the south african sugar industry and potential expansion...
TRANSCRIPT
MPUMALANGA
KWAZULU-NATALFREE STATE
EASTERN
CAPE
Malelane
Pongola
Umfolozi
Felixton
Amatikulu
Darnall
Gledhow
Maidstone
Sezela
Umzimkulu
Komati
UCL Company
Noodsburg
Eston
SUGAR MILLS
RAIN FED AREAS
IRRIGATED AREAS
Industry structure - representation
13 LOCAL GROWER
COUNCILS
Tongaat Hulett Sugar Ltd 4 Mills)Illovo Sugar Ltd (4 Mills)
TSB Sugar RSA Ltd (3 Mills)UCL Company Ltd (1 Mill)
Umfolozi Sugar Mill (Pty) Ltd (1 Mill)Gledhow Sugar Company (Pty) Ltd
(1 Mill)
SA SUGAR ASSOCIATION
COUNCIL
GROWERS MILLERS
SA CANE GROWERS’
ASSOCIATION
SA SUGAR MILLERS’
ASSOCIATION LTD
South African Sugar Industry
an important contributor to the SA economy
Total average industry income R12 billion p.a
Gross Domestic Product 0.84% of SA GDP
Export earnings R2.5 billion p.a
Annual Cane Production 20 million tons
Average value of sugarcane production +/- R7.7 billion p.a.
Area under cane ~ 371 662 ha
Contribution to SA’s total agricultural
output
6%
Dependent rural livelihoods Approx. 1 million people
Direct job opportunities 79 000 (11% of agri employment)
Indirect employment 350 000
Production and exports statistics
• The global sugar industry has almost 120 producers, including the
individual EU member states.
• In its 2013 Yearbook the International Sugar Organisation (ISO)
ranked South Africa as the 18th largest sugar producer globally.
• South Africa further ranked as the 11th largest exporter globally.
• The industry is more than 150 years old.
World sugar market – major producers 2011
0 5 10 15 20 25 30 35 40
Peru
Vietnam
Cuba
RSA
Egypt
Columbia
Guatemala
Turkey
Indonesia
Ukraine
Phillipines
Australia
Pakistan
Russia
Mexico
USA
Thailand
China
EU
India
Brazil
Million Tonnes
South Africa
1,981,186 Tonnes
* South Africa dropped places from 16 in 2010 to 18 in 2011 due to drought.
World sugar market – major exporters 2011
* South Africa dropped places from 9 in 2010 to 11 in 2011 due to drought.
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Serbia
Azerbaijan
U.S.A.
Ghana
South Africa
Nicaragua
Zambia
EU
Mexico
Guatemala
UAE
Australia
India
Thailand
Brazil
South Africa
265,887 Tonnes
Million Tonnes
Journey for shared growth and sustainability
Improved
productivitySustainable sugarcane
agriculture
Increased revenueLimiting Imports
Diversification
Premium market access
SACU policy harmony
Stable regulatory
environmentTariff Protection
Internal industry
processes for cost
reduction
Holistic and specialised approach to the complex
challenges faced by the sugar industry
Skills training (Shukela Training
Centre)
Research (SASRI)
Land reform and rural development
Terminal
GROWER
DEVELOPMENT
FUNDING
FACILITY
Industry support
Grower Development Account
Invested over R206 million for the development
of black growers in the industry
Sugar Industry Trust fund for Education:
Established in 1965, assisted over 10 000
students from rural and urban communities with
bursaries, various interventions at a school level
such as maths and science.
Supplementary Payment Fund (SPF):
SPF initiated in 2005/06, with approximately
R240 million distributed to growers to date.
BOOST INCOME OF
SMALL SCALE
GROWERS
DELIVERING < 5 000
TONS CANE PER
SEASON
Decline in production
Decline in
area under
cane and
cane yields
~10%
reduction
over the past
10 years
Decline in number of growers
Decline in
number of
growers
50%
reduction in
small scale
grower
numbers
Land reform status
• Most progressive
commodity terms of
land transfers.
• 74 624 hectares
transferred (22% of
freehold
commercial land
under sugar cane
production).
• Black ownership will
exceed 50% as the
pace of restitution
gains momentum.
Impact of the recapitalisation and development
programme
• Received R3 million: replanting,
ratoon management, irrigation
infrastructure for bananas.
• Resulted in a 61 % increase in
production.
• 9 permanent jobs and 70 seasonal
jobs created.
• Hosted her own youth day
programme in 2013 on her farm.
