IMPACT OF MOZAMBIQUE UNREST TO ESWATINI SUGAR INDUSTRY DURBAN PORT ROUTE COSTS 10% MORE

MBABANE – The ongoing political unrest in Mozambique cost Eswatini to reroute its sugar exports to the African regional markets to the Durban port.

According to the Eswatini Sugar Association (ESA) Chief Executive Officer (CEO), Banele Nyamane, this costs them around 10 per cent more due to the long distance. When it comes to overseas markets, which is the United States of America (USA) and the European Union (EU), Nyamane said they sell bulk sugar to the USA, meaning it is the raw sugar that is loaded in one ship. He said they send the cargo every August meaning at this point, there is no impact to the USA sales. The CEO added that other bulk orders to the EU are scheduled for February and March and they remain optimistic that the situation in Mozambique would have been resolved by then.

Distribution

“What has been impacted is the bagged sugar destined for the regional markets,” said Nyamane. About 26 535 tonnes of sugar is shipped yearly to the USA through the African Growth and Opportunity Act (AGOA). The local sugar was exported to a terminal in Maputo, Mozambique. The terminal, called the Sociedade Terminal De Acucar De Maputo (STAM), played a significant role in the country’s sugar industry. It is owned by four sugar companies in four countries namely Eswatini, South Africa, Zimbabwe and Mozambique. STAM is responsible for the handling, storage and distribution of sugar produced in the four countries.

Each of these countries owns a share of 25 per cent of this terminal.SACU is the country’s primary market, comprising Botswana, Eswatini, Lesotho, Namibia and South Africa. This market is classified as a domestic market because of the free movement of goods within the customs union. An import tariff regime controls the entry of sugar produced outside of SACU.
In the annual report for 2023/24, ESE indicated that it intends to aggressively expand its footprint in the region, targeting Rwanda, the Democratic Republic of Congo and Zimbabwe in particular, although competition is fierce as most sugar producers in the region are ramping up their production capacity.

Notably, trade in goods has commenced under the AfCFTA Guided Trade Initiative as 54 African Union member states have signed the agreement and 47 have ratified it. This presents more opportunities for trade in sugar on the continent. The ESA integrated report for 2023/24 indicated that despite poor yields and the quality of sugar challenges, the organisation’s revenue was up by 13 per cent to reach E7.4 billion, when compared to the E6.44 billion recorded in 2023. This was mainly due to the high world market sugar prices supported by a favourable foreign exchange rate. “Despite a tough year, we successfully navigated our challenges and are pleased with our results,” read the report.

The organisation reported that the cost of sales increased from E6.10 billion to E7.04 billion, in line with an increase in distributable proceeds. Profits that are made by the association are distributed in full to millers and growers and form part of the cost of sales. Distribution costs incurred during the year were E69.31 million (2023:E 24.67 million), increasing mainly because of an increase in freight rates from the previous year.

Leadership

The geopolitical conflict in Mozambique comes at a very delicate time for South Africa, when logistics and the supply chains are under pressure from several other disruptive challenges, says Dr Juanita Maree, Chief Executive Officer of the Southern African Association of Freight Forwarders (SAAFF). A statement issued by SAAFF about the situation on the N4 Maputo Corridor, where the Lebombo Border Post has been closed because of election unrest in Ressano Garcia on the Mozambican side of the border, said: “South Africa’s business sector has voiced concern over the Southern African Development Community’s (SADC) slow response, calling on Member States to move immediately into a leadership position as mediator, to restore law and order and stabilise trade operations, which are critical to the regional economy.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: