SOUTH AFRICA – Raw sugar production in South Africa is forecasted to decline by 3% to 2.2 million metric tons (MT) in Marketing Year 2020/21 due to decrease in sugar cane quality and quantity delivered to the mills and lower mill efficiencies, according to a GAIN report by USDA.
The sugar cane crop quantity during the period under review is expected to decrease by less than 1% to 19.1 million MT from 19.2 million MT in the 2019/20.
The decline is attributed to frost and fire damage in some growing areas, lower replanting levels and some growers diversifying to more profitable crops such as macadamia nuts, avocados, citrus, vegetables and poultry production due to higher costs of production.
Despite the expected decline in sugar production, it is deemed to be above the average levels but yet to reach the peak production levels of 2.8 million MT recorded in the 2002/03 MY.
Consumption to rise by 4%
Consumption of domestic sugar on the other hand is estimated to rise by 4% to 1.7 million MT from 1.6 million MT of the last period.
This is based on the pace of sugar sales up to August 2020, growth in population, and a surge in demand during the national lockdown from consumers stuck at home resulting in an increase in activities such as cooking and home baking.
The recently announced South African Sugarcane Value Chain Master Plan to 2030, targets to increase domestic consumption of sugar by up to 300,000 MT in the next 3 years starting with 150 000 tons in the 2020/21 MY.
However, domestic consumption is expected to be partially offset by the decrease in demand of sugar from the beverage sector following the introduction of the tax on sugar sweetened beverages in 2018 and the increase in the tax in 2019.
Sugar in South Africa is primarily used for direct human consumption and for industrial purposes e.g. as an ingredient for producing beverages and confectionary products.
The industrial demand for sugar accounts for 60 percent of the total domestic sugar sales, while direct home consumption accounts for 40 percent of the total domestic sugar sales.
Other sectors not impacted by the sugar tax such as chocolate manufacturers have also voluntarily started reducing the use of sugar and replacing it with artificial sweeteners.
The per capita consumption of sugar in South Africa is about 45 kilograms (kg) per year, which is higher than most countries in the Southern Africa region whose per capita consumption is below 30 kg per year.
However, it is still much lower to the U.S. per capita consumption of between 68 to 77 kg per year.
Exports to decline by 15%
In term of trade, Sugar exports are estimated to decrease by 15% to 1.2 million MT from 1.5 million MT, based on the decline in demand due to the impact of COVID-19, decrease in production, consumer incomes and disruptions to some global supply chains.
South Africa always exports its surplus sugar regardless of the global prices and sometimes at a loss because of the domestic sugar regulations that stipulate that the price of cane paid to sugar cane growers should be based on revenue obtained from the sugar sales in the local and export market.
As a result, South Africa always exports surplus sugar once the domestic market and the South African Customs Union (SACU) markets are adequately supplied. SACU members include South Africa, Namibia, Botswana, Lesotho, Eswatini (Swaziland) and Namibia.
Malaysia is the leading market for South African raw sugar exports which accounted for 54% in 2019/20 exports, followed by India (12%), China (8%), Italy (7 %t), Namibia (5%), United Kingdom (4%), and United States (3%).
Its imports are forecasted to remain flat at 500,000 MT from 497,835 MT, based on the pace of imports up to July 2020, the incentives for manufactures to utilize local sugar instead of imports and depressed demand of sugar due to COVID-19.
Main import markets for South Africa’s sugar include Eswatini, Brazil and the United Arab Emirates.
The South African sugar milling sector is dominated by leading players such as Tongaat Hulett Sugar Ltd, Illovo Sugar Ltd, Tsb Sugar RSA Ltd, Gledhow Sugar Company, Umfolozi Sugar Mill Ltd and UCL Company Ltd.
These six milling companies own a combined total of 14 sugar mills, 12 in the Kwa-Zulu Natal Province and 2 in the Mpumalanga Province.
Notably, two of the sugar mills, Darnall and Umzimkulu Mill were not opened in the 2020/21, due to financial challenges and the milling company’s strategy to maintain their commercial viability.
The Tongaat Hulett Sugar Ltd, Illovo Sugar Ltd, RCL Foods and Umfolozi Sugar Mill Ltd produce both raw and refined sugar. The Umfolozi Sugar Mill Ltd and UCL Company Ltd only produce raw sugar. The Gledhow Sugar Company only produces refined sugar.
Tongaat Hulett Sugar Ltd, Illovo Sugar Ltd, and RCL Foods also own sugar mills outside South Africa in Eswatini, Malawi, Zimbabwe, Zambia, Mozambique, and Tanzania.
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