SEPTEMBER 2018

Sugar Industry Report

FAIRPLAY TO HOST NATIONAL ETHANOL ACTION SUMMIT

In December FairPlay will host an Ethanol Action Summit. The Ethanol Action Summit will be a platform for private sector and public sector stakeholders to explore ways to drive growth and economic benefits from the development of a national ethanol strategy.

The sugar industry has been in decline over the last 15 years. It is crucial to unlock and optimize the potential of the sugar industry within South Africa and the wider Southern African Development Community (SADC) region. The Ethanol Action Summit is a platform for stakeholders to explore sustainable models driving growth and to share experiences towards the implementation of mandatory blending of Ethanol in fuel.

Following on the recent announcement of the South Africa Government’s commitment to finalise the biofuel blending regulatory framework and have it approved by cabinet by the end of March next year Minister Radebe and the Department of Energy will be invited to the summit to speak about the roadmap for implementation of his fuels ethanol strategy.

FairPlay has been advocating this development for some time. The potential, both nationally and regionally, of sugar industry diversification into ethanol production for use in blended fuels and bioplastics and many other products is huge.

One government estimate some years ago put the potential job creation from a fuel ethanol policy at 125 000. The sugar industry is more conservative, estimating some 25 000 new jobs could be created. Either way, it will be a huge bonus in a country with one of the highest unemployment rates in the world. The spinoffs from this growth and investment will boost the national economy.

Major sugar producing countries around the world have diversified into ethanol production but South Africa has lagged far behind. A new ethanol from sugar industry in South Africa means increased land under sugar cultivation, and more jobs in rural areas. All of this is in keeping with President Ramaphosa’s economic stimulus package.

FAIRPLAY MEETS WITH COCA COLA SOUTH AFRICA TO SEEK COMMON GROUND IN SUPPORT OF THE SUGAR INDUSTRY

Over the past several months FairPlay has taken Coca Cola Beverages South Africa (CCBSA) to task for buying imported sugar. FairPlay’s position is that buying imported sugar causes damage to the domestic sugar industry with adisproportionate share of that burden falling on small farmers.

After several weeks of, at times, difficult communications between CCSBA and FairPlay the parties met in September to air their concerns and to explore ways to mitigate the impacts of imports on the South Africa sugar industry.

As a result of those discussions Coca Cola South Africa acknowledges that sugar growing and production is a strategic industry worthy of support. Coca Cola has committed to work with FairPlay in developing plans for sugar industry diversification and to provide support to small-scale farmers and to provide support to the victims of sugar dumping.

FairPlay and CCBSA plan further meetings to develop plans to work together in the interests of South Africa sugar workers. FairPlay and CCBSA expect to issue a joint statement on the outcomes of these discussions shortly.

FAIRPLAY WELCOMES GOVERNMENT’S NEW BIOFUELS PLAN

FairPlay Founder, Francois Baird has welcomed the South African Government’s decision to revive its biofuels strategy. In a speech delivered on his behalf at an energy conference in Cape Town, Energy Minister Jeff Radebe said that government plans to finalise the biofuel blending regulatory framework and have it approved bycabinet by the end of March next year.

The announcement is a welcome move that confirms the FairPlay position that implementing a mandatory bioethanol fuel blend will benefit the country through job creation, increased fixed investment, technology development and energy security, as well as expanded sugar production and desperately needed jobs in poor rural areas.

While countries around the world are developing and implementing fuel ethanol policies, spurred by sharply rising oil prices, South Africa has been left behind.

According to Baird “It is welcome news for the country, the economy and in particular the sugar industry which has been contracting in the face of surging sugar imports when it should have been growing and creating jobs. That expansion is now in prospect, dependent on the details of the plan to be released next year.”

The Minister’s plan for a 2 percent petrol-ethanol blend can have multiple benefits. It will result in a new ethanol industry, increased land under sugar cultivation, and more jobs in rural areas. All of this is in keeping with President Ramaphosa’s economic stimulus package.

