Sugar-a booming industry

Amid the gloomy economic prospects for Swaziland the sugar industry is showing a buoyancy that verges on euphoria. 'Our biggest limiting factor today,' says Andy Colhoun, President of the Swaziland Sugar Association (SSA), 'Is lack of sugar to sell: we have more demand than we have stocks and have become an industry that rations and allocates rather than markets.' This is a remarkable achievement for an industry which began in 1956 with a small mill at Big Bend producing for the domestic market and for South Africa. in 1992/93 Swaziland had to buy back sugar previously sold to New Zealand to supply Zimbabwe (whose production was badly affected by drought), despite overall output rising to 494 800 tonnes, its highest ever. With production forecasts for 1993/94 showing a drop of about 12.4 %, the SSA would have a very serious juggling act to perform to meet obligations. Sugar supply to Southern Africa as a whole has risen dramatically to around 134 000 tonnes and it is still rising due mainly to increased demand in South Africa, whose production is 'getting worse and worse every year', according to Mr Colhoun.

Traditionally Swaziland exports; to the European Union, where it enjoys a guaranteed annual quota of 120 000 t of raw sugar under the Lomé Convention. Bought at preferential prices, often three times those of the world market, this represents 25 % of its total sales abroad. About 27 000 t are sold to Canada, and between 15 000 and 21 000 t to the United States (quota export to the US depends on demand and volume, therefore, varies).

Apart from the Southern African market, the most important development in the past three years has been an increase in local consumption; from 39000 t in 1990/91 to 55 000 t in 1991/92, for example, a 42 % increase (representing 12 % of production). The main consumer is the manufacturing food industry: Swazican, which makes sweets and jams, the Coca-Cola soft drink concentrates, Cadbury's confectioneries, and a number of other base products made for South African industries.

By far the biggest export Gamer (about E 500 million per annum) and a major employer (16000 direct employment and 20 000 indirect), Swaziland's sugar industry must be the envy of many producer nations whose market outlets have been restricted and whose income from sugar has declined considerably in recent years. A low-cost producer, its sugar is, for example, R300 per tonne cheaper than South Africa's. This success story, however, is due to a combination of factors which are largely absent in many producing countries.

Firstly, sugar cane is grown under irrigation throughout the year unlike in Zimbabwe and South Africa, for example, where it is rainfed. So the crop is rarely adversely affected by drought. It grows faster, its cycle is shorter (making harvest possible once every year in contrast to South Africa where cane is cut every 18 months) and its sugar content is high. Secondly, labour is cheap. In fact mechanised cane cutting is progressively being abandoned in many fields in favour of human labour and this is proving very productive. Thirdly, and no doubt a very significant but less noticeable factor, is that all the three large sugar mills in Swaziland were built a long time ago (the most recent in the early 1980s) and have almost all been amortised. 'In fact all three could mill a lot more sugar without incurring great investment costs,' according to Mr Colhoun. Even the Umbobo Ranch -, which expandad its refinery between 1991 and 1993 to increase its white sugar milling capacity from 38 000 to 90 000 tonnes, did not incur burdensome costs.

Redefinition of objectives

But there is no room for complacency. As Mr Jonny Masson, President of the Swaziland Chamber of Commerce and Industry, pointed out, the sugar industry knows that it has to redefine its objectives. 'We've got to look at the marketing options and the scenarios and decide on which direction to follow,' he said. And one option that is becoming obvious is the regional market, for, although local consumption is rising, there is considerable uncertainty about the future of the main user industries as South Africa comes in from the cold. Speculation about relocation and disinvestment is rife. Mr Colhoun provides a more valid reason for that option. 'Sugar is a high bulk low-value product,' he says, 'and transport kills it. We will have to decide whether, in the future, it will not be worthwhile to send less overseas and keep more in the region. Mozambique is bouncing back (suddenly there are people who want to take sugar to that country because the war has stopped, the roads and the rail tracks are being used again and the shops are reopening). Namibia is a good market; a lot of the sugar that it buys from us goes into Angola.'

In very simple terms, the basic problem is how to increase further this tiny nation's annual production of 485 000 tonnes, which is already equivalent to Zimbabwe's and a quarter of all South Africa's, to meet demand wherever it comes from.

It is important to note that the sugar industry in Swaziland is regulated by the 1967 Sugar Act and is tightly controlled. At the base are the estates (the growers) of which the three largest, at Mhlume, Simunye and Ubombo Ranches, also run the country's three mills. Others are in Big Bend, Crook" and Tambankulu. Some 36 000 hectares are currently under sugar cane and the "tat" do not plan to bring more land under the crop according to Mr Colhoun. All sugar produced in Swaziland is the property of the Swaziland Sugar Assodation which markets and sells it and then pays the millers, who in turn pay the growers. The SSA is thus at the summit.

A dominant feature of the modem sector in Swaziland's dual economy, the industry, which is ran mainly by expatriates, has been criticised for its 'neocolonialist' outlook and for being too far removed from the traditional economy. But that image is gradually changing as it embraces a new production strategy. This is aimed at bringing in small-scale growers and opening up opportunities for indigenous people to move away from the constraints of traditional agriculture and into the lucrative world of the modern sector. A pilot scheme, whereby small-scale planters were allocated 10 000 tonnes, has been launched and the results are said to be encouraging.

As sugar cane production is 100 % under irrigation in Swaziland, Mr Colhoun told the Courier that, in order to make a real breakthrough, the country needs to build a dam. Just such a dam is planned on the Komati River and government officials insist it is aimed at small-scale growers who have begun, in increasing numbers, to show interest in sugar cane. Indeed there are already a number of EDF-financed rural development irrigation projects which have sugar cane growing as a component.

This scheme is, however, not a free-for-all affair. It is strictly controlled. 'You can't grow sugar cane,' Mr Colhoun explains, 'unless you have a quota. You have to have a bit of expertise, the land, the water and the Chief's permission. So what we are doing is allocating quota as and when the land goes under irrigation, and we are also careful as an industry to make sure that a person who gets a quota can actually make a living out of it. We appoint an extension officer actually to assist the small growers to make sure they are successful. And some of the estates also appoint someone within the mill to assist those in their area.'

This increasing army of small scale growers is expected in a couple of years to make a considerable impact on Swaziland's overall sugar production and lead to a greater integration of the modem and traditional sectors of the economy.

A.O.