By Sam Maphumulo
For more than 150 years, the South African sugar industry has been growing sugarcane and has been a consistent supplier of sugar and molasses in the region, contributing to economic growth and providing job creation opportunities in the rural areas of KwaZulu-Natal and Mpumalanga.
The industry has, however, faced ongoing challenges that have threatened its sustainability ranging from natural phenomena through droughts and floods, regional challenges such as increased input costs and civil unrest, and industry-specific challenges which include sugar imports, the insufficient tariff and the implementation of the devastating Health Promotion Levy (commonly known as sugar tax).
The levy has had a deleterious impact on the industry, resulting in multi-billion-rand revenue loss, substantial job losses and the permanent closure of two mills (Darnall and Umzimkulu), both located in KwaZulu-Natal.
These challenges put the industry in dire straits and precipitated an existential crisis.
This prompted a critical government-led intervention aimed at arresting the decline of the industry while ensuring its stability and growth.
The Sugarcane Value Chain Master Plan to 2030 is designed to ensure the long-term sustainability of the sector.
Product diversification is one of the apex priorities for this master plan and since its signing in November 2020, the industry has been hard at work investigating various opportunities that could be viable for the industry to increase its product offering, and utilise sugar which has, in the main, been exported to the world market at a loss.
The sugar industry has been in pursuit of alternate revenue streams for decades to move away from only producing sugar and molasses and to mimic other established sugarcane-growing countries such as Brazil and India who have successfully diversified their product offerings to include electricity and ethanol markets.
The robust pursuit of alternate streams has seen the industry conduct intense research to determine the viability of several diversification opportunities. Studies conducted by both the industry and government have indicated that although the socio-economic and environmental benefits of these projects are evident, large capital investments or subsidy support, and an enabling policy environment are required for these opportunities to take off.
The Sugarcane Value Chain Master Plan to 2030 has since provided a platform for the industry to come together with government and assess product diversification opportunities that could be expedited to commercialisation for the benefit of the industry, thus ensuring its sustainability. Diversification opportunities currently under investigation include bioethanol for blending with petroleum, sustainable aviation fuel through the alcohol-to-jet process, and polylactic acid and bio-polyethylene, which are bio-based polymers used to manufacture bioplastics.
Most diversification opportunities are still at scoping and pre-feasibility stages. If attractive, they will move to bankable feasibility before commercialisation.
The above-mentioned opportunities are not an exhaustive list. Other opportunities could be pursued further by the industry and one of these includes exporting power to grid. Currently, our milling operations generate electricity for own-use using bagasse derived from the sugarcane stalk.
Where mills have additional capacity, they export some of this surplus power through Eskom’s Standard Offer and Eskom’s Emergency Generation Programmes. This, however, could be expanded even further where up to 700MW of additional electric power could be exported to the national grid, provided a sufficient tariff is made available to support investment in further generation capacity.
This opportunity would not only contribute to a more sustainable future for the industry but would also allow the industry to play in role in providing additional energy security, particularly in the provinces of KwaZulu-Natal and Mpumalanga.
The sugar tax has been the greatest stumbling block for the industry, however, we are grateful that the industry was granted a two-year moratorium period on any increases to the levy to allow the industry to diversify.
The two-year period may not be sufficient for the commercialisation of the projects being investigated under the master plan, but our efforts thus far demonstrate our commitment to revolutionising the sector.
Past and present challenges have not deterred the regional sugar sector, instead, the soon-to-be sunrise industry is now looking forward, with product diversification being a key priority in achieving industry growth.
Opportunities investigated have already been commercialised in other parts of the world, with the crucial government support, which adds comfort that these projects are commercially feasible and need to be localised in South Africa.
Sam Maphumulo is a sustainability manager at the South African Sugar Association.
BUSINESS REPORT