A PROFILE OF THE SOUTH AFRICAN SUGAR MARKET VALUE CHAIN

Transcription

1 A PROFILE OF THE SOUTH AFRICAN SUGAR MARKET VALUE CHAIN 2013 Directorate Marketing Private Bag X 15 Arcadia 0007 Tel: Fax: MogalaM@daff.gov.za 1

2 Table of contents 1. DESCRIPTION OF THE INDUSTRY Production Areas Production Employment 7 2. MARKETING STRUCTURE Domestic Market and Domestic Sugar Prices 8 3. EXPORTS VOLUMES OF RAW SUGAR Share Analysis IMPORTS VOLUMES OF RAW SUGAR PROCESSING AND MILLING Marketing Arrangements MARKET VALUE CHAIN MARKET ACCESS Tariffs MARKET INTELLIGENCE ORGANIZATIONAL ANALYSIS EMPOWERMENT AND TRANSFORMATION BUSINESS OPPORTUNITIES AND CHALLENGES SUGAR MILLERS IN SOUTH AFRICA ACKNOWLEDGEMENTS 67 2

3 1. DESCRIPTION OF THE INDUSTRY The South African sugar industry makes an important contribution to the national economy, given its agricultural and industrial investments, foreign exchange earnings, its high employment and linkages with major suppliers, support industries and customers. It is a diverse industry combining the agricultural activities of sugarcane cultivation with the industrial factory production of raw and refined sugar, syrups and specialized sugars, and a range of by-products. The industry produces an estimated average of 2.2 million tons of sugar per season. About 75% of this sugar is marketed in the Southern African Customs Union (SACU) region. Based on revenue generated through sugar sales, in the SACU region and world export market, the South African sugar industry is responsible for generating an annual average direct income of R12 billion. The industry contributes an estimated average R5.1 billion to the country s foreign exchange earnings on an annual basis. The average annual value of sugarcane production is R4 billion, which is more than 15% of the total gross value of annual field crop production. Its support to the domestic value chain is estimated at R96 million. The sugar industry s contribution to the South African economy can be described as follows; The South African sugar industry makes an important contribution to the national economy, given its agricultural and industrial investments, foreign exchange earnings, its high employment, and its linkages with major suppliers, support industries and customers. The industry accounts for 0.9 % of total merchandise exports by value, 0.5% of total income tax, 3.6% or total fixed capital stock of business enterprises, and 0.3% of salaries and wages; This proportion is above the average of for all sectors in the economy, but similar to that for the agriculture, clothing, textiles and footwear, and accommodation and catering sectors; The sugar industry directly supports approximately jobs, and indirectly supports another jobs. Approximately one million people, more than 2% of South Africa s population depends on the sugar industry for a living. The South African Sugarcane Research Institute, through its research and development activities, contributes significantly to the development of the sugar industries of Sub-Saharan Africa, and it produces most of the varieties of cane grown in Africa south of the equator; The Sugar Milling Research Institute is regarded internationally as a leader in its field of research, training and consultancy. The industry is regulated in terms of the Sugar Act and the Sugar Industry Agreement, which are binding on all sugarcane growers and producers of sugar products. The contribution of the sugar industry to the Gross Value of Agricultural production can be summarized in Figure 1. Figure 1 below indicates gross value of sugar production in South Africa between 2003/04 and 2012/13. 3

4 2003/' /' /' /' /' /' /' /' /' /'13 Gross Value ('000 rands) Figure 1: Gross value of sugar production Source: Statistics & Economic Analysis, DAFF Period (Years) The figure further indicates that gross value of sugar production started to increase in 2003/04 marketing season, followed by a slight decline in 2004/05 to lower levels of approximately R3 million. A consistent increase in gross value of sugar production from 2005/06 to 2009/10 was due to a significant increase in production of the crop over the same period. The sugar cane s contribution to the gross value of agricultural production increased significantly from 2005/06 to 2009/10 and this was due to a consistent increase in sugar cane producer prices during the aforementioned period. The decline in the contribution of sugar to the gross value of production between 2003/04 and 2004/05 can be attributed to a strong rand against the dollar which had a reducing effect on producer prices of sugar cane. Rainfall across the entire industry was below expectation up to 2004/05 season resulting in the smallest crop since 1995/96. The slight decline in the contribution of sugar to the gross value of sugar production in 2010/11 can be attributed to a strong rand against the dollar which had a reducing effect on producer prices of sugar cane during that period. In 2011/12, the figure further indicates that the contribution of sugar to the gross value of sugar production in 2011/12 increase consistently to about R5.9 million until a peak was attained in 2012/13 at approximately R6.7 million. 1.1 Production Areas Sugarcane in South Africa is grown in 14 cane producing areas extending from Northern Pondoland in the Eastern Cape Province through the coastal belt and Kwazulu-Natal midlands to the Mpumalanga Lowveld. Of the ha currently under sugarcane prodction, about 68% is grown within 30km of the coast and 17% in the high rainfall areas of Kwazulu-Natal. The balance is grown in the northern irrigated areas that comprise Pongola and Mpumalanga lowveld. 4

5 1.2 Production On average 17.3 million tons of sugarcane have been produced and crushed during 2012/13 season from 14 mill supply areas, extending from Northern Pondoland in the Eastern Cape to the Mpumalanga Lowveld. Of the registered sugarcane growers are small-scale growers mainly on tribal land of whom delivered cane for crushing in 2012/13, accounting for 8.26% of the total crop. With the focus on empowerment of previously disadvantaged people, a growing number of black growers are entering sugarcane farming on commercial farms made available at market related prices by the major milling companies and other sellers of freehold land. Post 1994 purchases of freehold land created more than 1300 black commercial growers in the sugar industry, who own hectares, or 11% of freehold land under sugarcane. An additional hectares of land under sugarcane is already being used by small-scale black growers on tribal land. In total there are 1413 commercial growers (inclusive of the more than 378 new black commercial growers) who produce 83.8% of total sugarcane production. Milling companies with their own sugar estates produce 7.94% of the crop. The percentage of these millers-cum planter estates has decreased in recent years is likely to continue doing so as the companies promote black farming development. Figure 2 shows sugar cane production in South Africa during The figure further shows that large scale sugarcane growers in South Africa have contributed 84% of the crop, small scale sugarcane growers have contributed 8% and sugarcane estates have also contributed 8% during the period under review. Figure 2: Sugar cane production in South Africa % 8% 84% Large scale growers Sugar estates Small scale growers Source: South African Sugar Association (SASA) 5

6 Table 1 below depicts the total crop area under sugar cane in hectares between 2003/04 and 2012/13. Table 1: Total crop area under sugarcane (ha) between 2003/04 and 2012/13 Period of Years Hectares ( 000) 2003/ / / / / / / / / / Source: South African Sugar Association (SASA) The table further depicts that the area owned by large scale growers decreased from ha to ha between 2003/04 and 2012/13 as indicated in table 1 above. In 2009/10, the table also depicts that there was a huge decline in terms of the hectares that were allocated to sugarcane growing ( ha) to a level closer to the 2011/12 season which saw a further dramatic decline of about hectares. In 2012/13 season, the total crop area under sugarcane has increase by 39% as compared to 2011/12 season. Table 2 below illustrates the area planted, cane production and sugar production in South Africa between 2003/04 and 2012/12 production season. Table 2: Sugarcane: area planted, cane production and sugar production Year / 2005/ 2006/ 2007/ 2008/ 2009/ 2010/ 2011/ 2012/ / Area Planted (1000ha) Cane Production (1000 tons) Production of sugar (1000 tons) Source: Statistics & Economic Analysis and SASA The table further illustrates that in 2003/04, the area planted to sugar cane was at hectares leading to the production of tons of sugar cane. Between 2003/04 and 2004/05, the area planted decreased marginally by 2000 ha causing a decline in sugar cane production of about 6

