Available statistics show that Sugar remains Eswatini’s main export commodity. The country is the 4th largest sugar producer in Africa and the 25th largest producer in the world. Sugar production accounts for over half of Eswatini’s agricultural output and contributes about US$285m to the country’s gross domestic product. In this interview with African Leadership Magazine UK, the Chief Executive Officer, Eswatini Sugar Association, Phil Mnisi, tells us more about the association’s efforts towards adding value to sugar production, job and wealth creation, through sugar production. Excerpts:
There have been campaigns across the globe to reduce the intake of sugar. How will this affect the country’s GDP?
Sugar is still the main source of energy. In Africa, as you know, the consumption of sugar per capita is sitting at about six to eight kilograms, while the global statistics is 23. So, we still need to give a lot of sugar to Africa in particular, where it’s still a main source of energy. In some countries where they don’t have a lot of diversified economies, they use fortified sugar. And it has been proven that where sugar has been fortified, the mortality rate of young children has been reduced.
We still believe that sugar has a role to play. It is still a source of energy, and of course, in a country like Eswatini, it is still the main backbone of the economy and the main contributor to the GDP. Close to 16% of the country’s GDP is from sugar or the sugar industry. Sugar is the main foreign exchange earner for the country and is the second-largest employer after Government. This is just from the Mills, the growers and the public for all industries or ancillary industries that are around sugar logistics, chemical companies, fertilizer suppliers, byproducts that arise from sugar and the distilleries that we have from the byproduct of sugar like molasses, which we give to the Mills and is then converted into Ethanol or into gas. And so all this is actually just a minefield or an opportunity that lies with sugar. In the banking sector, where I come from, we are the major borrower from the banks in the country. In fact, in their balance sheet, without the Sugar Association, the banks don’t have much business and if you combine us, we borrow about 3 Billion from the commercial banks in Emalangeni.
And then you look at the other millers and growers that borrow from the banks; who are quite a significant portfolio that sustains the financial services sector. So, the sugar industry is quite pivotal in economic growth, job creation and in foreign exchange earnings. And in positioning the country even in the global stage, because we are among the top 20 largest sugar producers in the world and the leading sugar export producer in Africa. We are in the top four low-cost sugar producers in the world and we have the most efficient sugar industry.
If we took our productivity indexes or matrix, we are producing hundreds of tonnes of cane per hectare. And our average is normally 60 or 40 or between 80 and 104. And in terms of sucrose, which is the actual sugar in the cane, we are in the range of about 14 – 15 and you know that’s quite high. Normally, it’s in the range of eight or nine. So we are above 10 in terms of sucrose content.
What do you see as the major problem militating against the development of the sugar sector in other parts of the continent like Nigeria?
Nigeria is not a sugar producer. Nigeria buys sugar from Brazil, refines it, and then sells it. And if there’s anything that Africa still has an opportunity in is sugar – overall, we still quite record a deficit. There’s what are called surplus countries and deficit countries. You’ve got Nigeria – Nigeria is a consumption country. It’s not just a deficit. They don’t even know that what they grow does not even touch the consumption level in the country. You go to Ghana; we go to all these major countries, they’re all deficit countries, including Kenya. Kenya is a sugar growing producing country, but it’s a deficit – they consume about 900,000 tonnes of sugar, yet they produce about 360,000 tonnes; the difference is sourced outside. And we want to meet this demand, – it’s just a matter of having an organized structure to to create a full value chain that takes from a grower to the miller to the market. That’s what we have developed in the last 52 years. When the Sugar Association was established, we linked the grower to the miller and the miller to the market. So, we are the marketing agent, the marketing arm of the Association. Our mandate is to take the sugar that is being produced by the industry and provide the single best marketing platform. We find markets and create value – both intrinsic and extrinsic. We sell sugar. We believe that revenues were distributed back to the millers and across operators, and you collect on their behalf. Yes, you send it, you receive payment, and you pass it back to buy the data. So they don’t have a problem with finding markets.
Eswatini sugar production levels rose to an all-time high in 2018/2019 of 746981 tonnes of sugar, up 14.9% from 650126 the year before. What reasons do you have to believe that this growth will be sustained in the years to come?
