Preventing a sugar crash
Farmer's Weekly|December 03, 2021
The future of the country’s sugar cane sector has never been more uncertain and, as a result, the livelihoods of many thousands of people hang in the balance. Could the South African Sugarcane Value Chain Master Plan be the lifeline that the industry has been waiting for? Susan Marais reports.
Susan Marais

Glucose is often the first painkiller given to newborns, but how should South Africa’s critically ill sugar industry be treated? In two decades, the country’s annual sugar production has shrunk by nearly 25%, from 2,75 million to 2,1 million tons. Over the same period, we have lost almost 60% of our sugar cane farmers, and other sugar industry jobs are estimated to have declined by 45%.

As in the rest of the world, health concerns and modern lifestyles are leading to stagnation in sugar demand. Demand for sugar in the Southern African Customs Union has dropped from 1,65 million tons to 1,25 million tons a year, forcing South Africa to increase its exports to the global market, where prices are below the local cost of production. Given the increase in exports, the industry now has to absorb losses of approximately R2 billion per year.

The pace of decay, moreover, is accelerating. In 2020, two local sugar mills closed within weeks of each other, and the sector is bleeding jobs.

This is the reality that Trix Trikam, executive director of the South African Sugar Association (SASA), and the rest of the sugar industry, face on a daily basis.

The situation is driven by three main factors:

• Distorted global prices

These prices, which are below South Africa’s cost of production, are driven by sales of surpluses from various markets, particularly India, where surplus production and prices are a function of export incentives and extensive subsidy programmes.

• Eswatini’s competitive advantage

Eswatini lost its preferential EU export quotas in September 2017. Subsequently, the tariff-free access to the South African market and the relative cost advantage that producers of that country have enjoyed over their South African competitors have enabled them to price their sugar below that of local producers and thus take significant share. According to the US Department of Agriculture, Eswatini exported 331 273t of sugar to South Africa in the 2020/21 marketing season.

• The ‘sugar tax’

Government introduced the Health Promotion Levy (HPL), a tax on sugary drinks, in April 2018.

“In the first year that the sugar tax was implemented, 250 000t of sales to the beverage sector were lost, with the [sugar] industry experiencing a loss of at least R1,2 billion in revenue,” says Trikam.

A total of 9 000 farmers and farmworkers lost their jobs in that year, according to Sifiso Mhlaba, SASA’s national market executive. Concurrently, 558 jobs were lost in the sugar-processing industry, which includes milling and refining.

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