7 tons. Table 2 further illustrates that on average there is a direct relationship between area planted to sugar cane, sugar cane production volumes and sugar production volumes. As reflected in Table 2 above, sugarcane and sugar production has remained relatively constant as growth has been curtailed by preferential access arrangement granted to SADC and SACU producers and adverse global market conditions. The area under cane production in SA between 2003/04 and 2007/08 has remained constant at around and hectares. While the total area under cane expanded in the mid-90 s, primarily as a result of the establishment of the Komati Mill in Mpumalanga and the relocation of the Illovo Mill to its current site in Eston, where development is not constrained by urbanization as was the case in the coast, no further significant expansion has taken place. The area under sugarcane, being a perennial crop is less subject to fluctuations compared to other crops. Cane yields per hectare have remained at historic levels but the adoption of the Recoverable Value price system for cane payments, which incentivizes good agricultural practices, has resulted in improved sugar yields per hectare. The industry produces an estimated average of 2.2 million tons of sugar per season. About 75% of this sugar is marketed in the SACU region. The remainder is exported to markets in Africa, Asia and the Middle East. Table 2 also shows that there was a decline in sugar production between 2010/11 and 2011/12 production season from 1909 tons to 1825 tons. The major factors responsible for this decline are the diminishing profitability of growing cane in terms of input costs versus financial returns, years of poor cane prices to farmers, adverse weather conditions, poor cane contractor performance and service, high contracting rates, limited capital availability and, in some regions, the withdrawal of cane supply support that has traditionally been provided by sugar milling companies. In 2012/13, sugar production in South Africa illustrates that there were some signs of positive growth with a slight increase in tonnage of about 1951 tons, which represents 6.9% increase during the period under scrutiny. 1.3 Employment The sugar industry makes an important contribution to direct employment in sugarcane production and processing, and provides indirect employment for numerous support industries in the three provinces where sugarcane is grown Kwazulu-Natal, Mpumalanga and the Eastern Cape in sectors such as fertilizer, fuel, chemical, transport, food and services. Direct employment within the sugar industry is approximately jobs. Direct and indirect employment is estimated at people. There are approximately one million people dependent on the sugar industry in South Africa. The sugar milling sector of this industry employs people in 14 sugar mills. 2. MARKETING STRUCTURE 7

8 2003/' /' /' /' /' /' /' /' /' /'13 Prices (Rands/ton) 2.1 Domestic Market and Domestic Sugar Prices As members of the South African Customs Union (SACU), the total domestic market is comprised of sales into all SACU countries. The total SACU demand is met by supply from SACU producing countries, bilateral arrangements between non-sacu countries and SACU countries, and from access granted to non-sacu- SADC surplus sugar producing countries in terms of the SADC Protocol. Sugar prices in SACU are established in a regulated environment driven off a dollar based reference price system which determines the duty payable on sugar imports into SACU. This system was put in place by the Department of Trade and Industry in Millers, who sell the sugar domestically, compete against each other for market share in the direct and indirect (industrial) markets. Millers also face competition from sugar originating from SADC countries in terms of the SADC Free Trade Agreement, as well as from Swaziland. The dollar based reference price system was established by the DTI on the basis of a 10 year average of the No.5 world refined sugar price adjusted for certain elements. Outlined as Table 3, are recent recoverable value (RV) prices paid by millers to growers together with the cane price at average recoverable values for the industry. Figure 3: Average producer prices paid to growers Source: Statistics & Economic Analysis, DAFF Period (Years) Figure 3 shows domestic prices paid to growers between 2003/04 and 2012/13 marketing season. The figure further shows that prices paid to growers during the period under examination started to increase in 2003/04 season at approximately R per ton and then saw a decline in 2004/05 8

9 season at approximately R per ton until an increase was experienced in 2005/06 at approximately R per ton. From 2005/06 season, producer prices paid to sugar cane growers started to increase at an increasing rate until a peak was attained in 2012/13 season at approximately R per ton. Table 3 below illustrates that domestic sugar prices paid to growers between 2003 and 2012 in terms of recoverable value price against sugar cane price. Table 3: Prices paid to growers ( ) Year Recoverable Value (RV) Price Source: South African Sugar Association and Statistics & Economic Analysis Cane Price (R/ton) The table further illustrates that prices paid to growers of sugar on a recoverable value basis increased substantially between 2003/04 and 2012/13, while the cane price also followed the same trend during the same period. At the start of the 2003/04 season, the Recoverable Value (RV) payment system replaced the sucrose payment system. The RV system recognizes the effect of Sucrose % cane, Non-sucrose % cane and Fibre % cane on sugar production. Cane quality or RV % cane is increased by increasing maturity, freshness and cleanliness of the cane delivered. The RV formula estimates the quantity of sugar and molasses that can be made from a particular delivery of cane. The South African Sugar Association (SASA) determines a market related price (a notional price) that it uses in determining the minimum price payable by millers to growers for sugarcane. This price was increased at the beginning of 2006 by 6% which was the first adjustment since March Sugar prices in the domestic market have been severely affected by the constant threat of imports of low-priced subsidized sugar. Annual recoverable (RV) prices for sugar have been lower than increases in production costs and the average increase in farming inputs from 2001 to The table further illustrates that between 2003/04 and 2012/13, the recoverable value increased from R to R of the period under examination. The table also illustrates that between 2003/04 and 2004/05, there was a consistent decline in cane prices from R to R of the period under review. 9

10 The table further illustrates that from 2005/06 to 2012/13, there was a consistent increase in sugar cane prices of approximately R per ton to R per ton. 3. EXPORTS VOLUMES OF RAW SUGAR CANE More than thirty seven percent (37%) of the 2.2 million tons of sugar produced in South Africa per season is marketed in the Southern African Development Community (SADC). SADC is made up of 14 African countries located in the Southern part of Africa such as Zimbabwe, Zambia, Tanzania, Madagascar, Angola, Botswana, DRC, Lesotho, Malawi, Mauritius, Mozambique, Namibia, South Africa and Swaziland. Figure 4: Raw sugar exports destinations in 2012 Madagascar 2% Angola 6% Mozambique 10% Israel 0% Indonesia 24% USA 19% Japan 20% Zimbabwe 19% Indonesia Japan Zimbabwe USA Mozambique Angola Madagascar Israel Source: ITC Trade Map Figure 4 illustrates raw sugar cane exports from South Africa to different regions of the world during the The pie chart further illustrates over the same period, most of South African sugar was exported to Indonesia at 24%, Japan at 20%, Zimbabwe at 19%, USA at 19%, Mozambique at 10%, Angola at 6% and Madagascar at 2% respectively during the period under scrutiny. The greatest percentage / share of South African raw sugar cane exports during this period went to Indonesia during the period under review. 10

