VZCZCXRO9639
PP RUEHROV
DE RUEHKH #2001 2361021
ZNR UUUUU ZZH
P 241021Z AUG 06
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC PRIORITY 4264
INFO RUCNIAD/IGAD COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS KHARTOUM 002001 
 
SIPDIS 
 
SIPDIS 
 
DEPARTMENT FOR AF/SPG, AF/EPS AND EB/CBA 
PLEASE PASS TO AID/W FOR AFR 
 
E.O. 12958:  N/A 
TAGS: EAGR EAID PREL EPET SU
SUBJECT: SUDAN SUGAR INDUSTRY GROWING 
 
 
¶1.  Summary: Sugar consumption is growing rapidly in Sudan. The 
privately owned Kenana Sugar Company sees potential for further 
investment in Sudan's sugar industry, including a major new 
plantation employing 5,000 in the south. However, U.S. sanctions 
hamper development of the industry. The company is interested in 
pursuing a license through OFAC to bring in U.S. consultants and 
equipment.  End Summary. 
 
Sugar Industry Growing 
---------------------- 
 
¶2.  In a meeting on August 20, Dr. Osman Al-Nazir, Director General 
of Kenana Sugar Company provided an overview of sugar production in 
Sudan. He noted that consumption is rising rapidly, with household 
use up by 40 percent in the past two years and industrial use rising 
from 50,000 tons to 183,000 tons in two years. A large part of the 
industrial use is for soft drinks.  Al-Nazir noted that Kenana's 
mill, originally built to produce 300,000 metric tons per year, now 
churns out 400,000 tons of sugar annually. He described the plant as 
a 'twin' to a plant in Texas, and said that Kenana misses its former 
ties to U.S. technical expertise.  The company is working in 
coordination with the Minister of Industry to start the process to 
obtain a license through OFAC to bring in U.S. consultants. Al-Nazir 
added that the company would like to be able to import U.S. 
equipment, specifically Caterpillar and John Deere equipment. 
Al-Nazir mentioned that Kenana would especially like to purchase 
John Deere two-row harvesters, as there is no equivalent available 
elsewhere. Al-Nazir stated that use of U.S. technology would allow 
for greater energy efficiency.  The company is already one of the 
most highly productive sugar growers in the world, with yields of 
117 tons per hectare. 
 
Consumption, Imports and Exports 
-------------------------------- 
 
¶3. Sugar consumption is running at about 1.2 million tons per year. 
Kenana produces 400,000 tons and imports and refines another 
200,000.  Four government owned sugar mill produce about 400,000 
tons. This leaves a shortfall of about 200,000 tons.  The new White 
Nile project, built with Chinese assistance, will come into 
production in about 3 years and supply 350,000 tons per year. Kenana 
annually exports 100,000 tons of sugar at high prices to the EU 
under the Everything but Arms arrangement. Earlier this year, Kenana 
imported raw sugar from Brazil for refining. 
 
¶4. Al-Nazir expressed disappointment in the government's decision to 
increase the tax on sugar, lamenting that the price of sugar now is 
51 percent tax and 49 percent 'ex-mill' price.  He said that the 
sugar industry had hoped that increase in oil revenues would lead to 
a reduction in taxes on sugar. However, that had not occurred. 
 
Potential of Project in Southern Sudan 
-------------------------------------- 
 
¶5. The Melut sugar project in Southern Sudan could employ 5,000 
permanent workers and an additional 5,000 during the construction 
phase, according to Al-Nazir. As proposed, the Melut project would 
be owned by the Government of Southern Sudan, but Kenana is 
interested in providing services under contract to the get the 
project up and running.  The projection is for the Melut project to 
provide 110,000 tons per year, which would be about 50 to 60 percent 
of the South's consumption. 
 
 
 
Green Energy 
------------ 
 
¶6. Looking ahead further, Al-Nazir said that Kenana is looking at 
the production of ethanol from molasses.  Currently, nearly all 
molasses produced is trucked from the mill to Port Sudan and 
exported.  Kenana would like to transform the 130,000 tons of 
molasses produced each year into 70 million liters of ethanol. 
Al-Nazir said that ethanol production would have the advantage of 
allowing more of Sudan's oil to be exported while improving the 
profitability of the sugar sector.  Barring new discoveries, it is 
anticipated that Sudan's oil production will begin to decline by 
¶2009. Ethanol would provide a green source of energy to replace 
declines in petroleum production. 
 
HUME