Well, I think one, we need to remember that we are coming from a drought; in 2015, 2016, and 2017. And, of course, we can call 2018/2019 our best year as we recovered from the drought. And then the season was quite good. The sucrose was quite good. So we had a very good high production in 2018, 2019 and 2020, which is what we are closing at this year. Actually, it is relatively low. That’s why the numbers are marginally low. And the reason is, we had a very long season. So we crushed 6.2 million tonnes of cane in 2018/2019, then extended the crushing season. So in 2019/2020, the numbers are going to look a little bit lower, because we had a shorter season. So we had a young cane that was crushed in there in this last production season. So what you need to understand about sugarcane production is that climate affects it. So it’s a crucial point. Depending on the weather, it could be the rain and sometimes too much heat, this can also cause a problem like this past year where we had a lot of flowering. When cane flowers, it reduces production. And also, too much rain breaks the cane, so the cane falls, and then it doesn’t come back. You get more cane when it goes up straight and when it’s large. So there’s a lot of intricacies when you’re dealing with a cane and talking about production. We don’t just look at the absolute year on year growth; we look at the factors that contributed to that. It could be climate, it could be just the behaviour of the cane during that season. Relatively we are maintaining the same levels of production, 750,000 tonnes of sugar, that’s what we’ve been producing. And I believe that we are going to sustain that for various reasons mainly being the technical support that we provide to our growers.
Sugar Association has a technical support service team that works with all the growers. We have established structures that support the growing efficiencies; the productivity of growing cane in the country. So that is done. We have introduced a new programme called sustainability. We are growing cane on a sustainable basis. In other words, we are looking at all the factors that will ensure that we have a sustainable industry today, and for the future. We have pressure from our customers. They now demand and ask questions like ‘are you growing sugar on a sustainable basis?’ ‘Are you going to sustain this into the future?’ The whole value chain that we have established as a sugar industry in the country augurs well to create a sustainable industry. Why? Because we have growers and millers that are organized. Then you have the Sugar Association that brings them all together. So the governance and the leadership is all in place and the processes of supporting this industry are well entrenched in the last 52 years. The other issue I want to bring in is that Government, the Minister and the Ministry of Commerce, Industry and Trade, in particular, is extremely supportive in ensuring that we open markets because with sugar you have to sell it in preferential markets where you get less duty quarter free. Being a member of SADC, SACU, COMESA, the EU and recently signing the EPA (the Economic Partnership Agreement with Britain (following Brexit) – all these are opening opportunities for us to be able to sell our sugar. So, if we create that value, from the forward integration, we are able to bring those revenues to support the industry on a backward stream. Having said that, there still lies huge opportunities. And for me, that’s the crux of the matter. We are still a primary producing industry, and we should move from producing sugar and molasses to value addition. We should say what value are we extracting from the stick of cane? In other words, we shouldn’t be a sugar industry, but a sugar cane industry. From that stick of cane, what must we do? What are we doing with the sugar, the molasses and the Ethanol in terms of value addition? And that’s where the opportunities lie.
We should move away from producing sugar alone. With sugar you can do sauces, gas and nail polish, among others. The products that come from sugar are just unbelievable. For example, you can take Ethanol, reproduce it and blend it, then make nail polish. You can also take Ethanol, blend it with oil and you have blended fuel. To have clean energy; you take the gas, and you can make electricity.
I am happy that we are already engaging with the Ministers of Commerce and Finance to work towards forging value addition, at industry and primary industry level. We can take the industry around the world to another level, Middle East, UK and USA. We can bring the companies and the industries here. Instead of selling our sugar, we will be selling a product that is needed in the Middle East for innovation.
Eswatini sells about 230,000 tonnes of refined sugar per year within the Southern African Customs Union (SACU). Historically, South Africa has been the major buyer. With the 2018 5.2 percent hike on sugar import tax by South Africa, how is Eswatini looking at developing trade partnerships beyond the Southern Africa region?
Well, I need to take you back a bit. In the early stages of the industry, the EU was our preferential market. In fact, we were given such a price that there was no need to market sugar, which was crucial and we had a fantastic price. In 2018, the EU opened up and allowed EU beet growers to grow sugar. Not that we cannot sell in the EU; we can but in a very competitive landscape. So, about six years ago we started diversifying in preparation for the reform changes that were happening in the EU. We started looking at what we call our domestic market i.e. selling within SACU. That is what we define as our domestic market; basically Botswana, South Africa, Lesotho, Namibia and Eswatini with the exception of Mozambique, who is not part of SACU. So we started using that domestic market as an avenue to diversify our dependency on the EU market. We also sell into Africa, especially in East Africa, wherever we see a good price e.g. Kenya. While we sell in the Stock Market, and we know that there is concentration there because South Africa is also a surplus producer, we still have a share to sell in the South African market. But remember, both of us, South Africa and Eswatini, are the only two sugar producers within SACU. Within the SACU market, we explore opportunities to sell in the regional market. And we still continue to sell in the EU, where we have a preferential quarter. And of course, if there are opportunities in Asia, we sell our sugar, for example in China. We also have market access to Taiwan. We always explore opportunities where we can get maximum value for our sugar. So that’s how we are dealing with the SACU concentration so to speak. And by the way, it’s not just only the refined sugar, we do raw sugar as well. And out of that raw sugar, there are two types. There’s one which is direct consumption, which is basically sugar that goes straight into consumption. And then there’s what we call raw sugar. That one goes to refineries, especially in Europe.
Eswatini Interview Sugar Association CEO Edited