The Eswatini sugar marketer, Eswatini Sugar Association (ESA) must aggressively and continuously look for alternative lucrative markets as South Africa, an influential member of its money-spinning SACU market is obviously not relenting in its efforts of having Eswatini sugar landing on its shores drastically reduced.
To make sure Eswatini sugar exported to South Africa as part of the SACU market, the South African Government together with sugar industry stakeholders put together the Sugar Industry Master plan.
The sugar master plan seeks to take urgent action to protect thousands of jobs, rural livelihoods and businesses, and at the same time create a bold new ambition for the future, which seeks to create diversified revenue streams for sugar producers, and deliver significant new job opportunities.
As part of the master plan, industrial users and retailers have agreed to minimum offtake of sugar for a period of three years; with at least 80 percent of sugar consumption to come from South African farms and millers during the first year, increasing to 95 percent by 2023.
During this period, the sugar industry agreed to price restraint, and to begin a process of managed restructuring for the industry to help diversify revenue sources.
South African Sugar Association (SASA) Executive Director Trix Trikam recently said: “We are particularly concerned about high volumes of sugar imports from Eswatini. India and Brazil have continued to be the main non-African countries importing sugar into South Africa. These issues are being addressed through the recently signed Sugarcane Value Chain Master Plan to 2030.”
SASA said, however, the current sugar tariff remained inadequate and needed to be addressed properly. “We are involved in ongoing engagements with government and relevant entities to address the issue,” said Trikam.
SA Canegrowers’ Association launched its Home Sweet Home campaign, aimed at encouraging South Africans consumers to buy local sugar products in order to help safeguard the one million livelihoods the industry supports.
Rex Talmage, the chairperson of the SA Canegrowers’ Association, said weak trade protection has seen a major increase in cheap sugar imports flooding South Africa from Brazil and the United Arab Emirates as well as the Southern African Customs Union (SACU).
“For every ton of imported sugar that floods our shores, our local South African industry loses E4 000. These cheap, low quality imports have caused the local industry to lose just over E2.2 billion in the last year alone,” he said.
Talmage said that a record level of sugar (715 000 tons) was expected to pour in from Eswatini this year.
“It is important to note that Eswatini sugar enters South Africa free of any import tariff, meaning billions more stand to be lost during the 2020/2021 season,” he said.
Talmage said the local industry has been forced to export domestic surplus onto a “dumped” or over-supplied world market at a significant loss, which had left South African growers with an eroded RV price (the price which growers are paid for their sugarcane). This was devastating as at times the revenue was lower than the cost of producing a crop, he said.
This was said to have put the future of the South African sugarcane industry under serious threat, including the futures of 21 000 black small-scale growers, 65 000 farmworkers as well as the 270 000 indirect jobs and the one million livelihoods the industry supports.
The Association of South African Sugar Importers (ASASI) chairperson Chris Engelbrecht said the sugar industry was suffering from many issues, including draught, management, poor sustainability, cheap imports for a few months, most of local sugar fields not being in the right climate, the industry not being efficient and corruption in the industry.
ASASI said in the past five years, the local sugar industry had suffered a drought and made wrong commitments on export quotas and could not meet local demand.
Engelbrecht said this had triggered an unjustified local price increase of almost 20 percent in one year.
He said that then an incorrect zero duty was gazetted for a few months, causing big international suppliers to jump in and flood the South African market.
“The sudden oversupply and the snowball effect afterwards were devastating for the whole industry including the long-term importers. It took more than two years for the market to correct itself. In the last year imports were at a minimum.”
If the South African sugar industry stakeholders could successfully implement the master plan, Eswatini Sugar Association (ESA) revenue generation can be negatively impacted because South Africa is the largest market for Eswatini sugar within the profitable SACU market.
According to ESA latest Annual Report (2019/2020) sugar association made E5.9 billion revenue. Although the increase in sales was marginal, at less than 1 percent, this performance was due to attractive prices realized in the various markets in which the sugar is sold, coupled with favourable exchange rates over the course of the year.
Outstandingly, 59 percent of this revenue came from SACU, 28 percent from EU, 10 percent from regional and 3 percent from the US.
Despite the fact that 59 percent came from SACU, Sugar sales fell considerably in the customs union market following the coming into force of the Health Promotion Levy on sugar-sweetened beverages (otherwise known as the “sugar tax”) in South Africa. This has led to key beverage manufacturers reformulating their products to reduce sugar content. This reduction in demand has put the SACU market sales under stress, necessitating the rigorous and aggressive exploration of alternative markets in the region to avoid the sale of Eswatini sugar to less remunerative world markets.
Against this backdrop, ESA remains self-confident that there are alternative markets that it can tap on to. In its latest annual report, the association said there remains a significant potential to service the regional African markets (SADC, COMESA and the wider TFTA and AfCFTA areas) with Eswatini sugar.
“Sub-Saharan Africa consumes 6 percent of the world’s total sugar. Consumption in the Equatorial and Southern African region alone is expected to grow by 4.28 percent in 2019/20 – the highest growth rate in consumption in the world,” ESA said.
The ESA also highlighted that prices attainable in most of these markets are at a premium to world market prices.
“It is part of our marketing strategy to increase sales into these regional markets going forward, through increasing capacity to bag sugar that is currently sold as bulk raw sugar to international preferential markets for refining,” said the ESA.
The association went on to say, ESA is committed to increasing its marketing reach into these regional markets for the development of value chains, thus presenting market opportunities for Eswatini sugar.