This
strategy document is a response to the declining performance of the sugar
sector and is, in particular, a mitigation measure against the negative effects
on the sugar industry and the wider economy that will result from the reform of
the European Union (EU) sugar market.
Swaziland, the Sugar Industry and
the EU Sugar Sector Reforms
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 over 35 percent of the workforce in the agricultural sector is
employed in the sugar industry. The Swazi sugar industry can be held up as a
real success story from other sectors, in terms of growth and productivity.
Presently, on less than 50,000 ha of irrigated land, it produces in excess of
650,000 tonnes of sugar per year, representing a turnover of more than E1.5
billion, or above € 200 million. Swaziland’s sugar industry has consistently
ranked among the top ten most efficient producers of sugar. The industry is
poised for some major expansions in the short to medium term with new entrants
expected to come through the Komati Downstream Development Project and the
Lower Usuthu Smallholder Irrigation Project, as about 16,000 hectares of land
will be cultivated to sugarcane, producing an extra 200,000 tonnes of sugar.
The
success of the industry, and of Swaziland’s export-led economy, and the basis
for further expansion can be attributable to the preferential markets that have
been provided by developed countries (particularly in Europe and the USA). 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.
The
sugar industry is now facing several challenges, primary of which has been the
appreciation of the local currency, and, recently, the process of erosion of
preferences in the EU market. The result of these developments is a reduction
in export earnings and a reduction in industry revenues (due to a fall in the
average sugar price).
The
EU has announced reforms to its internal sugar market regime, which will result
in the lowering of prices obtainable in the EU by a cumulative 36% over the
next four years (between 2006 and 2009). In complement to its sugar market
reform, the EU has pledged to support countries, in particular those dependent
on the EU market through the Sugar Protocol provisions of the Cotonou
Agreement, in their adaptation process. Swaziland is therefore, through this
strategy document, responding both to the need for reform in order to ensure
the continued viability of the sugar industry and the requirement of the EU to
have a comprehensive strategy to which the support could be channeled.
Swaziland
is also facing a host of economic challenges, ranging from low economic growth
to high levels of unemployment and poverty. The HIV/AIDS pandemic has also
reached alarming proportions, with an estimated 42.6 percent of the adult
population being HIV positive and the public resources available to respond to
these challenges are gradually diminishing.