11 Export Quantity (tons) The South African sugar industry exports more than 75% of its sugar production, and is generally amongst the top ten sugar exporters in the world. Raw sugar cane exports are predominantly to Asia, Far East and Middle East refineries. The industry competes directly with Brazil, Thailand, Australia and Guatemala for raw sugar markets and with refineries in the EU (subsidized sugar exports). Figure 5 depicts below export volumes of raw sugar from South Africa to various regions between 2003 and Figure 5: Export volumes of raw sugar (cane or beet) to various regions Source: Quantec EasyData Africa Americas Asia Europe Oceania Period (Years) The graph further depicts that the major export market destination for South African raw sugar exports was Asia, followed by Africa over the past decade. The graph also depicts that exports of raw sugar from South Africa started to increase substantially in 2003, with a consistent increase in 2004 until a peak was attained in 2005 at an export quantity of approximately tons. Africa as a second largest region recorded its high quantities of raw sugar exports from South Africa in 2003 at an export quantity of about tons. The exports of raw sugar are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. Americas, Europe and Oceania had very low intake of raw sugar from South Africa of not more than tons per annum during the period under scrutiny. In 2012, there was a 100% decline in export volumes of raw sugar from South Africa to Asia as compared to Figure 6 below shows export volumes of raw sugar from South Africa to Africa between 2003 and

12 Export Quantity (tons) Source: Quantec EasyData Figure 6: Export volumes of raw sugar (cane or beet) to Africa Eastern Africa Rest Middle Africa Rest Northern Africa Western Africa SADC Period (Years) The figure further shows that the major export market destination for South African raw sugar to Africa was SADC, followed by Northern Africa. The figure also shows that the largest volumes of export of raw sugar from South Africa to SADC were recorded in 2003, 2006 and 2007 at export quantities of approximately , and tons respectively. Exports of raw sugar are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. Eastern, Western and Middle Africa had very low levels of raw sugar intakes from South Africa of not more than 8000 tons per annum during the same period under review. There was a 100% decline in export volumes of raw sugar from South Africa to the SADC region in 2012 as compared to Figure 7 below indicates export volumes of raw sugar from South Africa to the SADC region between 2003 and

13 Export Quantity (tons) Figure 7: Export volumes of raw sugar (cane or beet) to SADC Angola Democratic Republic of the Congo Mauritius Mozambique United Republic of Tanzania Zambia Zimbabwe Source: Quantec EasyData Period (Years) 13

14 Export Quantity (tons) The figure further indicates that the major export market destination for South African raw sugar to SADC was Mozambique over the past decade. Angola, DRC, Mauritius, United Republic of Tanzania, Zambia and Zimbabwe had very low levels of raw sugar exports from South Africa of not more than tons per annum during the period under review. The figure also indicates that raw sugar exports from South Africa to Mozambique started to increase in 2003 and at the same time attained a peak at an export quantity of about tons. The figure further indicates that between 2004 and 2005, there was a consistent decline in raw sugar exports from South Africa to Mozambique. In 2006, a surge in raw sugar exports was experienced until a second and third peak were attained at export quantities of about and tons respectively. Between 2008 and 2012, there was a consistent decline in raw sugar export volumes from South Africa to Mozambique to lower levels of about tons in The figure also indicates that in 2012, there was a 100% decline in export volumes of raw sugar from South Africa to Mozambique as compared to Figure 8 illustrates export volumes of raw sugar from South Africa to the Americas between 2003 and Figure 8: Export volumes of raw sugar (cane or beet) to Americas NAFTA Source: Quantec EasyData Period (Years) The graph further illustrates that the major export market destination for South African raw sugar exports to Americas was NAFTA over the past ten years. The figure also illustrates that the largest export volumes of raw sugar from South Africa to NAFTA were recorded in 2005 and 2009 at export quantities of approximately tons and tons respectively. Exports of raw sugar cane are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. Between 2003 and 2004, and again between 2006 and 2008 and between 2008 and 2012 exports of raw sugar from South Africa to NAFTA declined to lower 14

15 Export Quantity (tons) levels of between 5 and tons per annum. In 2012, there was a 100% decline in export volumes of raw sugar from South Africa to NAFTA as compared to Figure 9 below depicts export volumes of raw sugar from South Africa to NAFTA between 2003 and Figure 9: Export volumes of raw sugar (cane or beet) to NAFTA Source: Quantec EasyData Canada United States Period (Years) The figure further depicts that the major export market destination for South African raw sugar exports to NAFTA was United States during the period under review. The figure also depicts that the largest volumes of raw sugar exports were recorded in 2005 and 2009 at export quantities of approximately tons and tons respectively. Exports of raw sugar cane are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. Canada had a very low intake of raw sugar exports from South Africa of not more than 78 tons per annum during the period under examination. There was a 100% decline in export volumes of raw sugar from South Africa to the United States in 2012 as compared to Figure 10 below shows export volumes of raw sugar from South Africa to Asia between 2003 and

16 Export Quantity (tons) Figure 10: Export volumes of raw sugar (cane or beet) to Asia Eastern Asia South-central Asia South-eastern Asia Western Asia Source: Quantec EasyData Period (Years) The graph further shows that the major export market destination for raw sugar cane from South Africa to Asia was Eastern Asia, followed by South-central Asia and South-eastern Asia during the past decade. The figure also shows that the largest volumes of raw sugar exports from South Africa to Eastern Asia were recorded in 2003, 2004 and 2005 at export quantities of approximately tons, tons and tons respectively. Exports of raw sugar cane are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. South-central Asia obtained its peak of exports of raw sugar from South Africa in 2006 at an export quantity of about tons. South-eastern Asia obtained its peak of raw sugar exports from South Africa in 2005 at an export quantity of about tons during the period under scrutiny. Between 2006 and 2012 of the ten year period, raw sugar exports from South Africa to Eastern Asia declined consistently to the lowest levels of about tons in In 2012, there was a 100% decline in export volumes of raw sugar from South Africa to Eastern Asia as compared to Figure 11 below indicates export volumes of raw sugar from South Africa to Eastern Asia between 2003 and

17 Export Quantity (tons) Figure 11: Export volumes of raw sugar (cane or beet) to Eastern Asia Source: Quantec EasyData China Japan Republic of Korea Period (Years) The figure further indicates that the major export market destination for raw sugar from South Africa to Eastern Asia was Japan, followed by Republic of Korea. The figure also indicates that during the past decade, Japan dominated exports of raw sugar almost throughout the period under review The figure further indicates that exports of raw sugar from South Africa to Japan attained a peak in 2009 at an export quantity of approximately 131 million tons, while Republic of Korea attained a peak also in 2009 at approximately 35 million tons. Figure 11 also indicates that there was 100% decline in export volumes of raw sugar from South Africa to Japan in 2012 as compared to 2011, while there was a 100% decline in export volumes of raw sugar from South Africa to Republic of Korea in 2012 as compared to Figure 12 below illustrates export volumes of raw sugar from South Africa to Europe between 2003 and

18 Export Quantity (tons) Figure 12: Export volumes of raw sugar (cane or beet) to Europe Eastern Europe European Union Source: Quantec EasyData Period (Years) The graph further illustrates that exports volumes of raw sugar from South Africa to Europe landed mainly in Eastern Europe, followed by European Union during the teen year period under review. The figure also illustrates that the largest volumes of exports of raw sugar from South Africa to Eastern Europe were recorded in 2003 at approximately tons. The figure also illustrates that the largest volumes of exports of raw sugar from South Africa to the European Union were recorded in 2007 at approximately tons, while exports of raw sugar to Western Europe were recorded in 2002 at approximately tons during the past decade. Exports of sugar cane are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. The figure further illustrates that between 2004 and 2012, exports of raw sugar from South Africa to Eastern Europe ranged between tons and tons. The figure also illustrates that there was a 100% decline in export volumes of raw sugar from South Africa to Eastern Europe in 2012 as compared to 2003, while there was also a 100% decline in export volumes of raw sugar from South Africa to the European Union in 2012 as compared to Figure 13 depicts export volumes of raw sugar from South Africa to European Union between 2003 and

