11 May 2021
Chairperson of our Portfolio Committee , honourable Duma Nkosi.
Committee Whip, Judy Hermans
Portfolio Committee Members,
Officials from our Department.
The leaders and Representatives of the Sugar Industry from all diverse organizations.
Ladies and Gentlemen.
Thank you very much for this invitation on such an important stakeholder engagement within the sugar industry. This engagement is all the more important in the context of the devastating headwinds that our economy has been plunged by COVID-19, with the result that global value chains were severely disrupted and various sectors (no less also the sugar industry) was affected.
As you will see in our presentation as the Department through our Officials, the 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%. About two sugar mills are facing extreme difficulty. These are bad news for the sector given the stated ambitious goals as contained in the Master Plan.
What has been the causal effects of this industry decline?
Factors that have driven this decline has been:
- Distorted global prices, that are below South Africa’s cost of production
- Increasing volumes of low-priced tariff-free exports from eSwatini into the SACU market.
- The Health Promotion Levy (or HPL), and the Covid-19 impacts
As part of the Master Plan, R 1 billion was set aside for transformation plan as a critical element of inclusivity. I am excited that there is progress in this area as SASA is implementing it, with R400m already been spent for over a 2 year period. I hope that interested stakeholders who stand to benefit from the transformation element such as SAFDA are on board and satisfied on how that process is being pursued.
The Sugar Masterplan requires a consistent set of collaborative actions by all stakeholders in the industry. Minister Patel last year designated the sugar industry in terms of section 10(3)(b)(iv) of the Competition Act, 1998 (Act No. 89 of 1998) for 1 year commencing 1 July 2020. Consequently, the Competition Commission granted conditional exemption to SASA in terms of 10(1) of the Competition Act commencing from 20 October 2020 to 30 June 2021. I am happy that a New Task Team 8 has been established in terms of the exemption, this has permitted work to proceed into designing and implementing a programme of action, given that collaboration between competitors is not ordinarily allowed in terms of the Act.
With this Masterplan, we seek to 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 sugarcane value chain, the wider bio-economy, society and the environment.
In phase 1 of the Sugarcane-based value chain, we still anticipate that the Masterplan will run for three years and is focused on key actions with the following objectives:
-To Stabilise the industry;
– To Restructure industry capacity and costs in an orderly manner to ensure alignment to current and future market size, and establish the appropriate platform for a diversified sugarcane-based value chain by 2030.
-To Protect and retain sugarcane value-chain (including upstream and downstream) jobs as far as possible through the transition;
-To Secure the foundational role of small-scale growers in the sugarcane value chain, and ensure a balanced approach to supporting small-scale grower sustainability towards Vision 2030;
– To Mitigate the impact on workers and small-scale growers of capacity reductions; and
– To ensure that transformation of ownership and participation is significantly advanced through the restructuring and the transition to Vision 2030.
In this Phase 1 of the Masterplan, industrial users and retailers of sugar have committed to minimum levels of South African grown and produced sugar, equal to no less than 80% of need during first year, and increasing to 95% by the 3rd year. To support this undertaking, sugar producers have equally committed to price restraint during this period. Over the three-year Phase 1 period, the sugar industry will commence a stabilisation and restructuring plan which will include, inter alia, development of diversified revenue sources for the industry, small-scale grower retention, support and transformation.
I am isolating these important aspects of the Master Plan targets purposefully because, despite the setbacks imposed by factors I have mentioned above, including COVID, these constraints must never be an entry point in justifying revision of our targets as agreed to in the Master Plan. We must be ambitious and double our efforts in meeting these targets as laid out in the Master Plan.
We must ensure that the future industry structure secures and protects the foundational role and participation of small-scale growers and independent mills in the value chain alongside large-scale growers, millers and refiners;
Of importance to me and Minister himself, is the facilitation and advancement in the implementation of industry transformation plans as set out in the Masterplan without lip service paid on this effort.
We must ensure that the financial benefits of the restructuring plan are shared equitably and appropriately between consumers, users, refiners, millers and both small-scale and commercial growers.
Finally, I am excited that there is commitment to formalise the Project Management Office, and that we are going to receive Quarterly reports produced (in progress, based on a weekly dashboard established). This will provide us a clear line of sight in monitoring all the efforts in meeting the targets as contained in the Master Plan.
I wish this engagement between the Portfolio Committee, the Industry and the Department a success underpinned by clear line of march predicated on genuine commitments to the dictates of the Master Plan as agreed to last year.
I thank you.