Market decline

Plant closures and continued market decline worry producers

With two factories closing and cocooning them for the 2020/21 season, growers fear the remaining 12 sweets will struggle to successfully complete this season’s harvest, the South African Canegrowers’ Association said (SA Canegrowers ).

Sugar giants Tongaat Hulett and Illovo Sugar South Africa announced this year their intention to put operations on hold at their respective sugar factories in Darnall and Umzimkulu, both located in KwaZulu-Natal.

President of SA Caniculteurs Rex talmage says the closures could have a “negative impact” on producers who cannot deliver their entire harvest in an already declining sugar industry.

South Africa’s cane-growing sector comprises 21,500 cane producers – of which 20,200 are small-scale producers – producing about 20% of the 19 million tonnes of cane per year.

The association notes that the sugar industry, worth R14 billion, consistently ranks in the top 15 out of around 120 sugar-producing countries around the world.

The sugar industry contributes significantly to the gross domestic product of agriculture, fishing and forestry in KwaZulu-Natal (44%) and Mpumalanga (40%).

“Despite this, the sugar industry has experienced a severe decline in recent years, due to several challenges, including insufficient protection against cheap imports, drought and falling sugar prices,” Talmage said. Engineering News.

The health promotion tax – also known as the sugar tax and introduced by the government in April 2018 – has further contributed to these challenges, he points out, adding that the sugar tax has cost industry 1, R 5 billion, with 9,000 farms. level jobs having been lost in its first year of implementation.

Given that the sugar industry now directly employs around 65,000 people, with indirect jobs estimated at an additional 270,000 people, he notes that the challenges of the sector must be addressed to ensure the industry’s long-term sustainability. to come up.

“We must prevent thousands of jobs from being lost in mostly underprivileged communities, as an estimated one million people, mostly living in deep rural areas, depend on the sugar industry for a living,” he explains.

Meanwhile, he argues that around 75% of South African sugar is traded in the Southern African Customs Union (Sacu), with the remaining percentage traded to other countries in Africa, Asia and the United States. Middle East.

However, the aforementioned challenges caused Sacu’s market share of local producers to decline to just 55%, from 1.65 million tonnes to 1.25 million tonnes per year.

“The decline in local demand for sugar has affected the most vulnerable participants – small producers and rural farm workers – in the sector.

“If the challenges mentioned are not resolved, the local sugar industry will continue to decline,” says Talmage.

Master plan development

The industry is working with the government to develop a master plan for the sugar industry that aims to create a more diverse and sustainable sugar industry.

“It is essential that the plan preserves and protects the fundamental role of smallholder producers to achieve the successes our agricultural sector and the South African economy desperately need,” said Talmage.

He stresses that a key factor that needs to be included in the master plan is the certainty of product tax policy, especially with regard to the sugar tax.

The association called on the government to suspend the sugar tax until a full socio-economic assessment of its impact has been undertaken.

“The second aspect is the need to provide strategic trade protection for the local market. During the 2017/18 season, 500,000 t of cheap sugar imports flooded the Sacu market, which had a disastrous effect on local producers.

In addition, the association would like particular emphasis to be placed on the loyalty and support of small producers to ensure the development of the sector and its significant and lasting participation in the entire sugar industry.

There must also be a clear plan to restructure the sugar industry so that it allows diversification away from sugar to other cane-derived products, such as fuel ethanol, says Talmage.

“This would structurally reduce the amount of sugar produced and reduce the industry’s deficit export exposure. However, this needs to be complemented by other viable alternatives such as expanding to other types of crops and projects – the recently completed biogas plant in Amatikulu, KwaZulu-Natal, for example.

Future aspirations

To ensure South Africa achieves parity with low-cost sugar producing countries, such as Brazil and Australia, Talmage points out that SA Canegrowers is at the forefront in helping producers use the best technology available in their cane growing operations.

This includes real-time tracking, cane quality data tools, cost comparisons, transport tracking, and access to satellite and drone technology.

“However, the local sugar industry is a big employer of labor. Mechanical harvesting technologies are not suited to the topography where the crops are located, and taken with the current cane payment system, has proven to be detrimental to the producers who have tested them, ”he comments.

As such, SA Canegrowers intends to continue working with all stakeholders – especially government – towards a more sustainable and efficient industry for the benefit of all producers, as well as other stakeholders in the agricultural sector. across South Africa.