19 Export Quantity (tons) Figure 13: Export volumes of raw sugar (cane or beet) to European Union Germany France United Kingdom Source: Quantec EasyData Period (Years) The figure further depicts that exports of raw sugar cane from South Africa to the European Union went to France over the past decade. The figure also depicts that exports volumes of raw sugar cane from South Africa to France started to increase substantially in 2007 and at the same time attained a peak at approximately tons over the past decade. The figure further depicts that in 2004 and 2005 and again in 2012, there were no export volumes of raw sugar cane from South Africa to France. The figure also depicts that export volumes of raw sugar cane from South Africa to Germany attained a peak also in 2007 at an export quantity of about 1000 tons. In 2012, there was 100% decline in export volumes of raw sugar from South Africa to France as compared to 2011, while there was no growth of raw sugar cane exports at 0.00% from South Africa to Germany in 2012 as compared to Figure 14 below shows export volumes of raw sugar from South Africa to Oceania between 2003 and

20 Export Quantity (tons) Figure 14: Export volumes of raw sugar (cane or beet) to Oceania Australia and New Zealand Source: Quantec EasyData Period (Years) The graph further shows that the major export market destination for raw sugar cane from South Africa to Oceania was Australia and New Zealand over the past decade. The figure also shows that exports of raw sugar from South Africa to Australia and New Zealand started to increase in 2004, until a peak in 2005 at approximately 6 tons. Exports of raw sugar cane are largely affected by the value of rand against other currencies, local production; supply and demand in the neighboring states. The figure further shows that in 2003 and again between 2006 and 2012, there were no raw sugar exports from South Africa to Australia and New Zealand. The figure also shows that there was no growth (0.00%) in export volumes of raw sugar cane from South Africa to Australia and New Zealand in 2012 as compared to Figure 15 indicates export values of raw sugar from provinces of South Africa to the world between 2003 and

21 Export Value (Rands) Figure 15: Value of raw sugar (cane or beet) exports by Provinces 3E E+09 2E E+09 1E Western Cape Eastern Cape Kwazulu-Natal North West Gauteng Mpumalanga Limpopo Source: Quantec EasyData Period (Years) 21

22 Export Value (Rands) The figure further indicates that the province that recorded the highest exports for raw sugar cane to the world over the past decade was KwaZulu-Natal Province, followed by Mpumalanga Province. A greater proportion of raw sugar cane exports originated from the KwaZulu-Natal province which is the major sugar producing province and the majority of the sugar mills are located within the province. The figure also indicates that exports of raw sugar cane from KwaZulu-Natal province to the world started to increase in 2003 until a peak was attained in 2006 and 2009 at approximately R2.4 billion and R 2.3 billion respectively. Raw sugar cane exports from Mpumalanga province to the world have been irregular and very low during the period between 2003 and 2012, and since the province is also one of the producers of the crop and has one sugar mill located there. Raw sugar cane exports from Mpumalanga province to the world attained a peak in 2010 at about R836 million. The figure also indicates that exports of raw sugar from Gauteng, Western Cape, Eastern Cape, Northern West and Limpopo provinces were very intermittent and did not exceed R213 million per annum. The figure further indicates that there was 83.1% increase in exports of raw sugar cane from KwaZulu-Natal province to the world in 2012 as compared to Figure 16 below illustrates export values of raw sugar cane from Western Cape Province to the world between 2003 and Figure 16: Value of raw sugar (cane or beet) exports by Western Cape Province City of Cape Town Metropolitan Municipality West Coast District municipality P1Cape Winelands District Municipality Source: Quantec EasyData Period (Years) The graph further illustrates that the City of Cape Town Metropolitan Municipality commanded greatest share in terms of raw sugar cane exports from Western Cape Province, attaining a peak in 2009 at approximately R40 million. The graph also illustrates that between 2003 and 2007, raw sugar cane exports from the City of Cape Town Metro to the world experienced very low levels of trade of not more than R20.1 million. The graph further illustrates that from 2010 to 2012, there was 22

23 Export Value (Rands) a decline in exports of raw sugar cane from City of Cape Town Metro to the world until decent exports were experienced again in 2012 at R15.8 million. West Coast and Cape Winelands Districts had intermittent exports of raw sugar cane from South Africa to the world during the period under review. The graph also illustrates that there was 299% increase in exports of raw sugar cane from the City of Cape Town Metro to the world in 2012 as compared to Figure 17 below depicts export values of raw sugar cane from Eastern Cape Province to the world between 2003 and Figure 17: Value of raw sugar (cane or beet) exports by Eastern Cape Province Nelson Mandela Metropolitan Municipality Source: Quantec EasyData Period (Years) The graph further depicts that Nelson Mandela Metropolitan Municipality commanded greatest share in terms of raw sugar cane exports from Eastern Cape Province to the world over the past decade. Nelson Mandela Metro Municipality dominated raw sugar cane export market from 2003 to 2012 and attained a peak in 2008 at approximately R The graph also depicts that there were no exports of raw sugar cane from Nelson Mandela Metro to the world from 2003 to 2005 and gain in 2011 marketing season. The graph further depicts that in 2012, exports of raw sugar cane from Nelson Mandela Metro to the world substantially increased to a decent level of about R In 2012, there was a 100% increase in exports of raw sugar cane from Nelson Mandela Metro Municipality to the world as compared to Figure 18 below illustrates export values of raw sugar from KwaZulu-Natal Province to the world between 2003 and

24 Export Value (Rands) Figure 18: Value of raw sugar (cane or beet) exports by KwaZulu-Natal Province 3E E+09 2E E+09 1E Ugu District municipality UMgungundlovu District municipality Uthukela District municipality Umkhanyakude District municipality ethekwini Metropolitan Municipality Source: Quantec EasyData Period (Years) 24

25 Export Value (Rands) The graph further illustrates that ethekwini Metropolitan Municipality recorded greater export values of raw sugar cane from KwaZulu-Natal to the world during the period under examination. The graph also illustrates that exports of raw sugar cane from ethekwini Metropolitan Municipality to the world dominated over the past decade, until a peak was attained in 2006 at approximately R2.4 billion. The graph further illustrates that exports of raw sugar cane from UMgungundlovu District Municipality to the world recorded low levels of raw sugar cane exports and attained a peak in 2009 at approximately R722 million. The graph also illustrates that Ugu, Uthukela and UMkhanyakude District Municipalities had very low levels of raw sugar cane exports to the world of not more than R16 million per annum. The graph further illustrates that there was 85.2% increase in exports of raw sugar cane from ethekwini Metro municipality to the world in 2012 as compared to 2011, while there was also 163% increase in exports of raw sugar cane from UMgungundlovu District to the world in 2012 as compared to Figure 19 below indicates export values of raw sugar cane from North West Province to the world between 2003 and Figure 19: Value of raw sugar (cane or beet) exports by North West Province Bojanala District municipality Southern District municipality Source: Quantec EasyData Period (Years) The graph further indicates that raw sugar cane exports from North West Province to the world originated mainly from Southern District, followed by very low levels of raw sugar cane exports from Bojanala District to the world during the period under scrutiny. The graph also indicates that the main exports of raw sugar cane from Southern District to the world took place in 2009 when a peak was attained at approximately R2.6 million. Bojanala District attained a peak of raw sugar cane exports from North West Province to the world also in 2009 at approximately R The figure 25

26 further indicates that between 2003 and 2008, there were no raw sugar cane exports from both Bojanala and Southern Districts. In 2012, there was 107% increase in exports of raw sugar cane from Southern District to the world as compared to Figure 20 below shows export values of raw sugar cane from Gauteng Province to the world between 2003 and

