Advocate Fay Mukaddam is the independent chairperson of South African Sugar Association. Picture: Supplied
By Fay Mukaddam
WHAT COMES to mind when towns such as Tongaat (in KwaZulu-Natal) and Malelane (in Mpumalanga) are mentioned?
The common denominator/factor is the sugar industry. These towns were developed mainly as the result of the cane growing and milling activities in these regions.
Over the years, the industry has proven beyond doubt that it is a catalyst for socio-economic development in some of the deeply rural and job-starved areas of KwaZulu-Natal.
The industry is the beacon of hope for many rural communities, especially (for) thousands of black small-scale growers spread across the two provinces. It is an industry which creates 65 000 direct and 270 000 indirect jobs, with at least one million people dependent on the sugar cane growing and milling sectors.
KwaZulu-Natal is synonymous with sugar cane farming. Anyone who grew up in the province is likely to have a childhood story of plucking cane stalks from the ground, using their teeth to access the sweetness of the crop. There is no other agricultural commodity which has such fond association with grassroots folks.
What makes the sugar industry even more unique is that every farmer is guaranteed that their product has a market. This is all thanks to the regulated nature of the sector. The creation (and existence thereof) of the South African Sugar Association (Sasa), flowing from the Sugar Act of 1978, has ensured that all cane farmers and millers operate in a structured manner in which all sugarcane – be it from small-scale growers (SSGs) or large-scale growers – is delivered to the industry’s 12 sugar factories (10 in KwaZulu-Natal and two in Mpumalanga).
Conningarth Economists (2013) captured it aptly: “The sugar supply chain has two very distinct activities, the sugar cane production and the sugar milling sections. It is a symbiotic relationship, since the one depends on the other. The miller cannot exist without a supply of sugar cane, while the cane producer needs a miller.”
Sasa, in turn, has three members (two grower associations and one miller association). These members are the South African Cane Growers’ Association (Sacga), the South African Farmers Development Association (Safda) and the South African Sugar Millers’ Association (Sasma).
Sacga and Safda represent a combined total of 25 172 growers. On the other hand, Sasma represents six milling companies, namely: Illovo Sugar SA, Tongaat Hulett Limited, RCL Foods, UCL, Umfolozi Sugar Mill and Gledhow Sugar Company. Sasa or industry members are part of Sasa Council, which is the highest decision-making body of the sector.
The Sasa chairperson is an independent person who comes from outside the industry. The Independent chairperson has three vice-chairs from Sacga, Safda and Sasma respectively. By virtue of their positions, the top four are also part of Sasa Council.
Sasa has been leading transformation initiatives of the industry. For example, the R1 billion five-year transformation plan, which has just ended, but has been extended by a year for this season (2024/2025), with an allocation of R238.9 million. An average of 13 349 small-scale growers per season have benefited from the Transformation Intervention Fund since the 2019/2020 season.
Of the R1.12bn paid, R592.361m was paid directly to black SSGs in the five years, and R281.72m paid directly to black large-scale growers in the same period.
A small-scale grower delivers less than 225 average tons of recoverable value over a period of four years. In terms of cane tonnage, this would be equivalent to delivering an average of less than 1 800 tons of cane per season. These interventions have been life-saving, especially for SSGs, due to the industry having faced some serious challenges including the sugar tax, imports and insufficient tariff.
The extension of transformation funding will continue to have a positive impact on SSGs and black growers. In terms of the current season, the largest portion of the funding is allocated to cane delivery-based interventions, where black growers, who deliver cane, benefit from an estimated R170m per annum.
As SSGs suffer from dis-economies of scale, there was a need for a price support mechanism in the short-term while long-term and possible structural interventions were being designed. This additional price support, in the form of Premium Price Payment (PPP), has been successful with the numbers of and tonnage from SSGs increasing since its introduction.
A minimum of R60m PPP to SSGs as part of the Industry Master Plan, for a period of three seasons (2021/2022 to 2023/2024), was allocated, escalating annually to R68 051 340 in the 2023/2024 season. The 2023/2024 season was the last year of PPP. However, on March 20, 2024, Sasa Council approved the extension of PPP to 2024/2025 with an inflationary adjustment, meaning the allocation for this season is R72 527 776.
It is clear the industry has been hard at work on transformation and the retention of SSGs, ensuring that we ameliorate their challenges in order for them to continue farming and we make a critical contribution to the industry. As per the sugar cane value chain master plan to 2030, SSGs occupy a foundational role in the industry.
In a nutshell, Sasa is focused on ensuring that the lack of economies of scale, long transport distances and high contractor costs, are mitigated by the transformation interventions and other support to SSGs. The long-term strategy is thus to ensure that SSGs remain in cane farming, are sustainable with improved productivity in the short-term while medium to long-term interventions are being developed.
It would be naïve to say it is “mission accomplished” in terms of overall transformation in the industry. A lot still needs to be done. What this passage of time requires are leaders who are committed to putting the interests of the industry first. This is no time for dilly-dallying on transformation (and other critical) issues. It is no time for petty politics, ideological clashes and unending fighting. It is an era of bold and decisive leadership.
We are leading at a time where we can break or make this industry – we hold the very future of the sector in our own hands. It is up to us to decide if we want to be remembered for having failed at this critical hour or having ushered in an unprecedented industry transformation. We are the drivers of the “Re-imagined Cane Industry Strategy” whose main pillars are transformation and diversification. We dare not fail!
Advocate Fay Mukaddam is the independent chairperson of South African Sugar Association.
BUSINESS REPORT