Sugar industry wants to enter EU agreement

The SA Sugar Association (Sasa) was in talks with the government to tap into the EU's plan to import about 3.5 million tons of sugar annually from African, Caribbean and Pacific (ACP) countries, Sasa executive director Trix Trikam said yesterday.

The EU considers South Africa's economy to be too sophisticated to qualify for its ACP agreement, which will extend preferential treatment to least-developed countries.

The EU reforms, which took effect in October last year, allow free market access of sugar from least-developed ACP countries.

"We certainly want to participate in that because we do not believe that these (ACP) countries currently have the capacity to fill that gap. We are not saying we will fill the gap, but we can play a meaningful role," Trikam said.

The EU was forced to reduce its domestic sugar production following a challenge at the World Trade Organisation to its exports of subsidised sugar in 2006. The reforms caused EU sugar production to fall from 18.3 million tons in 2006/07 to 13.9 million tons in 2009/10. EU domestic sugar consumption is approximately 20 million tons a year.

Johann van der Merwe, the director of external affairs at Sasa, said the association had engaged the government to help.

"We have identified the opportunity and in principle the government has realised and recognised it. We do not have an economic partnership agreement (EPA) with the EU. But we have a trade and development co-operation agreement with them that can also be used to establish preferential access for sugar," Van der Merwe said.

The South African sugar industry has an estimated annual income of R8 billion a year. The industry employs about 77 000 people directly and a further 350 000 indirectly.

The industry produces an estimated average of 2.3 million tons of sugar a season.

About 60 percent of the sugar is marketed in the Southern African Customs Union and the remainder goes to markets elsewhere in Africa, Asia and the Middle East.

Van der Merwe also pointed out that the South African sugar industry, ranked number 13 in the world, and was likely to benefit from a more positive policy environment for ethanol production.

"Brazil has been able to establish a very substantive ethanol fuel industry based on mandates supplied by the government. Their regulation currently provides for mandatory blending of 23 percent of ethanol into all transport fuel, down from more than 30 percent a few years ago," he said

He said the Brazilian government had also invested in flexible fuel technology for vehicles that had further grown the market for ethanol.

"More than 50 percent of the fuel currently sold in Brazil is from sugar cane ethanol. If the South African government can follow suit it could provide a high growth point for us since maize has been ruled out of ethanol production for food security reasons," Van der Merwe said.

He added: "The South African government in contrast has tried to develop a domestic industry without establishing blending mandates. This policy was released in 2008, and the fact that there have been no takers is a clear indication that, within a heavily regulated local fuel sector, blending mandates will be an essential element for establishing fuel ethanol markets."

source: busrep.co.za