Blueprint to save the sugar industry from collapse

Droughts, sugar imports, sugar tax and the fact that South African sugar is exported at a loss. A barrage of factors beyond its control has resulted in the decline of the local sugar industry over the past 10 years.

Sifiso Mhlaba, head of the South African Sugar Association’s national market, told Food For Mzansi that the once prosperous sector has deteriorated to such an extent that it has recently found itself on the verge of collapse. . Two sugar factories have had to close (there are currently only 12 factories in the country) and the number of sugar producers has also declined.

“There were about 33,000 producers in the industry 10 years ago, now there are just over 20,000. It shows that the industry has gone through a number of difficult times.

Consecutive years of difficulties

Mhlaba talks about the reasons for the challenges in the sector. In 2010 and 2011, the country experienced a drought that resulted in a drop in total production.

In 2013 and 2014, as producers recovered from the drought and therefore produced more sugar, there was a huge influx of sugar imports mainly from Brazil. “Although we produce more sugar, we sell less in the local market and export more.

Sifiso Mhlaba, National Market Manager of the South African Sugar Association. Photo: Supplied / Food for Mzansi

“We had the… drought affecting the financial viability of the industry and then we had sugar imports which put our financial viability at risk. “

Between 2015 and 2017, sugar producers were hit by another drought, once again leading to a drop in total production. “[We then had] a recovery or increase in total production, but this always seems to coincide with other challenges.

After the fifth year of financial strains for the sugar industry, the Health Promotion Tax (HPL) on sugary drinks was introduced in 2018, which allowed beverage manufacturers to significantly reduce the sugar content of their drinks.

The loss of sugar sales amounted to 250,000 tonnes and 1.2 billion rand in revenue per year.

“Then that meant that for another three years we had to export even more sugar at a loss, which almost brought the sugar industry to the ground. After six to seven years of financial distress, our industry was on the verge of collapse and that gave birth to the master plan, ”Mhlaba said.

READ ALSO: ICYMI: SAFDA says sugar tax will kill industry

Livelihoods at stake

A blueprint for the industry has become essential as thousands of people depend on it for their survival. “Agriculture represented 4% of the KZN economy. Of the 4%, about 2.6% came from sugar cane. In Mpumalanga, agriculture accounted for 3% of the economy and barely half of it was sugar cane. This really shows the importance of the cane industry to the two provincial economies.

“If you take our contribution to the national GDP, it’s around 0.2% and that might sound low. But if you go to the provincial level, it is quite important and if you go to the regional level, in some cities, it represents 90% of the economy, ”he says.

Mission of the master plan

Mhlaba explains that the master plan has around seven key action commitments and 10 task forces seeking to save the sugar industry.

“What’s important here is the first pledge of action which is really to restore local markets. It is after admitting that the more you export, the less viable you are. So we need to save as much sugar as possible in South Africa.

“However, for our consumers to commit to buying local sugar, there was a discussion around restricting producer prices and recognizing the role of strategic trade protection,” he said. declared.

The retention and mitigation of employment, retention and support of smallholder producers are also among the plan’s seven key action commitments.

“A key government and industry goal around sustaining and supporting small producers is actually transformation. I may have seen very briefly in the media that for us to have these discussions to transform the sugar sector, we needed a designation by the minister of dtic (department of trade, industry and competition) to an exemption from competition.

“I mean, at the end of the day, it’s members of SASMA (the South African Sugar Millers’ Association) but also individual families competing in the local market. So there has to be a sensitivity around what can be shared and how it can be shared. “

The competition commission has provided for a waiver which now expires in 2023.

READ ALSO: Black sugar cane producers suffocated by sugar tax

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Rachel J. Bradford