I would like to take this opportunity, on behalf of SASMA, to wish our partners the growers, customers, suppliers and other sugar industry stakeholders a wonderful festive season and a prosperous new year. In addition, I would also like to extend these wishes to the milling companies and their committed staff.
It has been another challenging year for the industry. Agriculturally, it has been a good year, the best in the last five years. Unfortunately, the good agricultural conditions have not translated into an overall financial recovery for the industry. The introduction of the “Health Promotion Levy” i.e. the sugar excise tax, has resulted in the reformulation of beverages by the bottling industry, with negative consequences for sugar sales.
In addition, the threat of sugar imports has suppressed sugar prices in the domestic market to well below the costs of production for an extended period. We are, however, grateful that the Dollar Based Reference Price, which sets the level of the sugar tariff for the Southern African Customs Union (SACU), was increased to US$680 by the International Trade Administration Commission (ITAC). This decision will not, of itself, sustain the industry for the future. The increased tariff has, however, reduced sugar imports and improved the viability of the industry.
Looking ahead to next year, the industry has noted with cautious optimism governments renewed interest in bio-fuels. The industry eagerly awaits government’s finalization of the biofuel blending regulatory framework, which according to reports, is to be considered by Cabinet by the end of March 2019. The diversification of the sugar industry from primarily a sugar producer, into an ethanol producer as an additional product, has been on the industry’s agenda for a long time. Many sugar industries around the world produce ethanol and are consequently more sustainable due to their diverse income streams.
During the year, government introduced significant amendments to sugar legislation which now provides for the grower community to be represented at the highest level of the industry through two grower associations. Previously, there had been only one grower representative organisation, the South African Cane Growers’ Association (SACGA). The inclusion of the South African Farmers Development Association (SAFDA) has provided a fresh perspective for the industry and transformation has been placed at the forefront of the industry agenda. As Millers, we look forward to working with the two grower associations on the challenges and opportunities ahead in the New Year.
The Millers will continue in 2019 to work with government in the interests of diversification, industry sustainability, transformation and economic growth. The industry is currently fragile but has the potential to increase its already significant economic footprint in the regions where sugar is manufactured. We have noted government’s new emphasis on agriculture as a driver of economic growth and with the renewed interest in bio-fuels, SASMA is hopeful that 2019 will be a turnaround year for the industry and its stakeholders.