27 Export Value (Rands) Figure 20: Value of raw sugar (cane or beet) exports by Gauteng Province Sedibeng District municipality Metsweding District Municipality West Rand District Municipality Ekurhuleni Metropolitan Municipality City of Johannesburg Metropolitan Municipality City of Tshwane Metropolitan Municipality Source: Quantec EasyData Period (Years) 27

28 The graph further shows that the City of Johannesburg Metro Municipality, followed by Ekurhuleni Metro Municipality recorded highest export values of raw sugar cane from Gauteng Province to the world during the period under examination. The graph also shows that exports of raw sugar cane from the City of Johannesburg Metro to the world started to increase in 2003 until a peak was attained in 2004 at approximately R200 million. The graph further shows that the declines in raw sugar cane exports from City of Johannesburg Metro Municipality to the world that were recorded between 2005 and 2012 ranged between R27.5 and R131 million. The graph further shows that Sedibeng, Metsweding and West Rand Districts and the City of Tshwane Metro Municipality had very low levels of raw sugar cane exports to the world of not more than R24.5 million per annum. The graph also shows that there was 38% increase in exports of raw sugar cane from the City of Johannesburg Metro Municipality to the world in 2012 as compared to Figure 21 depicts export values of raw sugar cane from Mpumalanga Province to the world between 2003 and

29 Export Value (Rands) Figure 21: Value of raw sugar (cane or beet) exports by Mpumalanga Province Ehlanzeni District municipality Source: Quantec EasyData Period (Years) 29

30 The figure further depicts that Ehlanzeni District Municipality commanded greatest share of raw sugar cane exports from Mpumalanga Province to the world during the period under scrutiny. The figure also depicts that exports of raw sugar cane from Ehlanzeni District Municipality to the world started to increase substantially in 2008, with a consistent increase until a peak was attained in 2010 at approximately R836 million. The figure further depicts that in 2005 and 2007, there were no exports of raw sugar cane from Ehlanzeni District Municipality to the world. The figure also depicts that there was a 15.6% decline in exports of raw sugar cane from Ehlanzeni District Municipality to the world in 2012 as compared to Figure 22 illustrates export values of raw sugar cane from Limpopo Province to the world between 2003 and

31 Export Value (Rands) Figure 23: Value of raw sugar (cane or beet) exports by Limpopo Province Vhembe District municipality Capricorn District municipality Waterberg District municipality Source: Quantec EasyData Period (Years) 31

32 The graph further illustrates that Vhembe District Municipality commanded greatest share of raw sugar cane exports from Limpopo Province to the world, followed by low levels of raw sugar cane exports from Capricorn and Waterberg District Municipalities. The figure also illustrates that exports of raw sugar cane from Vhembe District Municipality to the world were from a very low base during the first half of the ten year period attaining R956 in The figure further illustrates that exports of raw sugar cane from Vhembe District Municipality to the world were from a high base during the second half of the ten year period attaining a peak in 2010 and 2012 at approximately R24.0 and R35.5 million respectively. In 2012, there was a 47.9% increase in exports of raw sugar cane from Ehlanzeni District Municipality to the world as compared to Share Analysis Table 4 illustrates the share of provincial raw sugar cane exports from provinces of South Africa to the world between 2003 and The KwaZulu-Natal province commanded the greatest share in exports of raw sugar cane from 2003 to 2012, while Mpumalanga province came in a second place in 2011 of the period under scrutiny. This observation is due to the fact that the KwaZulu-Natal province is the greatest producer of sugar, the majority of the sugar mills are located within the province and the use of the Durban port as a bypass of exports of raw sugar, refined sugar and molasses play a major role in increasing the province s share of sugar exports to the world. The graph further illustrates that Mpumalanga province comes second in terms of the share of sugar exports primarily because the province is close to the borders of Swaziland and therefore makes it easy to export sugar to that country. Table 4: Share of provincial sugar exports to the total South Africa sugar exports (%) Year Province Western Cape Eastern Cape KwaZulu Natal North-West Gauteng Mpumalanga Limpopo Source: Calculated from Quantec EasyData Table 5 shows that City of Cape Town Metro commanded greatest share in terms of raw sugar cane exports from Western Cape Province during the period under scrutiny. 32

33 Table 5: Share of district sugar exports to the total Western Cape sugar exports (%) Year District City of Cape Town West Coast Cape Winelands Source: Calculated from Quantec EasyData Table 6 indicates that Nelson Mandela Metropolitan Municipality commanded greatest share in terms of raw sugar cane exports from Eastern Cape Province during the period under review. Table 6: Share of district sugar exports to the total Eastern Cape provincial sugar exports (%) Year District Nelson Mandela Source: Calculated from Quantec EasyData Table 7 depicts that ethekwini Metro Municipality commanded greatest share in terms of raw sugar cane exports from KwaZulu-Natal province followed by UMgungundlovu District during the period under review. Table 7: Share of district sugar exports to the total KwaZulu-Natal provincial sugar exports (%) Year District Ugu District UMgung undlovu District Uthukela District UMkhan yakude

34 Year District District ethekwi ni Metro Source: Calculated from Quantec EasyData Table 8 illustrates that Southern District commanded greatest share in terms of raw sugar cane exports from North West province during the period under review. Table 8: Share of district sugar exports to the total North West provincial sugar exports (%) Year District Bojanala District Southern District Source: Calculated from Quantec EasyData Table 9 shows that City of Johannesburg Metro Municipality, followed by Ekurhuleni Metro Municipality commanded greatest share in terms of raw sugar cane exports from Gauteng province during the period under review. Table 9: Share of district sugar exports to the total Gauteng provincial sugar exports (%) Year District Sedibeng District West Rand District Ekurhuleni Metro City of Johannesburg City of Tshwane Source: Calculated from Quantec EasyData 34

35 Table 10 shows that Ehlanzeni District Municipality commanded greatest share in terms of raw sugar cane exports from Mpumalanga province during the period under review. Table 10: Share of district sugar exports to the total Mpumalanga provincial sugar exports (%) Year District Ehlanzeni District Source: Calculated from Quantec EasyData Table 11 shows that Vhembe District commanded greatest share in terms of raw sugar cane exports from Limpopo province during the period under review. Table 11: Share of district sugar exports to the total Limpopo provincial sugar exports (%) Year District Vhembe District Capricorn District Waterberg District Source: Calculated from Quantec EasyData 4. IMPORTS VOLUMES OF RAW SUGAR CANE Figure 24 below depicts import volumes of raw sugar (cane or beet) from various regions into South Africa between 2003 and 2012 period. 35

36 Import Quantity (tons) Figure 24: Import volumes of raw sugar (cane or beet) from various regions Source: Quantec EasyData Africa Americas Asia Europe Oceania Period (Years) The graph further depicts that the greatest fraction of raw sugar cane imports from the world into South Africa was from Americas, followed by low import volumes from Africa, Europe, Oceania and Asia. The graph also depicts that imports of raw sugar cane from Americas into South Africa were from a very low base during the first half of the ten year period attaining a maximum of approximately tons per annum. The graph further depicts that import volumes of raw sugar cane from the Americas into South Africa started to increase substantially in 2006 and a consistent increase in 2007 owing to a marginal decline in domestic raw sugar cane production and consequently exports in 2009 and 2010 to lower levels of about tons in Import volumes of raw sugar cane from the Americas into South Africa attained a peak in 2011 at approximately tons, while import volumes of raw sugar cane from Africa into South Africa attained a peak in 2010 at approximately tons. The figure also depicts that there was a 100% decline in imports of raw sugar cane from Americas into South Africa in 2012 as compared to Figure 25 below indicates import volumes of raw sugar (cane or beet) from Africa into South Africa between 2003 and

