By Timothy Nsubuga

22^nd Aug 2011:

Mabira Forest: Controversial piece of real estate

President Yoweri Museveni’s latest proposal to give away 7,100 hectares of supposedly “degraded” parts of Mabira forest to Sugar Corporation of Uganda Limited [SCOUL], a sugar producing company based in Lugazi, could earn the “loss” making sugar corporation approximately $1billion from one off timber sales, an analyst has said.

The revelation, re-produced verbatim here below, was made by Mr. David Ofungi on his blog under the title “The Inconvenient Truth”. Mr Ofungi argues thus:

“…For those who were in Kitante Primary School, some may remember that the part of the school field where ‘Rwenzori Green’ used to camp out had what we used to call Mabira forest in the valley below. I am not sure whether it still survives with all that has been going on (Google Earth someone?). However, a big and immensely important task lies with every citizen of the globe as we try to save the bit of its namesake that is being given out to exploiters!

I do this painfully but just for argument’s sake, if we gave the sponsors of this madness the benefit of doubt with respect to supposed benefits to the economy, one would wonder why a loss making entity that doesn’t add a single cent to the treasury should rob one of our great national treasures. On the proverbial scorecard, the arguments for social-economical benefits do not even feature. Further still, the table below shows that economic pitch if raised, only enhances the ‘stink’ surrounding this issue.

If we use the lowest possible benchmark for all things environmental, it is a shame that even the much-loathed Bush administration has admitted that climate change is an issue that needs addressing. One cannot help but wonder whether our guys in leadership know that whatever it is they are smoking, chances are that they might just originate from Mabira Forest!

A summary of the income statement is shown below. For those not familiar with reading financial statements, do not be fooled by the 2004 figures. There was a restructuring of secured debt in 2003 which basically makes the company post a superficial or one-off profit. The outstanding loans were bundled with an additional facility from shareholders (read: government) to total 107 billion shillings in 2004 according to the balance sheet. This basically resulted in more debt repayments in 2005 which triggers more losses, probably till perpetuity if you ask me”.

Source: SCOUL financials

UGX MILLIONS

Source: SCOUL financials

“…Another doomsday scenario: At Sh1.2m per hectare, the proposed giveaway of 7,100 hectares of Mabira Forest land, translates into UGX 8.5 billion. The company is likely to have a one-off superficial income from the sale of timber if the land giveaway succeeds. The value of this timber could be up to 1 billion $ according to estimates (ecological damage cannot possibly be priced). Now there is unlikely to be any covenants that deter the company from collateralizing the land for further debt to fund the said expansion. Basically, free land could be mortgaged for even more debt finance!

This will really piss you off now…There are two shareholders in SCOUL; the International Investment Corporation (IIC) and the Government of Uganda with a share holding of 76.2% and 23.8% respectively. IIC, which is registered in Bermuda, is the investment arm of the Mehta Group. We all know that a Bermuda-registered company (offshore haven) must be structured in for some tax purpose!

You ready for more bad news? The Company’s board of directors consists of six members five of whom are appointed by IIC including the Chairman who has a casting vote. The government only has one board representative, a ministry of finance official who is unlikely to carry anything but a symbolic vote when it comes passing resolutions.

Oh, and just to twist the dagger, the growth in sales is mostly price driven as most who live in Uganda will know, the price of sugar has more than doubled in over the past three years. I have not seen the 2006 financials but with the current energy crisis and increased cost of fuel, change for the better is unlikely.

Did I mention that Kinyara Sugar Works, on two thirds the land (without the giveaway) of about 10,000 Ha has almost 1.5 times production of SCOUL and posts a profit? SCOUL (see table below) covers 15, 000 Ha. Sugar production in SCOUL in 2005 was 44,138 tons compared to 64,000 tons for Kinyara. There is a huge element of operational inefficiency with SCOUL because their cane production of 2500 tons per day is more than Kinyara’s which stands at 2000 tons per day. The situation is further exacerbated due to the fact that SCOUL has a bigger advantage due to its close proximity to the market resulting in lower transportation, relocation and other costs, all this when there is a government policy in place to ban non EAC sugar imports!

The table below shows comparative sugar production across the three existing firms”.

Source: http://www.germanwatch.org/tw/zu-afr06.pdf

Mr. Ofungi’s concluding question also raises serious questions about President Museveni’s real motive to forcefully giveaway parts of Mabira, an important natural resource.  Ofungi asks:

“…If the Mehta’s had faith in their abilities to run a sugar factory, surely they would have put in a bid, along with the Madhvani’s et al for Kinyara Sugar? Their absence manifests their incompetence and self interest which serves not our nation but a small private company, conveniently registered somewhere at a P.O. Box the West Indies”!

Museveni however maintains that Mabira forest should be given to SCOUL in order to arrest the prevailing sugar crisis pervading the country.  But if the issue is indeed about “arresting” the “current” sugar crisis, then we have to ask ourselves this simple question:  How long will it take from de-gazetting Mabira, clearing the land, planting sugarcane, to production of sugar?  Does the argument about “arresting the prevailing sugar crisis” still hold true when we know that the entire process could take year?  Over to you!

Those who are interested in joining the campaign to save Mabira forest can follow this link http://www.savemabira.petitiontime.com/ and sign a petition.  END.  Please login to www.ugandacorrespondent.com every Monday to read our top stories and anytime mid-week for our news updates.