Farmers will benefit from the premium price since it will align their prices with the local market
Photo by: Reuters
Sugarcane farmers received about R60-million worth of premium price payments on January 31 as agreed by the Small-Scale Grower Masterplan Task Team in accordance with the process laid out in the South African Sugarcane Value Chain Master Plan to 2030, which was endorsed by the board of the South African Sugar Association (Sasa) in June 2021.
The Sugar Masterplan was announced by President Cyril Ramaphosa during his 2019 State of the Nation address and was confirmed by Trade, Industry and Competition Minister Ebrahim Patel in his Budget Vote of the same year.
The aim of the Sugar Masterplan is to revitalise the ailing sugar industry and to stimulate economic growth in the sector. The Sugar Masterplan was concluded and signed off by sugar value chain stakeholders in November 2020.
The payment of the premium price is in line with one of the objectives of the Sugar Masterplan, which is to ensure the long-term success and retention of small-scale growers.
Farmers will benefit from the premium price since it will align their prices with the local market, compensate them for losses on international markets and erase the disadvantages related to their diseconomies of scale and remote locations away from sugar mills that drastically increase costs of production.
For sugar, international markets are distorted, loss-making and residual. Therefore, this intervention was needed to protect the revenue of small-scale farmers and cushion them from international market distortions, the South African Farmers Development Association (Safda) explained in a statement on January 31.
Safda said sugarcane farmers were paid using a recoverable value (RV), which recognised investments made in the production process to achieve sugarcane of good quality.
“Because of poor economies of scale, long distances to sugar mills and an inability to own farming equipment, small-scale farmers struggle to produce good-quality cane,” the association said.
The RV price is made up of proceeds derived from the sale of sugar and molasses sold in local and international markets.
“The premium price intervention came just in time to provide much-needed relief. The 2021 year was marked by civil unrest as well as floods that recently occurred causing damage to most farmer fields. This intervention money will assist farmers in recovering from these challenges while they wait on the government for relief," said Safda executive chairperson Dr Siyabonga Madlala.
The premium price payment added to Sasa’s transformation initiatives, which were approved on November 29, 2018, to a tune of about R1-billion over five years. In terms of this transformation fund, R200-million is disbursed to farmers yearly according to eight defined interventions.