Sugar industry in grip of a bitter crisis

11 Jul 2019

City Press, 10 July 2019
by Matthew Hattingh

Small-scale farmers, who are already struggling to stay afloat, face an even bleaker future as challenges deepen. The country’s R14 billion sugarcane industry is in the grip of crisis and its emerging black farmers, thousands of workers and communities dependent on the sector are feeling the squeeze. The SA Farmers Development Association (Safda) said there had been a significant decline in the number of small-scale sugarcane farmers – from around 50 000 in the early 2000s to below 20 000 today. “This means a number of rural households no longer have that [cane] income and tracts of land are lying fallow,” said Ronda Naidoo, a Safda spokesperson. She cited the challenges facing all farmers – low sugar prices and the Health Promotion Levy on Sugary Beverages or sugar tax, which led to about 250 000 tons in loss in local annual sugar consumption. These pressures are likely to cause more job losses and further farmers to exit sugarcane farming.

The SA Canegrowers Association has predicted that sugar demand would fall again as drinks bottlers reformulated their products further to avoid the sugar tax, which is aimed at tackling obesity and diabetes. Naidoo said that Safda’s members were more vulnerable than their commercial counterparts because they have “little to no financial buffers and do not have ready access to capital”. She said other factors that had impacted the industry included sugar imports, which depressed the price of local sugar; the “lingering effects of the recent drought”; and higher input costs such as fertiliser as well as the increase in fuel prices, which saw petrol and diesel prices climb close to record highs in June.

Safda executive chairperson Siyabonga Madlala told City Press that emerging farmers were typically far from mills, which meant high transport costs. He said their crops were generally grown on or near communally owned land where pastures were burnt without warning to improve grazing. To make matters worse, according to Safda, cane from small-scale farmers normally ended up at the back of the queue, behind bigger loads from the commercial farmers. Swazilihle Ndlovu is a 26-year-old farmer, and his family has a farm with 120 hectares of sugarcane in eSinembe, north of Tongaat. He said returns were marginal while input and transport costs were crippling small-scale growers. They also operated on unfavourable terms with the mills compared with commercial farmers. Access to capital to expand and managing cash flow were perennial problems in what was a seasonal business, he said.

“We are on the edge of survival. Prices are up and down. We budget for one to two months and at some point we are sitting on a negative. It’s really not sustainable industry at this point,” he said. Ndlovu called for transformation in the sector. “We are talking about an industry where land in black hands is less than 30%. When will black farmers start getting a bigger share? “We are [as an industry] still dominated by white commercial guys.” Ndlovu said some farmers were surviving by replacing sugar cane and growing vegetables but that came with challenges. Thabo Mtshali (54) who farms cane under an irrigation scheme in the Pongola region, in the far north of KwaZulu-Natal, told City Press times were tough. Mtshali said most of the scheme members were “struggling or close to collapse” despite government grants. He chairs the Phumelela Farmers’ Association which represents 34 small-scale farmers who own 10ha to 17 hectares of land.

Numbers have dwindled from 46 when the project was initiated by then minister of water affairs and forestry, Kader Asmal, on land formerly owned by the state in the late 1990s. Some members sold their farms to commercial farmers and a few to bigger black farmers. Mtshali said water and electricity costs were crippling the black farmers some of whom had been burdened with mortgages at the outset to help pay for a scheme. “The future is very negative for black farms because of the circumstances they operate under. The playing field is not level,” he said, commenting on the sugar industry in general. He said there was a move to diversify into crops such as macadamia nuts but small plots and limited means made raising bank loans difficult to make the change. Some parts of the sugarcane sector are harder hit than others. A person who works in the sugar industry, who wished not to be named, said small towns in KwaZulu-Natal that relied heavily on income from sugarcane farms or sugar mills included Mtubatuba, Empangeni, uMthunzini and Darnall.

To add to the industry woes, sugar giant Tongaat Hulett, which is already under a cloud for accounting irregularities, has embarked on major retrenchments that could see 5 000 people lose their jobs. That is bad news for the thousands of workers affected but also for small-scale farmers who depend on the company’s support staff, according to the Food and Allied Workers’ Union (Fawu). Fawu’s sugar industry organiser, Nkosikhona Nzama, said Tongaat Hulett was dealing with retrenchments on a unit-by-unit and skills basis instead of centrally – a move he claimed was calculated to keep the union and its members in the dark. Resource centre clerks appeared to be among the first to be affected by the retrenchments. The clerks serve as a link between small-scale growers and the company and provided technical advice. “The small growers will now have to get on to a bus, and another bus to find out about tonnage, their payments and all these things,” Nzama said.

He told a story of an elderly woman grower who he said was “crying like a baby” when she learnt she was likely to lose the support of the clerks. At the end of last month, the union referred Tongaat Hulett to the Council for Conciliation, Mediation and Arbitration (CCMA) over its handling of the retrenchment process. Fawu deputy general secretary, Mayoyo Mngomezulu, has called on government to intervene regarding the Tongaat Hulett restructuring. KwaZulu-Natal economic development MEC Nomusa Dube-Ncube met Tongaat Hulett representatives in late May, shortly after the company sent out the retrenchment letters. Dube-Ncube established a task team to look at this development. Nathi Olifant, a spokesperson for the KwaZulu-Natal economic development department said: “Due to other challenges faced by Tongaat Hulett, the team had not developed a plan or response to the crisis.” Olifant said the task team would help finalise a long-term plan for the industry and this was being done with the department of trade and industry (the dti).

Bongani Lukhele, a spokesperson for the dti, said the department was helping to put together a jobs mitigation plan, which included diversification in the sugar industry. The matter was now being discussed at the National Economic Development and Labour Council. He said the International Trade Administration Commission of SA investigated any tariff review applications in an open process. “Upon conclusion of the investigation, the commission will then make a recommendation to the Minister of Trade and Industry Ebrahim Patel for approval,” said Lukhele. Tongaat Hulett spokesperson Michelle Jean-Louis, when asked about any plans to close operations, including sugar mills, said: “The organisation is reviewing a number of its assets, some of which may be sold and others restructured or retained.”