37 Import Quantity (tons) Figure 25: Import volumes of raw sugar (cane or beet) from Africa Western Africa SADC Source: Quantec EasyData Period (Years) The figure further indicates that imports of raw sugar cane from Africa into South Africa originated mainly in the SADC region during the period under examination, particularly from Malawi and Zambia. The figure also indicates that import volumes of raw sugar cane from SADC region into South Africa started to increase in 2003, and decline between 2004 and 2009 to lower levels of about 641 tons per annum. The figure further indicates that import volumes of raw sugar cane from SADC region into South Africa attained a peak in 2010 at approximately tons. The figure also indicates that the SADC region had no competition in terms of imports of raw sugar cane from Africa into South Africa during this period. The graph further indicates that there was a 100% decline in imports of raw sugar cane from the SADC region into South Africa in 2012 as compared to Figure 26 below illustrates import volumes of raw sugar (cane or beet) from the SADC region into South Africa between 2003 and

38 Import Quantity (tons) Figure 26: Import volumes of raw sugar (cane or beet) from SADC Mauritius Malawi Mozambique Zambia Zimbabwe Source: Quantec EasyData Period (Years) The figure further illustrates that imports of raw sugar cane from the SADC region into South Africa originated mainly in Malawi, followed by Zambia during the period under examination. The figure also depicts that import volumes of raw sugar cane from Malawi into South Africa started to increase substantially in 2003 and at the same time attained a peak at approximately tons, while import volumes of raw sugar cane from Zambia into South Africa attained a peak also in 2003 at approximately tons. The figure further illustrates that between 2010 and 2012, there were no import volumes of raw sugar cane from Malawi into South Africa during the period under review. In 2012, there was a 100% decline in imports of raw sugar cane from Malawi into South Africa as compared to 2003, while there was also 100% decline in imports of raw sugar cane from Zambia into South Africa in 2012 as compared to Figure 27 below shows import volumes of raw sugar (cane or beet) from Americas into South Africa between 2003 and

39 Import Quantity (tons) Figure 28: Import volumes of raw sugar (cane or beet) from Americas Central America South America NAFTA Source: Quantec EasyData Period (Years) The graph further shows that South America commanded greatest share in terms of imports of raw sugar cane from Americas into South Africa during the period under examination particularly Brazil. Import volumes of raw sugar cane from South America into South Africa started to increase substantially in 2007 until a peak was attained in 2008 at approximately tons during the same period under review. During the same period under scrutiny, raw sugar cane imports from Brazil experienced a sharp increase between 2007 and 2008 due to a marginal decline in domestic sugar cane production and consequently exports. Import volumes of raw sugar cane from South America into South Africa also attained a peak again in 2011 at approximately tons during the period under review. The figure also shows that there was a 100% decline in imports of raw sugar cane from South America into South Africa in 2012 as compared to Figure 28 below depicts import volumes of raw sugar cane from South America into South Africa between 2003 and

40 Import Quantity (tons) Figure 28: Import volumes of raw sugar (cane or beet) from South America Argentina Brazil Source: Quantec EasyData Period (Years) The graph further depicts that Brazil in particular commanded greatest share in terms of imports of raw sugar cane from South America into South Africa during the period under examination with limited competition from Argentina. Import volumes of raw sugar cane from Brazil into South Africa started to increase substantially in 2007 until a peak was attained in 2008 at approximately tons during the period under review. During the same period under scrutiny, raw sugar cane imports from Brazil into South Africa also attained a peak in 2011 at approximately tons. The graph further depicts that a sharp increase in imports of raw sugar cane between 2007 and 2008 due to a marginal decline in domestic sugar cane production and consequently exports was experienced. The graph also depicts that there was a 100% decline in imports of raw sugar cane from Brazil into South Africa in 2012 as compared to Figure 29 illustrates import volumes of raw sugar cane from Asia into South Africa between 2003 and

41 Import Quantity (tons) Figure 29: Import volumes of raw sugar (cane or beet) from Asia Eastern Asia South-central Asia South-eastern Asia Western Asia Source: Quantec EasyData Period (Years) The graph further illustrates that raw sugar cane imports from Asia into South Africa originated mainly in South-central Asia, followed by South-eastern Asia, Western and Eastern Asia during the period under review. The graph also illustrates that import volumes of raw sugar cane from Southcentral Asia into South Africa started to increase substantially in 2007 and 2008 and at the same time attained a peak at approximately and tons respectively. Import volumes of raw sugar cane from South-eastern Asia into South Africa attained a peak in 2011 at approximately 9339 tons. The graph further illustrates that import volumes of raw sugar cane from Eastern and Western Asia into South Africa had very intermittent import volumes of raw sugar cane of not more than tons per annum. In 2012, there was a 100% decline in imports of raw sugar cane from South-central Asia into South Africa as compared to Figure 30 below indicates import volumes of raw sugar (cane or beet) from South-central Asia into South Africa between 2003 and

42 Import Quantity (tons) Figure 30: Import volumes of raw sugar (cane or beet) from South-central Asia India Source: Quantec EasyData Period (Years) The graph further indicates raw sugar cane imports from South-central Asia into South Africa were originated mainly in India during the period under review. The graph also indicates that import volumes of raw sugar cane from India into South Africa were from a low base during the first half of the ten year period ( ) attaining 196 tons in During the second half of the ten year period ( ), imports of raw sugar cane from India into South Africa increased substantially until two peaks were attained. The graph further indicates that import volumes of raw sugar cane from India into South Africa attained a peak in 2007 and 2008 at approximately and tons respectively. The graph also indicates that between 2009 and 2012, import volumes of raw sugar cane into South Africa also declined dramatically to levels below 500 tons during the period under examination. In 2012, there was a 100% decline in imports of raw sugar cane from India into South Africa as compared to Figure 31 below illustrates import volumes of raw sugar (cane or beet) from Europe into South Africa between 2003 and

43 Import Quantity (tons) Figure 31: Import volumes of raw sugar (cane or beet) from Europe Western Europe Rest European Union Source: Quantec EasyData Period (Years) The figure further illustrates that Western Europe Rest was the main supplier of raw sugar cane imports from Europe into South Africa during the period under review. The figure also illustrates that imports of raw sugar cane from Western Europe rest into South Africa started to increase in 2006 and at the same time attained a peak at approximately tons. The figure further illustrates that imports of raw sugar cane from Western Europe into South Africa were very intermittent and not more than 1500 tons per annum. The figure also illustrates that imports of raw sugar cane from European Union into South Africa were low throughout the period under scrutiny and did not exceed 1039 tons per annum. The figure further illustrates that there was a 100% decline in imports of raw sugar cane from Western Europe Rest into South Africa in 2012 as compared to Figure 32 shows import volumes of raw sugar (cane or beet) from the European Union into South Africa between 2003 and

44 Import Quantity (tons) Figure 32: Import volumes of raw sugar (cane or beet) from European Union Source: Quantec EasyData Belgium Germany United Kingdom Netherlands Period (Years) The figure further shows that Germany was the main supplier of raw sugar cane imports from the European Union into South Africa over the past ten years. The figure also shows that imports of raw sugar cane from Germany into South Africa started to increase substantially in 2006 and at the same time attained a peak at approximately 759 tons. The figure further shows that imports of raw sugar cane from other European countries into South Africa were below 170 tons per annum over the past decade. In 2012, the figure also shows that there was a 100% decline in imports of raw sugar cane from Germany into South Africa as compared to PROCESSING AND MILLING Sugarcane is milled in 14 sugar mills situated in Kwazulu-Natal and Mpumalanga. There are six sugar milling companies in South Africa, namely: Illovo Sugar Ltd operates five sugar mills in South Africa, two of which have refineries and three with packaging plants. It has four cane growing estates and produces a variety of downstream products. Tongaat-Hullet Sugar Ltd operates four sugar mills, two packaging plants, a central refinery in Durban, various sugar estates and an animal feeds operation. Transvaal Sugar Ltd operates two sugar mills, a refinery and a packaging plant, sugar estates, cane and sugar transport enterprises, and an animal feeds division. 44