Sugarcane processing
Fibre (bagasse)
• Industry co-product used to produce electricityand steam - current fuel supply matched to ownenergy use
• Other products - animal feeds, paper, chemicals
Sugars
• 80% as sugar
• 20% as molasses
Sugars to ethanol
• Molasses as potable and industrial ethanol
• Fuel ethanol
Sugarcane – one of most efficient plants to convert sunlight into energy
15% fibre
15% sugar
Tops &
leaves
15% fibre
Renewable Energy Opportunities
• Cogenerated electricity
– Feedstock - bagasse & sugarcane brown leaves
– Brownfields cane supply – Brownfields cogeneration plant
• Biomass electricity
– Feedstock - sugarcane fibre brown leaves & other biomass fuels
– Brownfields cane supply – Greenfields biomass plant
• Biofuels
– Feedstock - sugar juice
– Greenfields cane supply – Greenfields ethanol distillery
– Brownfields cane supply - Greenfields back-end/stand alone ethanol distillery
Options premised on the principle that supply to existing domestic sugar market value
streams and ethanol distilleries remain
Harnessing the full value of the sugarcane talk
Renewable cogenerated electricity
Sugarcane HarvestingBagasse
Renewable Fuel
Processing at sugar
millElectricity
• Sugar industry can contribute to addressing current energy crisis
• Minimal capital investments, agreements and grid connections
secured sugar industry could export cumulatively 78 MWs to
national grid
• Projects span over 3 year period
Sugar Independent Power Producers
Technology and efficiency improvements, 2 to 7 times more
energy available ~ 712 MWs
Jobs and skills development
Vertical expansion –
increased intensity
of production
Horizontal
expansion – new
land under
production
Seasonal expansion
– length of season
from 36 to 40 weeks
Greencane
harvesting
Bioethanol
SugarcanePotable and
industrial ethanol
Fuel
Bioethanol
• Fastest implementation - export sugar could be diverted to fuel ethanol
• Industry would always supply local sugar market
• Most capital and cost efficient approach – also consistent with Brazilian practice is for
brownfields sugar ethanol production
• At least 2 to 3 large ethanol distilleries, capacity 125 000 m3/a with diversion of
50% of sugars to ethanol
• Investment > R3 billion rand and creation of > 4 500 jobs mainly in agriculture
Jobs estimated at full and expanded capacity
Job Creation
Sugar-electricity Bio-ethanol
Agriculture 19 147 15 369
Construction 6 935 5 243
Operations 416 466
Total 26 498 21 078
Full-Time Positions
• A full-time position constitutes employment for at least 12 person months.
• Creation of new jobs in agricultural and operations phases is attributable to expanded
agricultural production
• Vertical expansion – increased intensity of production
• Horizontal expansion – new land under production
• Seasonal expansion – length of season from 36 to 40 weeks
• Greencane harvesting – labour intensive harvesting of cane without burning to
remove leaves and tops in order to provide brown-leaf for electricity production
The industry’s relatively high levels of transformation translate into
significant job creation, preferential procurement & rural development
potential
Element Bioelectricity Fuel-ethanol Combined
Job Creation 26,498 21,078 47,576
BBBEE Procurement during the agricultural
phase50% 56% 51%
Procurement from small-scale Growers 11% 13% 11%
Procurement from female small-scale Growers 6% 7% 6%
Procurement from Beneficiaries of Land Reform 14% 21% 15%
Existing support for Beneficiaries of Land
Reform, small-scale Growers and cooperatives*- - R667 million
Development of IP* R15 million R10 million R25 million
Transfer of IP to rural communities (Skills &
knowledge transfer)*- - R23 million
Source: Letsema team analysis, * = Period: Approximately a year /project length (2012/2013)
Economic value add benefits from renewable
energy
Growth in sugarcane value chain for SA Inc.
> R20 billion
investment
> 40 000 jobs
Localisation &
industrialisation
Energy supply and
energy security
Extensive rural and agric dev.
Compliment IPPs
Renewable fuels
Build and expand socio
economic programmes – enterprise
dev.
Low carbon economic
growth
Principles of rural development
• Sustainable production models
• Production support
• Infrastructure development
• Enterprise Development
Sustainable sugar cane
development
• Youth Development
• Training and skills development
• Co-operatives support programme
People Development
Enterprise development
• Across cane production cycle
• contractors for planting
• ratoon management
• harvesting
• haulage
• Growth in supply chain services
• motor vehicle supply and
repair firms,
• fertilizer and chemicals
• engineering services
• fuel and lubricant outlets
Concluding points on energy
Biofuels
• Biofuels regulatory framework and the subsidy models are under
review by National Treasury
Renewable cogeneration from sugarcane fibre
• The release of the Request for Proposal for the national cogeneration
IPP programme which supports procurement of renewable
cogeneration from sugarcane fibre is imminent