Manufacture of Sugar in South Africa 2023

Introduction

South Africa’s sugar industry ranks in the top 15 of around 120 sugar-producing countries worldwide in terms of volumes produced. The industry faced significant challenges in recent years including drought, the effects of the sugar tax, unrest, the 2022 floods which swept through the main sugar-producing province, KwaZulu-Natal, and the financial collapse of the country’s largest sugar producer, Tongaat Hulett, which is under business rescue. In March 2023, the Gledhow sugar mill also went into business rescue.

Opportunities

Diversification into other sugar-based products. Increased employment in rural areas through small-scale farming and South African Farmers Development Association’s initiatives such as the move to cane biorefineries.

Outlook

The milling sector has limited capacity, leaving growers with financial and operational uncertainty. If milling capacity is not attended to, the country may have to import larger quantities of sugar. The South African Sugar Association predicts tough trading in the next five to 10 years, with a decline in sugar volumes and employment, closure of mills and increased competition from big sugar exporters such as Brazil, Thailand, and India. The potential ramifications of the Tongaat Hulett business rescue process may cause significant instability and financial risk in the industry.

Report Coverage

This report on the Manufacture of Sugar in South Africa includes information on capacity, production and consumption, the industry masterplan, sugar tax, notable players and developments. There are profiles of nine companies, including Tongaat Hulett and Gledhow, both in business rescue, major players such as RCL Foods (TSB Sugar) and Illovo Sugar, and mills such as Umfolozi.

Strengths

A significant contributor to economic growth and development. Provides employment in rural areas. The industry is well established and has a long history. The South African industry ranks among the top 15 of approximately 120 sugar-producing countries.

Threats

Declining mill efficiencies. Defaulting on payment by millers in business rescue threatens the livelihoods of small-scale growers and the rural economy. Increase in sugar tax. Loadshedding. Lower global sugar prices could pose a threat of dumping as was the case a few years ago. Oversupply of sugar in some global markets.

Weaknesses

Erratic power supply. High local production costs compared with other sugar exporters who benefit from government subsidies. Increasing costs of production. Reliant on favourable weather. The global sugar price is affected by subsidy induced overproduction in some major sugar-producing countries.