45 The UCL Company Ltd previously known as Union Co-operative Ltd has recently converted to a company. The company also operates a wattle extract factory, a maize mill, a saw mill, a payroll division and a trading division. Umvoti Transport (Pty) Ltd a black empowerment grouping, owns the Umfolozi mill, located in the Umfolozi region on the North-Coast of Kwazulu-Natal. The operation consists of a sugar mill only. Gledhow Sugar Company a black empowerment grouping owns the Gledhow Mill, located on the North Coast of Kwazulu-Natal. The operation comprises a sugar mill, refinery, packaging plant and a sugar estate. Harvested sugarcane is transported to the sugar mills where it is washed and placed in machines that chop it up. The chopped fiber is mixed with water and pressed to produce cane juice. The fibrous mass left after pressing is known as bagasse, and is used as animal feed, to make paper or as fuel to generate energy. After further heating and filtration, the juice goes to the evaporator and vacuum pan where much of the remaining water is removed, leaving syrup behind. The mixture is put in a centrifuge, leaving the crystals behind. Molasses, a thick, dark fluid rich in vitamins and minerals, is used as cattle feed and to make brewer s yeast and alcoholic drinks such as cane spirits. The raw sugar crystals will still have some molasses stuck to them and are sent to the refinery for further processing. The molasses are removed by soaking the raw sugar in a solution so saturated with sugar that none of the raw sugar crystals can dissolve. The crystals are then dissolved in water and the solution is filtered to remove impurities. The syrup then has all the remaining color removed from it in a bed of activated charcoal. After this complex process the sugar is crystallized again and the crystals are placed in a machine that tumbles them until pure white sugar is obtained 5.1 Marketing Arrangements The Division of Proceeds formula is the formula through which revenue that accrues to the sugar industry is allocated to the millers and growers as part of the partnership arrangement. Figure 34: Marketing arrangements in the South African sugar industry 45

46 Local Market Sugar Sales Export Market Sugar Sales Molasses Sales Total Industrial Proceeds Deduct Industrial Costs Equals Net Divisible Proceeds Fixed Division Growers Share Millers Share Price/Ton Distributed to Individual Millers Source: South African Sugar Association Industrial costs are the costs of administering the Sugar Association that include all the specialist services provided by SASA including agricultural research, sugar exports and more. Industrial costs are a first charge against the total notional industrial proceeds to determine the net divisible proceeds which are then split based on a fixed percentage between millers and growers. Total deliveries to mills during a season are then divided into the growers share which then establishes the price per ton for the growers deliveries. 6. MARKET VALUE CHAIN Figure 35 below presents the market value chain for sugar in South Africa. 46

47 Research & Biotechnology Input Suppliers Sugarcane Producers Livestock Animal feed manufacturers By-products Molasses Bagasse chemicals Sugar Millers & Refineries Local Market Sugar Export Market Sugar Raw sugar Refined Sugar Sugar syrup Molasses Sugar confectioneries Downstream industrial sector Manufacturers of foodstuffs, beverages, white/brown sugar Direct sector Wholesalers Retailers Consumers Source: Adapted from Food Price Monitoring Committee Report 47

48 7. MARKET ACCESS 7.1 Tariffs Table 12: shows the various tariffs that are applied by various countries to the exports of raw sugar cane originating from the Republic of South Africa in COUNTRY (Importer) PRODUCT DESCRIPTION TRADE REGIME DESCRIPTION APPLIED TARIFFS AD VALOREM EQUIVALENT OF SPECIFIC APPLIED TARIFF Angola Mozambique Mauritius Zimbabwe United States of America Raw cane sugar not containing added flavoring or coloring matter whose content of sucrose by weight, in the dry state, corresponds to a polarimetic reading of less than 98.5 degree, centrifugal Raw cane sugar not containing added flavoring or coloring matter whose content of sucrose by weight, in the dry state, corresponds to a polarimetic reading of less than 98.5 degree, centrifugal Cane or beet sugar and chemically pure sucrose excluding, in solid form: Raw sugar not containing added flavouring or colouring matter: Cane sugar Raw cane sugar (excluding added flavoring or coloring) Cane sugar, raw, in solid form, w/o added flavoring or coloring, subject to gen. note 15 of the HTS MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) MFN duties (Applied) 2.00% 2.00% 7.50% 7.50% 0.00% 0.00% 20.00% 20.00% 0.00% 0.00% Canada Cane sugar, raw, in solid form, w/o added flavoring or coloring, subject to gen. note 15 of the HTS Raw cane sugar, in solid form, not containing added flavouring or colouring matter, obtained without centrifugation General tariff for GSP countries MFN duties (Applied) 0.00% 0.00% 0.00% 0.00% Hong Kong Cane or beet sugar and chemically MFN duties 0.00% 0.00% 48

49 COUNTRY (Importer) PRODUCT DESCRIPTION TRADE REGIME DESCRIPTION APPLIED TARIFFS AD VALOREM EQUIVALENT OF SPECIFIC APPLIED TARIFF pure sucrose, in solid form: Raw sugar not containing added flavouring or colouring (applied) China Source: ITC Market Access Map Cane or beet sugar and chemically pure sucrose, in solid form: Raw sugar not containing added flavouring or colouring MFN duties (applied) 50.00% OTQR: 50.00% ITQR: 50.00% Table 12 indicates various tariffs that are applied by various countries to the exports of raw sugar originating from the Republic of South Africa in The table further indicates that the international sugar trading regime is generally very unfair and the playing field is not level. Most of the countries sugar markets are highly protected by very high tariffs that restrict the entry of sugar imports. The China sugar market is the most highly protected market with extremely high tariffs charged 50% for South African sugar imports over the period under scrutiny. Canada has no tariffs for the import of raw sugar for use by refineries in the production of refined sugar that is to be used in the production of wine but generally their sugar market is protected. Japan is the only country that decided to reduce duties that they charge for raw sugar imports originating from South Africa. In 2008 Japan applied a tariff of $335.84/ton and this tariff still applied in The table further indicates that Zimbabwe applies a tariff of 20% to South African sugar imports in Table 13: shows the existing tariff position applied by South Africa to the imports of raw sugar cane originating from various regions in COUNTRY (Importer) PRODUCT DESCRIPTION TRADE REGIME DESCRIPTION APPLIED TARIFFS ESTIMATED TOTAL AD VALOREM EQUIVALENT Malawi Zambia Zimbabwe Cane or beet sugar and chemically pure sucrose, in solid form: Raw sugar not containing added flavouring or colouring Cane or beet sugar and chemically pure sucrose, in solid form: Raw sugar not containing added flavouring or colouring Raw cane sugar (excluding added flavoring or coloring) MFN duties (Applied) 0.00% 0.00% MFN duties (Applied) 0.00% 0.00% MFN duties (Applied) 0.00% 0.00% 49