It is worth noting that, unlike maize or other grains, the use of sugar to make fuel ethanol does not impact on national food security.

THE DUMPING OF EU SUBSIDIZED OVERPRODUCTION HAS DISASTROUS IMPACT ON AFRICA’S SUGAR PRODUCERS

In a comprehensive report for Sugaronline by Julian Price, recent EU sugar trade estimates reveal that this year the EU will export twice as much sugar than it imports. The report notes that ACP (Africa, Caribbean and Pacific) developing countries, including South Africa and other SACU member states are experiencing nearly a 50 percent drop in their exports to the EU. Since EU quotas were abolished in October 2017, just five ACP countries have exported bulk raw sugar to the EU.

Late last year the EU removed domestic quotas and thus any restrictions on the amount of domestically produced sugar that can be sold in the EU. Additionally, changes to EU sugar subsidies through “Voluntary Coupled Support” (VCS) pay Europe’s farmers to grow sugar beets, seriously impacting the trade in sugar that is the backbone of national economies in Africa and elsewhere. Given that there now are no restrictions on how much tonnage can be marketed internally in the EU, the available market for developing country sugar industries in the EU has been reduced and prices in the EU are now below the equivalent price on the world market.

ACP Sugar, a coalition of developing country sugar producers is highly critical of the over production and consequent trade distorting effects of VCS in the EU sugar sector. It points out that estimates suggest that within EU27 countries “VCS supports production of 3.6 million tonnes of sugar production that, by definition, would have otherwise been unsustainable'”.

The ACP/LDC Sugar Industries Group argues that sugar trade protection is warranted. Without reasonable trade protection the ACP/LDC suppliers of bulk raw sugar will find it difficult to compete with the surpluses created in the EU.

DTI SAYS SUGAR INDUSTRY WILL NEED TO DIVERSIFY

The Chief Director for agro-processing at the Department of Trade and Industry (the dti), Ncumisa Mcata-Mhlauli has said the recently endorsed International Trade and Administration Commission (ITAC) recommendation by Minister Rob Davies to adjust the sugar and increase import duty of US$680/tonne will provide relief required by the industry to protect against the surge of imports. However tariffs alone cannot sustain the sugar industry.

The South African Sugar Association (SASA) Vice Chairman, Mr Hans Hackmann notes that the industry they continues to find themselves on the wrong side of the scale even with the current sugar tariff.

“We have done some work on the outcome of the $680 tariff and we concluded that it is not sufficient to sustain our industry at this current level and within the next twelve months we probably can sustain the operation of the fourteen sugar mills only, I think our producers will earn negative margins and will be unprofitable,” said Hackmann.

According to Mcata-Mhlauli, tariffs forms part of a set of measures considered by government in collaboration with industry in order to improve the sustainability of the industry and future prospects. She said holistic solutions are required to improve the sustainability of the sugar industry overall.

Mcata-Mhlauli noted in a recent statement released by the dti : “In the long-term the industry will have to diversify and expand into new industries. At the moment, the industry is currently protected by Dollar based reference price which according to the South African Sugar Association is not responsive enough to protect the local industry.”

The FairPlay Movement is a not-for-profit trade movement that fights for jobs. Its goal is to end predatory trade practices between countries so that big and small nations play by the same rules. It supports the principle that penalties for transgressing those rules apply equally to everybody.

FairPlay was founded in October 2016. In alliance with existing organisations and experts it formulates and promotes strategies to defend communities made vulnerable by predatory trade practices and promote sustainable livelihoods.

These alliance partners are international, currently from the USA, Canada, UK, Ghana and South Africa.

FairPlay mission: To end the scourge of dumping as an immoral trade practice.

FairPlay vision: A world where dumping no longer exists, with free trade according to the rules.

http://fairplaymovement.org

FAIRPLAY SUGAR CAMPAIGN ON SOCIAL MEDIA
Follow FairPlay Social Media on  @FairPlayZA     http://www.facebook.com/fairplayZA/







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