THE NAS

The Sugar Sector in Swaziland

The Swazi sugar industry is a success story. On less than 50,000 ha of irrigated land it produces in excess of 650,000 tons of sugar, with a turnover of €200m. The sugar industry is of critical importance to Swaziland’s development, and plays a multifaceted role in the economy. It contributes about 18 percent to national output and accounts for 59% of the overall agricultural output. Over 35 percent of the workforce in the agricultural sector is employed in the sugar industry. Swaziland’s sugar industry ranks in the top ten in the world in terms of efficiency.

Part of this success has been due to its access to protected and preferential markets. In the 1960’s Swaziland took over South Africa’s Commonwealth quota in the 1960’s, and it enjoys access to SACU. It also sold 120,000 tons per annum to the EU market under the EU raw, ACP and SPS. The European market absorbs about 150,000 tonnes of the total sugar production of Swaziland, whilst representing over 30% of industry revenue due to the higher prices obtainable in the EU.

European Union Sugar Reform

The EU sugar market with its high-end prices is one of the most important market outlets for the Swazi sugar industry and ranks second behind the SACU markets.

In 2006 the EU’s reforms in its internal sugar market regime came into effect, which will result in the lowering of prices obtainable in the EU by a cumulative 36% over the next four years (starting in 2006) as EU quotas are phased out. As a result, the prices to growers and millers are estimated to drop by about 20%, and annual revenues will decline by € 22m over the four years. With all other factors remaining constant, the sucrose price in 2010 will drop by € 270 ton compared with 2005. By 2009 the ACP sugar producing countries will have to compete against other less developed countries that will be granted access to EU markets under the EBA agreement.

Figure 1: Market outlets for Swazi sugar



Currently Swaziland has to cope with a price decrease of 5% for sugar exported to Europe. However, so far the negative effects have been offset due to the weakness of the SA Rand to which the Lilangeni is linked.

The National Adaptation Strategy

As a response to the EU sugar sector reforms, the Government of Swaziland (GoS) elaborated a National Adaptation Strategy (NAS). The key objective of the NAS is to develop a proactive strategy for responding to the EU sugar sector reform and to minimise the adverse effects on the Swazi sugar industry and the wider national economy

In order to mitigate the negative impact the withdrawal of quotas and preferential prices would have, the EU pledged to support affected countries in their adaptation process, in particular those dependent on the EU market through the Sugar Protocol provisions of the Cotonou Agreement, Swaziland qualified for this support.

To meet the EU’s requirement for a comprehensive strategy as a condition for support, and to ensure the continued viability of the sugar industry, Swaziland prepared its National Adaptation Strategy in 2007. The financial requirements for implementing this strategy are estimated at €366 million, or about E2.6 billion.

The NAS has four main pillars:

1) To support the restructuring needs of the industry, whilst ensuring that a programme of continuous productivity and efficiency improvement is implemented. The creation of a Restructuring and Diversification Management Unit is urgently needed.

2) To ensure the continued viability of smallholder sugar cane farmers and the stabilisation of their financial situation.

3) To preserve and enhance (preferential) market access. There is need to ensure that expanded duty free access is pursued with the developed countries, in particular the EU as it is expected to continue being a high premium market for Swazi sugar for some time into the future. Regional markets will also need to be nurtured and protected in order to absorb Swazi sugar at reasonable prices. In this regard, Swaziland will initiative dialogue and intensify its lobby against any developments which seek to erode the value of regional integration and the regional markets. This will particularly focus on the possible retro-fitting of the RSA-EU TDCA into the whole of SACU (and other SADC countries presently negotiating an EPA with the EU), and further initiatives to seek expanded duty free access into the EU market. In the first instance, the protection and guarantee of the present SPS allocation of 30,000 tonnes will need to be secured. Support to trade negotiations, and lobby systems, is necessary.

4) To minimize the deterioration in living standards resulting from the reforms, in terms of the welfare of retrenched workers and the ability of the sugar companies to continue providing quality social services at their estates for the benefit of workers and neighbouring communities.

The NAS identified actions in eight thematic areas:

Table 1: Extract of main intervention areas of the NAS