50 COUNTRY (Importer) PRODUCT DESCRIPTION TRADE REGIME DESCRIPTION APPLIED TARIFFS ESTIMATED TOTAL AD VALOREM EQUIVALENT Brazil Germany Mauritius Mozambique Source: ITC Market Access Map Raw cane sugar (excluding added flavoring or coloring) Raw cane sugar (excluding added flavoring or coloring) Raw cane sugar (excluding added flavoring or coloring) Raw cane sugar (excluding added flavoring or coloring) MFN duties (Applied) 0.00% 0.00% MFN duties (Applied) 0.00% 0.00% MFN duties (applied) 0.00% 0.00% MFN duties (applied) 0.00% 0.00% Table 13 demonstrates that the existing tariff position applied by South Africa to the imports of raw sugar originating from various regions of the world in The table further demonstrates that the international sugar trading regime is generally very unfair and the playing field is not level. The table also demonstrates that South African sugar market is not protected as the country has no tariffs for the import of raw sugar. Tariffs for certain classes of raw sugar from Switzerland have been reduced marginally while others have increased marginally in 2011 and 2012 marketing seasons. Tariff Headings TARIFF SUB- HEADING DESCRIPTION STATISTICAL RATE OF DUTY UNIT General EU SADC Kg 38.1c/kg 38.1c/kg 38.1c/kg Raw Sugar Cane in solid form Refined Sugar Cane Kg 38.1c/kg 38.1c/kg 38.1c/kg Sugar Beet Kg 38.1c/kg 38.1c/kg 38.1c/kg Sugar Syrup Kg 38.1c/kg 38.1c/kg 38.1c/kg Sugar Confectionary Kg 38.1c/kg 38.1c/kg 38.1c/kg Sugar Molasses Kg 18.1c/kg 38.1c/kg 38.1c/kg Note: The tariff is based on the Dollar based reference price of US$330 The South African Sugar Association with the support of the Swaziland Sugar Association has requested an increase in the current tariff position from 38.1c/kg to 50.1c/kg through ITAC; which will result in an adjustment in the level of the Dollar based reference price from US$330 to US$

51 8. MARKET INTELLIGENCE Table 14: List of importing markets for raw sugar (cane or beet) exported by South Africa in 2012 Trade Indicators Importers Exported value 2012 (USD thousand) Share in South Africa's exports (%) Exported quantity 2012 (tons) Unit value (USD/unit) Exported growth in value between (%, p.a.) Exported growth in quantity between (%, p.a.) Exported growth in value between (%, p.a.) Tariff (estimated) faced by South Africa (%) World Indonesia Japan Zimbabwe United States of America Mozambique Angola Madagascar Israel Zambia Swaziland DRC Saint Helena Kenya Source: ITC Trade Map 51

52 Table 14 illustrates the list of importing markets for raw sugar cane exported by South Africa to the world in As shown in the table South Africa exported a total of tons of raw sugar cane to the world market during the period under scrutiny. The greatest volumes were exported from South Africa to Indonesia, Japan, United States of America and Zimbabwe, with each country accounting for 24%, 19.9%, 19.1%, 18.9% and 19.1% share respectively in South Africa s sugar exports in The table further illustrates that Indonesia was the leading importer of raw sugar cane from South Africa with tons of raw sugar cane, while Japan was the second importer at tons of raw sugar cane from South Africa and United States of America as the fourth at approximately tons as compared to tons from South Africa to Zimbabwe. Indonesia and Japan s imports worldwide experienced a decline in value of 63% and 25% respectively, while Zimbabwe s imports worldwide experienced a positive growth in value of 32% and 30% between 2008 to 2012, and the growth of the world market over the same period declined by 19%. On the same note, Japan s imports from South Africa experienced a decline of 25% in value and 38% in quantity between 2008 and 2012, and the growth of the world market over the same period was -19% and -34%. The table also illustrates that Zimbabwe s exported growth in value and quantity between 2008 and 2012 period was more that the exported growth in value and quantity to the world during the same period. 52

53 Figure 36: Growth in demand for raw sugar, cane exported by South Africa in 2012 Source: ITC Trade Map 53

54 Figure 36 shows growth in demand for raw sugar cane exported by South Africa to the world in The graph further shows that Indonesia and Mozambique were the biggest markets of raw sugar cane exported by South Africa in South Africa s sugar exports to Madagascar were growing at a rate that is greater than their imports to the rest of the world between 2008 and 2012 but in a declining market. By adding a horizontal line representing the world market growth and a vertical line representing the average growth of South Africa s export for this product, the following conclusions can be drawn: o South Africa s exports of raw sugar cane to Zimbabwe were growing at a slower pace as compared to imports from the world at approximately 60% between 2008 and South Africa s annual growth exports of raw sugar cane to Zimbabwean market were also increasing at a rate that is slower than the world imports of about 35% in the dynamic market. o South Africa s annual growth exports of raw sugar cane to Kenya and Israel were declining at -10% and -25% respectively between 2008 and 2012 as compared to fast growing imports from the world at approximately 60% respectively over the same period. 54

55 Figure 37: Prospects for market diversification for raw sugar, cane exported by South Africa in 2012 Source: ITC Trade Map 55

56 Figure 37 indicates prospects for market diversification for raw sugar cane exported by South Africa to the world in The bubble graph further indicates that in world terms Indonesia and Japan were the biggest markets of raw sugar cane from South Africa to the world over the same period. The graph also indicates that if South Africa has to diversify its markets of raw sugar cane, small and attractive markets exist in Angola, Kenya, Israel and Madagascar. Indonesia remains as a traditional market for South Africa s raw sugar cane in 2012 because of the size of the bubble graph that indicates the main world s importers with over tons of raw sugar cane and with a world market share of 24% between 2008 and In addition, the chart also indicates that countries such as Indonesia and Japan have experienced a positive and higher share of South Africa s exports of raw sugar cane at approximately between 19% and 24% during 2008 and It is also important to note that growth by countries such as Angola, Kenya, Israel and Madagascar have been off a low base, but they represent possible markets for South Africa s raw sugar cane during 2012 marketing season. 56

57 Table 15: List of supplying markets for raw sugar, cane imported by South Africa in 2012 Trade Indicators Exporters Imported value 2012 (USD thousand) Share in South Africa's imports (%) Imported quantity 2012 (tons) Unit value (USD/u nit) Imported growth in value between (%, p.a.) Imported growth in quantity between (%, p.a.) Imported growth in value between (%, p.a.) Tariff (estimated) applied by South Africa (%) World Brazil Malaysia India Mauritius United States of America Germany Netherlands Hong Kong, China Belgium China Source: ITC Trade Map 57

58 Table 15 depicts the list of supplying markets for raw sugar cane imported by South Africa from various regions in As shown in the table South Africa imported a total of tons of raw sugar cane from the world market over the same period under scrutiny. South Africa s imports of raw sugar cane from the world declined dramatically in 2012 by tons (903%) as compared to 2011 import season. The greatest volumes of raw sugar cane were imported from Brazil, followed by small quantities from Malaysia and India accounting for 86.5% share, 12.7% and 0.5% respectively of South Africa s sugar imports in The table further depicts that Brazil was the main exporter of raw sugar cane from South America to South Africa in Brazil s sugar exports to South Africa experienced a growth in value of 8% and a decline of 7% in quantity between 2008 and 2012, and the growth of the average world market over the same period was 9% in value and -6% in quantity. The table also depicts that Brazil s imported growth in value at 45% between 2011 and 2012 declined more than the average world imports at 40% over the same period. The table further depicts that United States of America was the most competitive supplier of raw sugar cane into South Africa over the past ten years India, China and Germany supplied South Africa with very low volumes of sugar of not more than 300 tons each during

59 Figure 38: Competitiveness of suppliers to South Africa for raw sugar, cane import in 2012 Source: ITC Trade Map 59