Local sugar production declines by 10%

THIS year, local sugar production declined by about 10% from initial forecasts, Swaziland Sugar Association Chief Executive Officer (CEO) Dr Mike Matsebula stated.
This was a result of poor climatic conditions that have hit hard the Southern African region and the Swazi sugar industry has also been seriously affected by the poor climatic conditions for sugarcane growing in the region, but not necessarily drought, Matsebula explained.

He said when combined with unfavourable exchange rate movements (strengthening of the Rand/Lilangeni against the Euro and Dollar), this has impacted negatively on the realised proceeds for the industry.

The exchange rate movements are a significant factor because more than 50% of total sugar sales are destined for markets outside SACU.

“Even though the quantity of sugar sold increased (due to stock draw downs and adjustments to the shipping schedules), revenues remained stagnant.

“In other words, the positive effect of an increase in sales was offset by the unfavourable foreign exchange rate movements,” he said.

The CEO said the environment where sugar sales revenues were not improving was not ideal, given the cost increases being incurred by the industry.

He said in particular, irrigation costs had risen sharply as a result of the recent hike in electricity prices. “This has resulted in a decline of profitability, with those members who were on the margin now facing a dire situation, he said.
Developments

The CEO went to explain that “While SSA cannot be in a position to pronounce on the financial performance of its individual members (growers and millers), it is reasonable to expect that they shall also be negatively affected by these market developments.

It must however be noted that the financial performance of the Swazi and South African sugar industries would not be similar given the differences in the markets served by the two.

In particular, the exposure of the Swazi sugar industry to the markets outside SACU is proportionately higher”.

Matsebula said it was regard that the unfavourable foreign exchange rate movements observed above have had a noticeable negative impact on the financial performance of the Swazi sugar industry.

source: observer