In 2024, USMA, which represents major sugar manufacturers in Uganda, including Kakira Sugar Works, Kinyara Sugar Works Ltd, the Sugar Corporation of Uganda Ltd, Bugiri Sugar Ltd, and Sango Bay Estates Ltd, petitioned the court to declare the licenses issued to CN Sugar Limited and Shakti Sugar Limited as illegal.
The court found that the ministry of Trade’s failure to establish USB was a breach of statutory duty, as required by section 4 of the Sugar Act. In its response, CN Sugar, through its director, Petel Namit, argued that the proposed amendments to the Sugar Act, which sought to delete the provisions dealing with USB and replace it with a “Sugar Industry Stakeholders Council,” were to blame for the lack of a regulatory framework. However, the court rejected this argument, finding it to be “ridiculous.”
Namit told the court that his company invested $35 million in reliance on the Sugar Policy of 2010 and assurances from the regulatory authority under the ministry of Finance. He claimed that this investment was made in good faith, expecting to carry out sugar-related activities. On the other hand, Patel Ravikumar Ramalal of Shakti Sugar pointed to the National Sugar Policy of 2010, which provides for the granting of licenses to new sugar factories for nucleus estates of approximately 500 hectares.
Ramalal argued that Shakti did not require a sugar license from the Attorney General or the ministry since it already possessed a qualified foreign investment license from the Uganda Investment Authority (UIA). This license was granted on November 15, 2022, for sugar manufacturing in the Nalyamabidde Bubajjwe Kayunga district. The license required compliance with various regulations, including the National Environmental Act and the Investment Code Act.
Shakti’s operational license was further supported by the Kayunga district council’s decision to grant a development permit certificate on May 19, 2023. Shakti argued that to commence operations, it only needed to present an Environmental Impact Assessment Certificate from the National Environment Management Authority (NEMA). The development permit also required compliance with district sanitation and health standards, which Shakti claimed it fully met.
Notably, Shakti argued that the absence of formal criminal charges against it under the Sugar Act implied that its license was lawfully granted by the UIA. However, acting commissioner Denis Ainebyona, representing the Attorney General and ministry of Trade, clarified that CN Sugar and Shakti Sugar had only established a nucleus estate and a warehouse, not an actual sugar mill. He emphasized that a sugarcane nucleus estate is merely a preliminary step toward obtaining a sugar mill license and does not, in itself, constitute a sugar mill license.
The ministry acknowledged that it had merely encouraged CN Sugar and Shakti Sugar to establish nucleus estates, a process that does not require licenses. In his ruling, justice Singiza noted that the ministry of Trade’s actions were not only illegal but also undermined the existing 2010 government policy on sugar in Uganda.
The court also found that the ministry of Trade had granted licenses to CN Sugar and Shakti Sugar without following the required procedures. The court noted that Local Council One (LC I) chairpersons had issued Letters of No Objection (LONOs) to the two companies, which were then used to obtain licenses from the ministry of Trade. However, the court found that the LONOs were not a substitute for the licenses required by law.
“The arguments of all the respondents remain that it is wrong to construe the LONOs granted to CN by the MTIC as a disguised licence when they were merely administrative requirements by the UIA. As already determined and in agreement with counsel for the USMA, the LONOs given to CN and Shakti were permissions which were illegally used to establish sugar factories in different districts,” said Singiza.
Singiza observed that the failure of the ministry of Trade to establish the Uganda Sugar Board had created a legal and policy vacuum, which had been exploited by CN Sugar and Shakti Sugar. The court noted that the two companies had taken advantage of the situation to establish their sugar and jaggery mills, which was contrary to the law and government policy.
The court also declared that the failure to constitute and put in place the USB was illegal. This is among the ten orders made against the government and the two companies. Additionally, the court declared that the establishment of CN and Shakti Sugar and jaggery mills within a 25-kilometre radius of other existing sugar and jaggery mills is contrary to the government policy on sugar, as amplified by the presidential guidance on the zoning of sugar business enterprises.
The court issued an order of certiorari cancelling all purported new sugar licenses or permissions in the form of LONOs that had been granted to CN Sugar and Shakti Sugar. CN Sugar and Shakti Sugar were also ordered to immediately halt all their sugar and jaggery mills until they have been duly licensed by an authorized body.