Presentation on theme: "DEPARTMENT OF TRADE AND INDUSTRY SOUTH AFRICA REVIEW OF THE SUGAR ACT Presentation to the Portfolio Committee on Trade and Industry Wednesday, 30 August."— Presentation transcript:
DEPARTMENT OF TRADE AND INDUSTRY SOUTH AFRICA REVIEW OF THE SUGAR ACT Presentation to the Portfolio Committee on Trade and Industry Wednesday, 30 August 2006 Parliament Cape Town
Presentation layout Purpose of Presentation Perspective and Sector Overview Process Followed Way forward
The South African Sugar Industry Area under cane 429 045 ha. 50 000 cane growers of which nearly 48 000 are black small scale cane growers. scale Produce around 21 million tons of sugarcane or 2.5 million tons of sugar during the 2005/06 season. LocalLocal Market 1.26 million tons sugar. Export Market 1.24 million tons sugar. 26% of Sugarcane under irrigation. 6 Milling CompaniesCompanies 14 sugar mills 10 refineries [PMG note: maps not included, please email email@example.com]
Industry Structure Growers (50 000) 14 Local Grower Councils SA Cane Growers Association SA Sugar Association Council 50/50 Representation by Millers and Growers Millers 6 Milling Companies Tongaat Hulett Sugar Limited Illovo Sugar Limited TSB Sugar RSA Limited Union Co-operative Limited Usukela Milling Limited (BEE) Umvoti Transport Limited (BEE) SA Sugar Millers’ Association Ltd
One of the world’s leading cost competitive producers of high quality sugar.competitive 11 th biggest producer of sugar in the world and the 8 th biggest exporter of sugar in the world.producer Diverse industry combining the agricultural activities of sugarcane cultivation with industrial factory production of raw and refined sugar, syrups, specialised sugars and a range of by- products. Major investments and co-operation within the region.investmentsco-operation Makes an important contribution to the South African economy.contribution Supports the AgriBEE Framework and its implementation: Agricultural land Agricultural Agricultural Support ServicesSupport Human Resource DevelopmentDevelopment Enterprise Ownership and equityOwnership Competitiveness and Contribution to Economy
Changes in the sugar industry since 1994 The sugar industry is regulated by an Act, i.e. Act No. 9 of 1978, as well as an Industry Agreement. The Industry Agreement was substantially revised in 1993. The 1994 Sugar Industry Agreement resulted in the following changes: Competition on sugar in packed sizes less than 25kg for local and export market. The removal of quota restrictions on the production of cane and freedom of entry to new growers. The termination of mandatory delivery by growers to specific mills. Sugar industry Agreement 2000: Sugar sold on an “ex-mill” basis and no longer “free on rail” Durban. To improve competitiveness the cane payment system was changed from a “sucrose content” to a “recoverable value of cane” basis. Milling companies are responsible for the exportation of refined and direct consumption raws. Fixed export quotas replaced by flexible market shares. Maximum price replaced by notional price. Notional price is used as basis for proceeds sharing between millers and growers.
Key strategic challenges facing the industry The international sugar market remains one of the most distorted and volatile commodity markets in the world.world Sugarcane is not a nationally tradable commodity. Provide appropriate and adequate protection to growers against the monopsony powers of millers in the buying of sugarcane from cane growers. To ensure equitable exposure to the world market by all role- players. To provide appropriate incentives for competition in the domestic sugar market to ensure the long term competitiveness of the industry in South Africa as well as in SACU and SADC context. To provide the necessary authority to manage and mitigate the rapid spread of sugarcane pests and disease that could otherwise have dire consequences for the industry. Therefore need for a review
Objective of the review of the Act To improve the competitive environment in which the industry operates in a manner that will contribute to the optimal development of the industry – ensuring the long term cost competitiveness of the industry. To provide a positive legal position and minimise self regulation by industry. The optimal development of the South African industry within the SACU and SADC context.
Process followed 20 01 Published notice in Government Gazette No 21959 dated 12 January 2001. Established an Inter-Departmental committee (the dti, Competition Commission, Department of Agriculture and National Agricultural Marketing Council). Agreed on strategic principles to be amended to achieve the objective for the review. 20 02 Consultations with the sugar industry on strategic principles to be amended. 20 03 The discussion document was released as a basis for broad base consultations. Workshops were held with all industry stakeholders. Comments were received from all stakeholders. 20 04 Further consultations with stakeholders based on comments received. 20 05 AgriBEE Framework negotiated by Department of Agriculture which necessitated a review of the entire process. 20 06 Bio-fuels an ASGISA project requiring alignment of sugar industry regulation.fuels Full vertical slicing.vertical
Agreement between millers and growers to share proceeds within full vertical slices will increase companies’ ability to respond to market changes. Therefore investment decisions will be based on normal commercial considerations rather than the level of government intervention in the industry. Bio-fuels an ASGISA project and sugar regulation needs to enable national aspirations and has to be aligned with Department of Minerals and Energy Affairs’ objectives in this regard. Amendments required are substantial. Issues for consideration on way forward
Presented by: Mxolisi Matshamba Acting Deputy Director General the dti Division: Trade and Investment South Africa Tel: 012 394 1318 Fax: 012 394 2318 e-Mail: mxolisim@the dti.gov.za Thank You