Ramaphosa said ‘sweet nothing’ about scary state of sugar sector

Sugar cane. Picture: BLOOMBERG
Sugar cane. Picture: BLOOMBERG

The South African sugar industry is on the verge of collapse as it continues to face several headwinds, including a drop in sales volumes, falling prices and stiff competition from cheap imports mainly from Brazil.   

The local sugar industry generates an income of about R14bn a year and is responsible for at least 350,000 jobs.

Graeme Stainbank, the chair of the South African Cane Growers' Association, warned on Monday that without government support thousands of jobs in the sector were at risk

“In his state of the nation address, President Cyril Ramaphosa was very clear on the need to develop agriculture for the benefit of all. However, inexplicably, he said sweet nothing about the perilous state of the sugar sector,” Stainbank said.

Stainbank said rural communities where little employment opportunities exist, will be hard hit by the possible jobs bloodbath in the sector.

“These job losses will inevitably lead to mass urbanisation. Sugar-cane growers, emerging farmers, farm workers and surrounding communities could soon disappear if the government fails to take urgent action.”

He said sector faced several problems including plunging prices, drought, and lack of government support.

Despite the severity of the drought, very little, if any, help was extended to cane growers, he said. 

Furthermore, sugar-cane farmers were plunged into another crisis when approximately 500,000 tonnes of imported sugar imports landed in SA in 2018. As a result, cane growers and other industry members incurred massive losses, and many are now on the brink of going out of business.

“If the cane price does not improve soon, more retrenchments, farm closures and severe job losses are in store for the industry,”  Stainbank said.

He said in 2018, the industry desperately tried to lobby the government to provide tariff protection against the dumping of cheap imports, mainly from Brazil. After drawn-out submissions and lobbying, the International Trade Administration Commission (Itac) finally agreed to raise the dollar-based reference price (DBRP) — which is an import tariff levied on products that come into SA. 

“The DBRP was eventually increased from $566 to $680, but it’s not the $856 per tonne level that the industry had applied for. The result is that cane growers and other industry members are unable to recover their full cost of production. In addition to the inability to recover production costs, cane growers had to come to terms with a drop in sale volumes, by and large as a result of a diminishing demand in the industrial market,” Stainbank said.

He added that after the health promotion levy (also known as ‘Sugar Tax’) came into effect in 2018, soft drink manufacturers started reducing bottle sizes as well as the sugar content of products. All these measures have led to a drop in the demand for sugar, which in turn drives revenue down.

Stainbank called for government to assist the sector by, among other measures, tightening the restrictions to prohibit sugar entering SA from neighbouring countries that are not subject to any duties. Government should also 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.

The department of agriculture, forestry and fisheries was yet to respond to request for comment on Monday.

DA MP Dean Macpherson said on Monday that he had written a letter to Joan Fubbs, the chair of Parliament’s trade and industry portfolio committee, to request an urgent joint meeting to discuss the immediate danger that the sugar-cane industry is now facing.

“What we see happening is what the industry is terming a ‘perfect storm’ which left unchecked, will wreck an industry that contributes R14bn and employs 350,000 people across the spectrum. As a country, we simply cannot afford this. It is up the committee to urgently intervene in this matter and find solutions before it is too late,” said Macpherson.