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Master plan to save sugar industry from collapse

by Sinesipho Tom
15th October 2021
The once-prosperous sugar industry has deteriorated to such an extent in the past decade that it almost collapsed. Photo: Supplied/ Food For Mzansi

The once-prosperous sugar industry has deteriorated to such an extent in the past decade that it almost collapsed. Photo: Supplied/ Food For Mzansi

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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 led to the decline of the local sugar industry in the last 10 years.

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

“There were about 33 000 growers in the industry 10 years ago and now there are just over 20 000. This shows that the industry has been through quite a number of challenging times.”

Back-to-back years of hardship

Mhlaba recounts the reasons for the sector’s challenges. In 2010 and 2011 the country experienced drought which resulted in a total production decline.

In 2013 and 2014, as growers were recovering from the drought and therefore producing more sugar, there came a huge inflow of sugar imports mainly from Brazil. “Although we were producing more sugar, we were selling less into the local market and exporting more.

Sifiso Mhlaba, the South African Sugar Association’s national market executive. Photo: Supplied/ Food For Mzansi
Sifiso Mhlaba, the South African Sugar Association’s national market executive. Photo: Supplied/Food For Mzansi

“We had the… drought affecting the financial viability of the industry and we then had sugar imports which put our financial viability in further jeopardy.”

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

After the fifth year of financial stress for the sugar industry, the Health Promotion Levy (HPL) on sugary beverages was introduced in 2018, which saw beverage manufacturers cut down drastically on the sugar content of their drinks.

Sugar sales losses amounted to 250 000 tonnes and R1.2 billion in revenue per annum.

“It then meant that, for a further three years, we had to export even more sugar at a loss, which almost collapsed the sugar industry. After six to seven years of financial distress, our industry was about to collapse and this gave rise to the masterplan,” Mhlaba says.

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

Livelihoods at stake

A master plan for the industry became critical as thousands depend on it for survival. “Agriculture accounted for 4% of the KZN economy. Of the 4% about 2.6% was from sugarcane. In Mpumalanga, agriculture accounted for 3% of the economy and just around half of that was sugarcane. This really points to the importance of the sugarcane industry to the two provincial economies.

“If you take our contribution at the national GDP, it’s about 0.2 % and that may seem small. But if you go provincially, it is quite important and if you go regionally, in some towns it accounts for 90% of the economy,” he says.

Mission of the master plan

Mhlaba explains that the master plan has about seven key action commitments and 10 task teams looking to save the sugar industry.

“What is important here, is the first action commitment which is really to restore local markets. This is after the admission of the fact that the more you export, the less viable you are. So we need to keep as much sugar in South Africa as possible.

“However, in order for our consumers to make commitments to buy local sugar, there was a discussion around a producer-price restraint and also recognising the role of strategic trade protection,” he says.

Job retention and mitigation, small-scale grower retention and support are also part of the seven key action commitments in the plan.

“A key objective of government and the industry, around maintaining and supporting small-scale growers, is actually transformation. I might have seen very briefly in the media that in order for us to have these discussions to transform the sugar sector, there was a need for a designation by the minister of dtic (department of trade, industry and competition) for competition exemption.

“I mean, at the end of the day these are members of SASMA (the South African​ Sugar Millers’ Association) but also individual families who compete in the local market. So there needs to be sensitivity around what can be shared and how it can be shared.”

The competition commission provided an exemption that now expires in 2023.

ALSO READ: Black sugarcane farmers stifled by sugar tax

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Sinesipho Tom

Sinesipho Tom is an audience engagement journalist at Food for Mzansi. Before joining the team, she worked in financial and business news at Media24. She has an appetite for news reporting and has written articles for Business Insider, Fin24 and Parent 24. If you could describe Sinesipho in a sentence you would say that she is a small-town girl with big, big dreams.

Tags: department of trade industry and competitionSouth African Sugar Association
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