Local industrial and commercial sugar consumers have committed to take up 300,000 more tonnes of locally produced sugar in the 2022/2023 year than previously but the outlook for this looks is uncertain, says SA Sugar Association (Sasa) commercial director Judith Wilson.
The commitment was made in terms of the sugar industry master plan thrashed out in 2020 between Sasa — which represents cane growers, millers and the industry — and commerce.
One of the pillars of the plan is that sugar producers will exercise price restraint, limiting increases to consumer price inflation or below while the industry agreed to increase its uptake of locally produced sugar. So far Sasa members have complied with the price restraint commitment and in the first year of the plan the industry exceeded the target of 150,000 tonnes of additional uptake of local sugar, achieving a total of 178,000 tonnes in the 2020/2021 season, but the outlook for the third year from April 1 2022 to end-March 2023 looks uncertain.
Local sales of an additional 300,000 tonnes over and above the 1.25-million tonnes of sugar sold into the local market (including the Southern African Customs Union) before the master plan was initiated would be a challenge, Wilson said.
“While it’s still pleasing that sales are holding steady at a higher level, it will take some significant commitment from buyers of sugar in the industrial and retail markets for the industry to reach a full 300,000 tonne increase in year three. We are very hopeful that they will,” Wilson said during an engagement with journalists last week.
“The state of the economy, Covid-19 and a number of other factors may make achievement of the full target challenging,” she said.
The ideal situation is for the sugar industry to sell all its production on the local market because exports do not cover the cost of production.
There was no defined sales target for the second year of the plan from April 2021 to March 2022 though Sasa national market executive Sifiso Mhlaba said that the sales in this year looked similar to year one.
The master plan spearheaded by trade, industry & competition minister Ebrahim Patel and agriculture, land reform & rural development minister Thoko Didiza aims to lift the industry out of what Sasa executive director Trix Trikam said is the “intensive care unit” back into the ward and eventually out of hospital altogether. The increase in local uptake in the first year of the plan had allowed the industry to exit ICU but it had not yet been restored to good health.
Its problems were due both to the increased consumption of imported sugar — mainly from Brazil and Eswatini — and the affect that the health promotion levy (sugar tax) had on consumption. Drought also played a role.
In 2018/2019 — the first year of the introduction of the sugar tax — the industry lost 250,000 tonnes of sales worth about R1.2bn in revenue to the beverages sector.
The increase in the import tariff in 2018 when the dollar based reference price was increased by the International Trade Administration Commission (Itac) from $566 to $680 (the price below which sugar cannot be imported into the country) helped stem the flood of imports but engagements on this continue. Trikam said discussions are under way with Eswatini to harmonise policy. Sugar imports from Eswatini can reach as high as 400,000 tonnes a year.
The industry has an annual turnover of about R18bn, creates 65,000 direct jobs and 270,000 indirect jobs with more than 1-million people dependent on it. It produces about 2.1-million tonnes of sugar annually. Another leg of the master plan is to explore diversification including the production of sugar cane juice and the use of sugar for bioethanol and aviation fuel. There is a possibility that an Engen refinery will be repurposed for bioethanol, Sasa external affairs director Portia Mpofu said.
The 2021 unrest and looting in KwaZulu-Natal and Gauteng saw more than 500,000 tonnes of cane burnt by arsonists in one week. Ten mills ceased production for a week losing over R100m in revenue. A total of 135,222 tonnes of cane could not be processed. Two warehouses were looted with 2,580 tonnes of sugar being stolen. “People are still reeling from this,” Trikam said.
In terms of the master plan, the sugar industry also committed itself to investing R1bn in transformation over five years. This would include providing financial support to small cane growers. In 2021/2022, R225.4m was invested in transformation initiatives, mainly directed to small cane growers. So far more than R600m has been spent on transformation. There are about 20,631 small-scale cane growers in the industry and 1,099 large-scale growers.
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