helps to avert the current crisis, it does not solve the issue of insufficient production locally. It also worsens the balance of trade, which continues to widen due to high imports and low exports.

For Rwanda to be able to avert future sugar crisis, it is required to have sufficient sugar production but land remains a major factor hindering this objective.

The current sugar miller in the country, KSW, the former state owned factory that was sold to Madhivani Group through privatisation in 1998, produces around 10,500 tons each year, which represents 30% of the total demand.   The company explains that low production is a result of small and poor land for sugarcane production.

When it acquired the factory in 1998, KSW signed a 50-year lease contract with the Government for 3,158Ha of land but it says only 2,160Ha are suitable for sugarcane production while the rest is prone to flooding.

The company had promised to meet 80% of the local sugar demand but it never lived to the promise due to land issues. With repeated appeals to the government to get more land, KSW failed to attract government attention and so it couldn't get land to increase its sugarcane production to have sufficient raw material for sugar production.

Now the coming of Civital Group with a hefty demand for such a big chunk of land puts the government in an awkward situation.  Mr. Nsanganira explains that Civital's request is being discussed with the ministry of agriculture but there is not response so far.

"They [Civital Group] discussed this with us[ Rwanda Development Board], and the ministry of agriculture and we are currently looking at how this could be possible," said Nsanganira, adding that there are possibilities that a rather small portion of land could be opted by the Government. Nsanganira, however, said the company is only interested in a big chunk of land for it to set up the plant that would produce for Rwanda and other markets. Civital runs a huge sugar milling plant in Algeria.

Nsanganira stressed that Rwanda needs such a plant to avert the current sugar crisis and also to reduce reliance on imports.

The issue could spark off debate over the balance between food production, which is very crucial for food security reasons, and sugar production, which is also crucial for bridging the trade deficit that continues to rob Rwanda of its foreign reserves.

http://www.busiweek.com/11/news

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