EU support to Swazi sugar industry achieves results, says EU Ambassador (18/09/2013)

Remarks by
Ambassador H.E. Mr. Hans DUYNHOUWER
Head of the Delegation of the European Union to the Kingdom of Swaziland
Happy Valley Hotel
17 September 2013

Thank you very much for giving me the opportunity to address this important meeting.

The title of the conference 'Changing landscape of World Sugar Trade: implications for sustainability of the Swazi Sugar Industry' is a very relevant one. I would like to give a European perspective on this matter.

My main message is a very simple one: Swaziland and other sugar exporting countries must be prepared to face in the future a more competitive environment in the EU market. Ongoing trade liberalisation measures and other reforms will lead to lower sugar prices; the Swaziland sugar industry can only survive if it remains competitive; hence the need for cost-effective transport links to and from the mills, cost-effective irrigation practices (energy), innovative business approaches and competitive financial institutions providing credit.

Which policy changes in Europe are relevant to the Swazi sugar industry? Let me start with the EU sugar reforms of 2006. These have transformed the European Union from a net-exporter into one of the world's largest net-importers of sugar. All this happened during a period of rising world prices. As a result internal EU prices have fallen less than originally envisaged. ACP countries and Swaziland have benefited from this. Swaziland's sugar exports to the EU increased from 111 thousand ton in 2006 to 301 thousand ton in 2012. The latest figures show that Swaziland accounts for about 8 percent of total EU imports.

As you will know, the European Union envisages further sugar sector reforms covering the period 2014 to 2020. The sugar market of the European Union will be further aligned with world market conditions. A key question has been the abolition of the internal production quota system as proposed by the European Commission. It is generally accepted that internal production quota have exercised an upward pressure on internal EU prices. After consultations and negotiations, it is now very likely that the production quota will be maintained until October 2017, i.e. for four more seasons. From October 2017 there will no longer be an internal production quota. As a result internal EU sugar prices will be less high.

Although future EU market conditions might be less attractive (lower prices), it is important to stress that continued preferential access of Cotonou countries to the European sugar market represents a real benefit. There is no intention to compromise on this. For least developed countries duty- and quota-free access under the EBA (Everything but Arms) initiative will continue. For other countries, and Swaziland is one of them, the conclusion of an Economic Partnership Agreement is essential. You will recall that two years ago, I urged for a speedy conclusion of the EPA negotiations. Swaziland sugar exports benefit at the moment from beneficial market access provisions under the 'Market Access Regulation'. These are, however, temporary in nature. It has now been decided to phase these out as of October 2014. Continued preferential access of Swazi sugar exports calls for a speedy conclusion of the Economic Partnership Agreement. Failing to do so in time will interrupt Swaziland's sugar exports to the European Union.

Effective market access is conditioned on a competitive industry. Our EUR 120 mln support to the Swaziland sugar sector under the Sugar Accompanying Measures Programme for Swaziland contributes to this. This programme is one of the biggest aid for trade programme of the European Union. It is endowed with an amount of EUR 1.25 billion. Swaziland has a 10 percent share herein.

Funds under the Sugar Accompanying Measures Programme support investments in upgrading roads, the rehabilitation of water canals, the expansion of the area under sugar and support to smallholders.

We have already achieved good results.

Allow me to summarise. Under the Sugar Accompanying Measures Programme we have:

  • established 30 farmer companies with 1,400 members and 2,400 ha under sugar cultivation;
  • provided business and governance advice to 51 new farmer companies. This includes the 30 farmer companies mentioned before and a further 21 farmer companies established with the support of the Government;
  • supported the rehabilitation of 14 existing schemes and the diversification of 2 more farms;
  • improved water supply through the rehabilitation of bulk water systems. This concerns Siphon 4 of the Mhlume Canal where works will be completed before the end of the year.
  • constructed roads; the 20 km St Philips 1 road has been completed;
  • set up a monitoring and evaluation system. A baseline has been established and a first annual report has been completed.

These are important results that have been achieved thanks to excellent cooperation between all the different stakeholders.

But more is to come.

  • Under the new Swaziland Sugar Facility (EUR 19.5 million) we will continue support for infrastructure, smallholder expansion and capacity development.
  • A new technical assistance programme will start in the coming months. It will provide continued support to SWADE, extension services and M&E development.
  • Support for additional infrastructure is also foreseen. It concerns St Philips II (12.4 km of asphalt roads plus 2 bridges on the MR14 and D50) and the Mananga Sihoye asphalt road (14 km); works on these projects have already started. The contract for the Dvokolwako - Manzana road (5.7 km including gravel) was awarded recently. In total more than 50 km of roads will be constructed under the programme.

The EUR 120 million funding of the Sugar Accompanying Measures Programme helps the sugar sector to prepare for the future. Within a few years the EU's support will be fully utilized; then stakeholders will have to assume the financial responsibility for ensuring a competitive industry. In this regard, allow me to say a few words on smallholder development. As you know the expansion of sugar under smallholders is a key feature of the country's National Adaptation Strategy. For that reason, this conference will consider, in detail, the challenges and opportunities to smallholder sugarcane growers. In this regard continued business support to smallholders is essential. This is what we have learnt from the reviews, the mid-term evaluation, studies and our day-to-day experience. As EU business support for farmer companies will be phased out in four years, it is critical that we prepare for the future. I call on the industry to address this matter without delay. The EU is ready to provide you with its support.

Finally, better roads, better irrigation, better management should translate into higher incomes, not least for the farmers. A fair deal for farmers, many of them new to the business, is essential for ensuring the continued supply of sugar to the mills. In other words, it is critical that sugar remains an attractive crop for farmers so that poverty is eliminated.

Ladies and gentlemen, I conclude by wishing you a fruitful conference.

Thank you for your kind attention.