While the African continent is structurally deficient in sugar, regional differences define the sugar production landscape in Africa. Sugar producers in Southern Africa generate surplus while the rest are in deficit. According to the analyst FO Licht, sugar production in the continent in 2021/22 (Oct-Sept) is forecast at 12.85 million tonnes raw value (mtrv) against consumption demand of 23.36 mtrv. This deficit of over 10 mtrv continues to invite significant investment in the sector for new build projects. This year, the US$1 billion Canal Sugar project in Egypt should commence operations – the beet sugar factory’s capacity is 400,000 tonnes. Several big-ticket projects in Africa have been announced over the past year. Illovo Sugar is investing US$246 million to more than double sugar production at Kilombero Sugar in Tanzania plus build a new cogen unit and expand ethanol production by 4 million litres. beckons a resurgence in investment in Africa which is structurally deficit in sugar. The first phase of the US$300 million new build sugar factory near Bagamoyo, Tanzania is nearing completion and will commence operation soon. When fully operational, it will produce 100,000 tonnes sugar. Planned new build investments in Chad (US$544 million), Côte d’Ivoire (US$278 million) and Nigeria (US$300 million) will support increased self-sufficiency in the continent once the projects are realised.
The recently published International Sugar Organisation’s commissioned report ‘Sugar in Africa’ prepared by the Oxford Business Group (OBG) highlights investment opportunities in the sugar sector in the continent. As the economies in Africa advance, opportunities exist beyond expanding sugar production to include diversifying through producing high-value co-products. The resilience of the African sugar industries must be applauded. During the virtual 10th Africa Sugar event in October 2020, I had the privilege of chairing the CEO panel. Well remember one senior executive pointing out that, unlike other sugar industries, most in the African continent simply do not get any level of meaningful support from their respective governments, whether in cash or kind through informed policies which incentivise/protect the sector. As such, these industries producing sugar are generally robust.
But there are structural and political issues that are a drag on the sugar sector advancing faster in the continent. Smallholders dominate cane production. They are handicapped by the fact that they do not have the suite of “managerial skills, good numeracy and basic science understanding” necessary for effective learning to apply the latest innovations in agriculture. “The scarcity of these skills combined with the diverse but specialised skill requirements, make it costly for smallholders to acquire them.” Larger units have the resources and capabilities to effectively “internalize these costs, allowing faster learning”1. Further, there are no innovative support mechanisms to help the farmers. In the celebrated book Poor Economics2, the authors highlight a case of smallholders in Kenya. They note that the reason for the low usage of fertilizer is for the following compelling reason. They know that fertilizer application boosts yield, but during the time between harvesting/selling their crops and planting the next crop is significant. By the time the next crop is about to be planted, they have run out of money. If, however, there was a system whereby they could purchase a voucher for fertilizer soon after harvesting their crops, they would allocate more funds for it. Secondly, poor infrastructure – lack of all-weather roads, power lines et al really add to the challenges when pursuing a new build project.
But the greatest challenges to the success of new projects are sugar smuggling and corrupt politicians who allow it. Last June, the sugar producer Compagnie Sucrière du Tchad (CST) was on the brink of collapse as it has not been able to sell its sugar for more than eight months due to smuggled sugar flooding the local market. Sugar industries in French West Africa have been hit hardest by smuggling. But this illegal trade is prevalent throughout the continent. Therefore, it is a shame that the OBG report does not address this issue at all nor does it decry the leadership vacuum in the industry actively trying to both condemn the practice and pressuring governments to follow suit through implementing safeguard measures. Smuggling is the problem behind the problem for these fledgling industries trying to drive success. At the end of the day, it is pointless “lobbying for the swift implementation of the African Continental Free Trade Area (AfCFTA)”3 when smuggling is not eradicated first in the continent.
There is little doubt, that without the handicaps of smuggling and corruption, in particular, investment in the sugar sector would flow in greater amount and self-sufficiency realized within a decade if not two in the continent.
1 Paul Collier and Stefan Dercon (2009) African agriculture in 50 years: Smallholders in a rapidly changing world? ftp://ftp.fao.org/docrep/fao/012/ak983e/ak983e00.pdf
2 Abhijit Banerjee and Esther Duffo (2011) Poor Economics (ISBN 1586487981, Publisher: Public Affairs, 320pp”
3 Remark by Jose Orive, Exec Director, ISO in the Oxford Business Group’s report ‘Sugar in Africa’ published in 2021.