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Thabile Nkunjana, an agricultural economist on the National Agricultural Marketing Council (NAMC), and Dr Sifiso Ntombela, chief economist on the NAMC, look at the decline in South Africa’s sugar manufacturing and the components threatening future progress.
South Africa’s agriculture sector generally continues to show optimistic progress when measured by way of output, exports and the creation of employment. In 2020, the sector grew 13,4% year-on-year, and the forecasts for 2021 additionally recommend progress.
Primary agricultural employment has remained comparatively regular because the begin of the COVID- 19 pandemic, with 868 000 individuals employed within the fourth quarter of 2021, and export exercise reaching a report stage of US$12,4 billion (about R180 billion) in 2021.
Despite this optimistic total image, some industries throughout the sector, resembling sugar, have skilled difficulties.
The battle
In phrases of tariffs, the sugar industry is arguably one of the vital protected in South Africa; it is usually amongst essentially the most closely taxed, each domestically and globally. Taxes such because the Health Promotion Levy (‘sugar tax’) are geared toward decreasing rising ranges of diabetes and weight problems.
The World Health Organization’s ‘Global Action Plan for the Prevention and Control of Noncommunicable Diseases 2013-2020’, revealed in 2013, was readily adopted by developed nations.
In response to this, sugar producers turned modern with a view to meet altering shopper calls for, and invested in product worth addition and diversification of infrastructure. These efforts turned a lifeline in a few of the nations that adopted the precept of sugar taxes to cut back well being points resembling weight problems and diabetes.
The South African sugar industry has not been spared world sugar market dynamics, on high of its distinctive issues. Local function gamers have raised considerations about challenges dealing with the industry. High native manufacturing prices in comparison with different sugar exporters, deteriorating infrastructure, sugar ‘dumping’, and levies have been highlighted as the primary points.
According to information from the South African Sugar Association, home sugar manufacturing between the 2005/06 and 2018/19 manufacturing seasons declined by at the very least 12,7%.
Of the 2 million tons of sugar produced domestically, 24% is claimed to come back from black farmers, a powerful determine in comparison with the contribution of black growers of different area crops within the nation.
The sugar industry has all the time been one of many greatest and most necessary contributors to South Africa’s agricultural value-added merchandise and exports. Between 2010 and 2021, the industry contributed a mean of about R5,1 billion each year to agricultural value-added merchandise, and in 2019 it exported merchandise value R8,5 billion.
However, this has progressively declined on account of points resembling low home manufacturing, escalating manufacturing prices, and rising low cost sugar imports.
These declining sugar exports are mirrored within the 2021 commerce numbers. According to the International Trade Centre’s Trade Map information, complete export earnings had been recorded at R5,7 billion in 2021, which was 23% decrease than the R7,4 billion of 2020 and 33% decrease than the R8,5 billion of 2019.
Amongst the aforementioned components affecting South Africa’s functionality to export sugar merchandise are altering shopper tastes and preferences fuelled by well being causes, in addition to the COVID-19 pandemic. The impression of decreased affordability on customers’ buying behaviour and shifting consuming patterns attributable to the pandemic have exacerbated the lower in world demand for sugary meals.
Support programmes
Despite the altering dynamics on the worldwide sugar market, nations that produce sugar have instituted numerous help programmes to make sure their home producers stay aggressive within the face of COVID-19 and altering sugar tax regimes.
Farmers in Brazil, Russia and India have benefitted from home commerce and home market help measures, thus serving to them to extend their sugar exports by 64%, 43% and 40% respectively between 2019 and 2020.
Equally, South African sugar farmers can profit from enhanced home market help measures to extend their manufacturing capability. The Sugarcane Value Chain Master Plan to 2030 is among the instruments with the potential to help the home sugar industry.
Trade measures, resembling elevated tariffs on imported sugar, have been carried out because the adoption of the grasp plan in 2020, and this has considerably assisted to mitigate low cost sugar imports into the nation.
To additional help the sugar industry, home market help programmes, resembling product diversification and shopper schooling campaigns, are needed. Consumer sentiment in the direction of wholesome consuming habits is among the components contributing to low sugar demand.
Better shopper academic campaigns are essential to hold customers knowledgeable, whereas nonetheless sustaining a superb demand for sugar. Developed nations are main this phenomenon, and growing nations resembling South Africa are rapidly following up on this pattern.
The industry would possibly have to discover different makes use of for sugar or implement different inventive methods of promoting it. Therefore, diversification or value-addition by way of numerous agro-processing industries is crucial to growing demand for sugar and sustaining the industry’s progress.
It can be necessary to extend analysis and improvement to discover more healthy sugar varieties that can guarantee customers’ consuming habits will not be affected sooner or later.
Given the significance of the industry in creating jobs, producing overseas revenue and contributing to agricultural value-addition, policymakers and industry captains have to channel assets and efforts in the direction of the sugar grasp plan’s implementation to make sure the industry is supported and stays aggressive on home and worldwide markets.
Short-term exemption from sugar tax, for instance, may create a respiratory house for sugar farmers fighting growing manufacturing prices and gasoline bills.
Finally, state-supported academic campaigns to extend consciousness amongst customers of sugar and the well being advantages related to consuming ample sugar vitamins are crucial to retaining demand for sugar and sugar merchandise on the native and regional markets.
Email Thabile Nkunjana at [email protected].
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