Government failing sugar industry’s diversification aspirations

While tariff protection may assist the sugar industry in the short-run, this must be complemented with other structural reforms according to Agricultural Business Chamber (AgBiz) Trade and Investment Intelligence head, Sifiso Ntombela.

The South African Sugar Association recently applied to the International Trade Administration Commission for a 51% increase in the sugar tariff to protect the industry from cheap imports, but Ntombela believes that the crisis in the industry can only be fixed by long-term solutions such as diversification and the use of different electricity technologies.

“From a context of greening the country’s economy, bioethanol and cogeneration can provide an alternative use of sugarcane which could diversify the farmers’ income streams,” he said.

Bioethanol is a fuel that can be produced from sugarcane using a process of fermentation which would enable sugarcane farmers to be somewhat protected from issues such as cheap imports and dumping. However, Ntombela told FTW Online that there had been very little support from government to enable farmers to make this jump in the production of alternatives to sugar such as bioethanol.

“Investment in bioethanol production is largely dependent on decisive interventions and support from government in order to support private investors,” he said. “This could create jobs which have been somewhat displaced in the industry by imports over the past years.”

He said that the same lack of support was evident when it came to investment in electricity technologies in the industry despite the fact that cogeneration – the joint generation of electricity and useful heat such as steam – had been highlighted in the Department of Energy’s Integrated Resource Plan and Integrated Energy Plan.

“Considering that South Africa has vast potential in coastal areas to produce sugarcane, this is seen as a future growth area as the country transforms into a green economy through its committed targets under the Paris Agreement,” added Ntombela.

“A holistic approach to improving the sugar industry’s competitiveness may have greater benefits for both producers and consumers in the long run.”

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