Picture: Karen Sandison/African News Agency(ANA)
Picture: Karen Sandison/African News Agency(ANA)

Sugar Master Plan one year anniversary: optimal functioning of sugar value chain is critical to its success

By Time of article published Nov 10, 2021

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By Andrew Russell

On November 16, the sugar industry will celebrate the one-year anniversary of the signing of phase one of the Sugar Industry Value Chain Master Plan. The plan was developed by government, industry stakeholders, retailers and social partners in order to tackle some of the major threats facing the sector and ensure its long-term profitability and sustainability.

These threats have included multiple droughts and falling world sugar prices, as well as an influx of cheap imports and the Health Promotion Levy (HPL or sugar tax), which continues to put pressure on the local industry. We were therefore delighted with the finalisation of the Master Plan last year, which focuses on seven action commitments over a three-year period.

These action commitments are increasing demand for locally grown and manufactured sugar, industry price restraint, improving import protection, strengthening small-scale growers’ support, increasing transformation in the industry, the creation of a diversified sugar cane-based industry and the potential restructuring of the industry.

Over the past year, SA Canegrowers have been an active participant in a number of the joint task teams that have been established in order to achieve these commitments.

This has included the Value Chain Diversification Task Team, which is mandated to develop a medium to long term strategy for the diversification of the sugar cane value chain. In May, SA Canegrowers presented the findings of a study it had commissioned with the Roundtable on Sustainable Biomaterials (RSB) on the viability of using South African sugar cane to manufacture sustainable aviation fuel (SAF).

The study found that by diverting 50 percent of the 19 million tons of cane produced by growers each year towards ethanol production, the industry could produce approximately 700 million litres of low-carbon ethanol annually for local or international bio-fuel markets. This ethanol can then be converted into 433 million litres of sustainable aviation fuel (SAF) for the aviation industry.

We are thrilled that this presentation has led to further engagements with government departments and other stakeholders, including the fuel and airline industries, when it comes to taking this ground-breaking initiative forward.

However, we recognise that this will be a long-term project, along with many of the other diversification projects currently being investigated by the industry. Growing cane for the production of sugar will therefore continue to be the main source of income for local growers and the one million livelihoods the industry supports.

It is, therefore, encouraging that despite the challenges faced by the sector, South Africa’s growers managed to increase their production from 14,8 million tons in 2016 to 19,2 million tons in 2020, with a small drop in the year ending March 2021 to 18,2 million tons.

This increased productivity is a credit to the growers and workers in light of the sector shedding just over 9,000 jobs during the first year of the implementation of the sugar tax, which was introduced by the government in 2018. However, for the sugar industry, this growth has not produced the gains it should have in terms of revenue. This is because cane on its own is useless if it cannot be processed into sugar by the mills that are located in KwaZulu-Natal and Mpumalanga.

Unfortunately, there has been a growing disjuncture between the growers’ ability to produce sugar cane and the sugar mills’ ability to crush the cane.

Until the end of 2020, there were 14 mills in South Africa. However, at the beginning of the year, Tongaat Hulett announced that it would be mothballing its mill at Darnall, which was followed by Illovo suspending operations at its mill in Umzimkulu. The decision by both milling companies to close these mills was motivated largely to improve efficiencies and reduce operational costs.

These closures, as well as operational challenges at other mills, have had a significant impact on the millers’ capacity to crush the cane tonnage produced by growers. Last season, more than 1.2 million tons were carried over, and this amount could reach more than 2 million tons this season, which would result in more than a R1.28 billion loss in revenue for the cane growing sector, putting thousands of jobs at risk.

This major threat to the sustainability of the sugar industry has been flagged by various role players, which have also included calls to prioritise small-scale growers for access to mills.

While small-scale growers are undoubtedly important to the health of the industry and are foundational to its structure, large- and medium-scale commercial growers are equally important. Not only do they contribute funding for the many transformation initiatives in the sector, they also deliver cane in quantities that make milling and refining processes economically viable and are therefore essential to the sustainability of the industry.

It is, therefore, critical that the root causes of why mills aren’t operating effectively in some areas are addressed, so they can adequately meet the needs of all growers.

In this regard, a number of mills performed remarkably last season. Despite the challenges brought by the Covid-19 pandemic and national lockdown, the Komati mill crushed more than 2,2 million tons of cane and had no carry-over to the 2021 season. Both the Pongola RCL mill and the Umfolozi sugar mill also had an exceptional year, with Pongola crushing the most cane since 2003 and the Umfolozi mill delivering a record crush under its new management.

However, there are a number of mills that are not performing effectively due to a variety of reasons, including management issues, while others have come under severe pressure due to the closure of the Umzimkulu and Darnall mills.

If we fail to prioritise this milling under-performance, the consequences for the industry will be dire. Most critically, jobs in the sector cannot be sustained without sufficient revenue from the cane these growers produce.

The sugar industry, therefore, needs to carefully assess the prevailing conditions at each mill and work to address those constraints on a case-by-case basis. There is no doubt much can be learnt from the successful millers’ operations about possible interventions that can improve the performance of the struggling mills.

SA Canegrowers, as ever, is ready and willing to work with millers and other key stakeholders to address these issues through the South African Sugar Association as well as the Task Teams established under the Master Plan. We know that any successes achieved under the Master Plan will be undone if the whole sugar value chain isn’t performing optimally. We, therefore, believe a constructive, collaborative approach on this crucial issue will benefit everyone, including the one million livelihoods the industry supports.

Andrew Russell is the chairperson of the SA Canegrowers Association.

*The views expressed here are not necessarily those of IOL or of title sites.


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