Dr Thomas Funke
Director: Industrial Affairs
17 January 2013
IMPACT OF PROPOSED ELECTRICITY TARIFFS ON
SUGAR CANE GROWERS IN KZN
CANEGROWERS
CANEGROWERS administers the interest of
approximately :
• 27 000 registered sugar cane growers; annually
producing around 20 million tons of sugar cane from
14 mill supply areas.
• More than 25 000 are small scale growers.
CANEGROWERS
• The South African sugar industry is one of the world’s
leading producers of high quality sugar
• Contributes an annual turnover of about R10 billion to
the national economy
• Direct and indirect employment is estimated at some
350 000 people
• Most of these people live in rural areas (KZN,MP)
DISTRIBUTION OF FARM LAND
• Total land area under sugar cane for the 2011/12 season was 378 985
hectares
• 76% of the area under cane relies on rainfall, 24% irrigated
• The Mpumalanga and Pongola regions are 100% irrigated, Zululand and
the Midlands are 45% and 10% irrigated, respectively.
• North Coast, South Coast and Tugela make up <5% of the irrigated regions,
of which 10% are small scale growers
• Mpumalanga >75% of the area under cane is black owned
Who CANRGROWERS represent?
Komati
Malelane
CANEGROWERS administers MPUMALANGA
the interest of
approximately :
• 27 000 registered sugar cane growers; annually
KWAZULU-NATAL
producing around 20 million tons of sugar cane
from 14 mill supply areas.
Pongola
FREE STATE
Umfolozi
Felixton
Amatikulu
UCL Company
Darnall
Gledhow
Maidstone
Noodsburg
• More than 25 000 are small scale growers.
Eston
IRRIGATED AREAS
Sezela
RAIN FED AREAS
Umzimkulu
SUGAR MILLS
EASTERN
CAPE
COSTS:
DRYLAND & IRRIGATED
100%
6.8%
90%
7.4%
80%
15.1%
11.0%
60%
9.2%
40%
Fuel & Lubes
15.8%
Mech Maint
Cane Transport
70%
50%
4.2%
6.0%
11.3%
10.1%
Sundry/Fixt Maint
Admin/Lic/Ins
2.2%
5.2%
15.5%
14.5%
4.3%
30%
Services/Irr
13.5%
20%
Fertiliser
28.5%
10%
Chemicals
19.3%
Farm Staff
0%
DRYLAND
IRRIGATED
CANE FARMERS ARE PRICE TAKERS
• Payment to growers for cane delivered is on a recoverable value (RV) basis.
• Growers are price takers and therefore have no influence to recover
increased costs from this RV price.
• The RV price index projected through to 2017/18, using the average
percentage increase from the actual price data from the seasons 1998/99
to 2011/12, against the electricity price will show that increases in
electricity costs are grossly disproportional to forecast RV price increases.
SCENARIO FOR ALL IRRIGATED GROWERS (USING 16%)
BASED ON 10-YEAR COST SURVEY REAL AVERAGE
SCENARIO FOR PONGOLA GROWERS (USING 16%) BASED ON
10-YEAR COST SURVEY REAL AVERAGE
-20.4% Net operating income
over the next five years with
an annual 16% increase in
tariffs
COMPARATIVE INDICES FOR THE PRICE RECEIVED FOR SUGAR CANE VERSUS
ELECTRICITY COSTS (USING 16%)
CONCLUSIONS
- The proposed tariff increases will render irrigated sugar cane
farming uncompetitive.
- This impacts directly on 24% of our sugar cane supply area.
-
The impact could eventually see the closure of at least 4 mills,
thereby impacting dramatically on food security and the rural KZN
economy.
- Such a situation could put 35 000 jobs (direct and indirect) at risk!
- The increases in tariffs are not appropriate, not affordable and
cannot be implemented.
QUESTIONS?
Dr Thomas Funke
Director: Industrial Affairs
South African Cane Growers’ Association
[email protected]