Government gazettes amendments to the regulations governing South African sugar industry
The Minister for Trade, Industry and Competition (the dtic) , Mr Ebrahim Patel gazetted amendments to the Sugar Industry Agreement and South African Sugar Association Constitution, and has further designated the industry in terms of the Competition Act for an exemption which will allow industry stakeholders to begin working together to implement a master plan for the industry.
Given the crisis facing the South African sugar industry, one that threatens tens of thousands of jobs and hundreds of thousands of livelihoods, government has, together with industry stakeholders including producers and users of sugar, developed a masterplan to enable the industry to restructure and grow.
The Sugar Masterplan sets out action to protect thousands of jobs, rural livelihoods and businesses, and at the same time create a bold new ambition for the future, which seeks to create diversified revenue streams for sugar producers, and deliver significant new job opportunities. The process to produce the master plan was co-chaired by both Minister Patel and the Minister of Agriculture, Land Reform and Rural Development, Minister Thoko Didiza.
“The sugar industry is a critical employer of workers and a source of livelihood for large numbers of rural communities. The sector has gone through enormous strain in recent years, including from a flood of imports. Our vision as government is that the industry can grow and that a partnership is needed to unlock the opportunities. Government brought together key stakeholders so that we can focus precisely on that objective,” said Minister Thoko Didiza.
“The Sugar Masterplan aims to diversify the value chain based on sugarcane away from one that is today almost solely focused on the production of raw and refined sugar, into one that in future produces a wider range of globally competitive sugarcane-based products. The Masterplan for the South African sugarcane value chain is the result of extensive engagement and consultation among sugar industry stakeholders and social partners. It represents a new social compact based on dialogue, shared ownership and wide support,” said Minister Ebrahim.
Annual sugar production in South Africa has declined by nearly 25%, from 2.75 million to 2.1 million tons per annum, over the past 20 years. The number of sugarcane farmers has declined by 60% during this period, and sugar industry related jobs are estimated to have reduced by 45%.
Declining profitability in the local industry has accelerated as a result of a “perfect storm” of developments in global and local markets that have now reached a critical point. The average sugarcane farmer and sugar milling company is incurring losses that are no longer sustainable, and which now create a set of conditions where there is a real risk of unmanaged decline in the industry with devastating consequences for rural unemployment and poverty.
The Masterplan seeks to address these critical challenges and create a diversified and globally competitive, sustainable and transformed sugarcane-based value chain that actively contributes to South Africa’s economic and social development, creating prosperity for stakeholders in the value chain, the wider bio-economy, society and the environment.
Agility and responsiveness to the needs of the sugar industry is key to the master plan and it has a phased approach to planning and implementation. The first phase includes immediate action to prevent the collapse of the sugar industry and to urgently commence a restructuring programme.
In order for the Sugar Masterplan to be implemented, the sugar industry needs exemption from certain provisions of the Competition Act, given that the Act prohibits coordination between competitors. Accordingly, Minister Patel gazetted a designation of the sugar industry, which permits the industry to be considered by the competition regulators for specified exemptions. Once the Competition Commission grants an exemption, the Masterplan will be signed and its implementation can commence.
The Government Gazette published contains a summary of the main features of the proposed Sugar Masterplan that has been developed for the sector, as well as amendments to the Sugar Industry Agreement and the South African Sugar Association’s Constitution and the designation of the Sugar Industry in terms of section 10 of the Competition Act.
The amendments to the Sugar Industry Agreement and the South African Sugar Association’s Constitution, which has also been agreed in consultation with the industry, will further support the objectives of the masterplan, by formalising the governance arrangements of the industry, including the role of key industry stakeholders (the South African Sugar Millers’ Association NPC, South African Cane Growers’ Association NPC and South African Farmers’ Development Association), and the disbursement of grower levies. This provides an explicit formal place for small-scale growers in the industry, which supports the transformation objectives of the master plan.