The High Court in Kampala has declared all licenses issued by the Ministry of Trade, Industry, and Cooperatives to sugar and jaggery mills since 2010 as null and void.
The court’s decision, delivered by Civil Division Judge Dr. Douglas Singiza on Monday, follows a successful petition filed by the Uganda Sugar Manufacturers Association (USMA).
The petition was filed against the Attorney General, Minister of Trade, Industry, and Cooperatives, CN Sugar Limited, and Shakti Sugar Limited.
In 2024, the 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 association argued that the Ministry of Trade’s actions of giving the said companies licenses disguised as Letters of No Objection were in contravention of the Sugar Act.
The Act stipulates that licenses for sugar and jaggery mills should be issued by the Uganda Sugar Board (USB). However, the USB does not exist, creating a legal and policy vacuum.
The court found that the Ministry of Trade’s failure to establish the Uganda Sugar Board (USB) was a breach of statutory duty, as required by Section 4 of the Sugar Act.
In its response, CN Sugar Limited, through its director Petel Namit, argued that the proposed amendments to the Sugar Act, which sought to delete the provisions dealing with the Uganda Sugar Board 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 Limited 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 of Trade, Industry, and Cooperatives (MTIC) since it already possessed an unqualified 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.
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 MTIC, clarified that CN Sugar Limited and Shakti Sugar Limited 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.
MTIC acknowledged that it had merely encouraged CN Sugar Limited and Shakti Sugar Limited to establish nucleus estates, a process that does not require licenses.
In his ruling, Judge 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 declared that the establishment of CN and Shakti sugar and jaggery mills within a 25-kilometer radius of other existing sugar and jaggery mills was contrary to government policy on sugar, as amplified by the presidential guidance on the zoning of sugar business enterprises.
The court also found that the Ministry of Trade had granted licenses to CN Sugar Limited and Shakti Sugar Limited without following the required procedures.
The court noted that Local Council One (LC1) 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 Letters of No Objection 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.
Judge Singiza observed that the failure by the Ministry of Trade to establish the Uganda Sugar Board had created a legal and policy vacuum, which had been exploited by CN Sugar Limited and Shakti Sugar Limited.
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 declared that the acts of the Ministry of Trade in licensing CN Sugar Limited and Shakti Sugar Limited, or any other sugar enterprise, to establish and operate sugar and jaggery mills were unlawful.
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-kilometer 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 Limited and Shakti Sugar Limited.
CN Sugar Limited and Shakti Sugar Limited were also ordered to immediately halt all their sugar and jaggery mills until they have been duly licensed by an authorized body.
The court has also issued a mandamus order directing the Ministry of Trade to immediately constitute the USB in terms of Section 4 of the Sugar Act within three months from the date of the ruling.
The Inspector General of Police was also ordered to immediately remove all of CN Sugar Limited’s and Shakti Sugar Limited’s sugar and jaggery mills and related enterprises from the prohibited zones in terms of Section 19 of the Sugar Act within 14 days from the date of the ruling.
The court’s ruling has significant implications for the sugar industry in Uganda.
The nullification of the licenses issued to CN Sugar Limited and Shakti Sugar Limited means that the two companies will have to cease their operations immediately.
The court has also ordered the Ministry of Trade to constitute the USB within three months, which will provide a regulatory framework for the sugar industry.
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