Important South African industry faces a serious threat

SA Canegrowers has issued a warning about job losses caused by cheap sugar imports, as local producers struggle to compete.

SA Canegrowers’ Higgins Mdluli, who was recently re-elected as the organisation’s chairman, cautioned that the industry faces many challenges.

Mdluli explained that one of the industry’s biggest challenges is the increasing risk local growers face from unfair global trade practices. 

“Foreign sugar is currently entering South Africa at prices below the cost of production and below the global sugar price, owing to some foreign governments either heavily subsidising their industries or countries dumping their excess sugar at a loss,” he said.

According to Mdluli, local sugarcane growers lose R6,000 in income for every ton of imported sugar.

This significantly impacts local producers and, therefore, employees, putting thousands of jobs at risk.

“Local sugarcane growers are unable to compete with such unfairly subsidised imports, at a time when the industry is also facing a host of other challenges, including unpredictable weather patterns, mill closures, and the sugar tax,” he said. 

“Cheap imports further undermine the viability of farming operations and place hundreds of thousands of jobs at risk across the industry value chain – from sugarcane fields to sugar milling companies and distribution networks.”

He said rural communities in KwaZulu-Natal and Mpumalanga are especially vulnerable, where large and small-scale sugarcane growers provide much-needed jobs and stability.

Mdluli explained that these cheap imports are not necessarily driven by necessity, as South Africa’s sugar industry produces more than enough sugar to service the full demand of SADC countries.

“Local canegrowers need greater protection from unfair sugar dumping and subsidised cheap imports,” he said. 

“We call on all social partners, government, industry players, and commercial end-users and consumers, to stand with South African sugarcane growers.” 

“Our growers contribute to a thriving, inclusive agricultural economy, but to continue to do so, we need to be able to compete on a level playing field.”

Mdluli said his organisation looks forward to working with all role players as part of the next version of the Sugarcane Value Chain Master Plan 2030 to help secure the sector well into the future.

Sugarcane Master Plan

South Africa’s sugar industry is one of the world’s leading cost-competitive producers of high-quality sugar.

The sugar industry encompasses the agricultural activities of sugarcane cultivation and the manufacture of raw and refined sugar, syrups, specialised sugars, and a range of by-products.

According to the South African Sugar Association, the cane-growing sector comprises 25,000 registered sugarcane growers in KwaZulu-Natal and Mpumalanga. 

The industry produces an estimated 2.2 million tons of sugar per season and is worth around R20 billion.

The Sugarcane Value Chain Master Plan 2030 forms part of the government’s re-imagined industrial strategy for this sector.

This follows President Cyril Ramaphosa’s announcement in his 2019 State of the Nation Address that the government will develop a number of Sector Master Plans to help create conducive conditions for industries to grow.

The Sugarcane Master Plan, in particular, aims to pave the way forward for South Africa’s sugarcane industry, which will ensure its sustainability and profitability.

The Master Plan describes South Africa’s sugarcane industry as “in crisis”, and one of its main ambitions is to prevent the sector’s collapse.

The document explains that annual sugar production in South Africa has declined by nearly 25%, from 2.75 million to 2.1 million tonnes per annum, over the past 20 years. 

The number of sugarcane farmers has declined by 60% during this period, and sugar industry-related jobs are estimated to have decreased by 45%.

“Declining profitability in the local industry has accelerated as a result of a ‘perfect storm’ of developments in global and local markets that have now reached a critical point,” it said.

“The average sugarcane farmer and sugar milling company is incurring losses that are no longer sustainable, and which now create a set of conditions where there is a real risk of unmanaged decline in the industry with devastating consequences for rural unemployment and poverty.”

This “perfect storm” encompasses several factors that have combined to reduce local demand in the Southern African Customs Union (SACU) for sugar from 1.65 million to 1.25 million tonnes per annum.

The Master Plan said this has forced increased exports into a global market where prices are below the local cost of production. 

Increased exports now mean the industry has to absorb losses of approximately R2 billion per year.