The South African Cane Growers’ Association has expressed its concern and disappointment at the fact that President Cyril Ramaphosa made no mention of the perilous state of the sugar sector in his state of the nation address.
Graeme Stainbank, chairman of the association, said the crisis should come as a wake-up call for the president. “The South African sugar sector is in an unprecedented crisis. This R14 billion industry is at risk of collapse, along with the 350 000 jobs it provides and the one million people it supports. What’s more, these jobs are mostly in rural areas where there are very few other employment opportunities, and these job losses will inevitably lead to mass urbanisation. Sugarcane growers, emerging farmers, farmworkers and the surrounding communities could soon disappear if the government does not take urgent action,” Stainbank said.
Sugar sector faces enormous problems:
Unstable rainfall patterns
Climate change has caused unpredictable weather conditions. The sugar regions of KwaZulu-Natal, for example, are recovering from a three-year drought that wreaked havoc on sugarcane growers, who lost more than R2 billion in one season alone.
Despite the destruction and severity of the drought, very little, if any, help was extended to cane growers, either during the prolonged drought or during the recovery period.
Sugarcane farmers were plunged into another crisis when around 500 000 tons of imported sugar was landed on our shores last year. South African sugar, among the highest quality in the world, was dumped onto the world market.
As a result of this cane growers and other industry members incurred immense losses, and many are now on the brink of going out of businesses. If the cane price does not improve soon, more retrenchments, farm closures and severe job losses are in store for the industry.
Little cushioning against imports
The sugar industry desperately tried for months, last year, to lobby government to provide tariff protection against the dumping of cheap imports, mainly from Brazil. After protracted submissions and lobbying, the International Trade Administration Commission (ITAC) finally agreed to raise the dollar-based reference price (DBRP), an import tariff levied on products that come into South Africa.
The DBRP was eventually increased from US$566 to US$680, but this was not the US$856 per ton level the industry had applied for and sugarcane growers and other industry members are unable to recover their full production cost.
Unable to recover their production costs, cane growers had to face a drop in sale volumes, which is primarily the result of diminishing demand in the industrial market.
After the health promotion levy (also known as the Sugar Tax) came into effect last year, soft drink manufacturers started to reduce bottle sizes and sugar content of products. These measures have led to a drop in the demand for sugar, driving revenue down further.
A perfect storm
These challenges are creating the conditions for a perfect storm in the sugar industry. Unless urgent action is taken, these problems will kill the sugar sector, Stainbank said. “It is puzzling that government is willing, at least partly, to protect the industry from imports through the DBRP, yet it has no qualms about implementing a tax so damaging that it could ultimately sound the death knell for the sugar industry,” he added.
The South African Cane Growers’ Association calls on government to take three immediate steps to help the industry out of the crisis:
- Grant the industry the tariff protection it asked for to level the playing fields and shield it from cheap imports from heavily subsidised countries.
- Tighten restrictions to prohibit sugar from entering South Africa from neighbouring countries that are not subject to any duties.
- Invest in industry-led innovations, such as ethanol production and cane-based packaging to support the industry’s efforts to find alternative markets for sugar. These innovations will create thousands of new jobs.
- Become more responsive to fluctuations in world sugar prices, protecting the local industry from price shocks and thereby securing the industry’s future.
“This is a call to action. If President Ramaphosa is serious about creating 275 000 jobs a year and using the agricultural sector as a revenue creator, he needs to take urgent steps to save the sugar industry – for the benefit of all,” Stainbank said. – Press release