Small-scale cane grower numbers are down by almost 23%. Robyn Joubert asked SA Canegrowers’ chairperson Tim Murray why, and what the industy is doing about it.
What are the main problems facing small-scale growers?
The main problems are limited access to land and finance, poor rural infrastructure such as farm access to main roads, poor contractor service delivery and weak bargaining power due to small farm size. A number of factors, including fluctuating world sugar prices and poor agronomic conditions in some cane-growing regions, have placed all cane growers under severe economic pressure and as a result they’re experiencing reducing margins. Small-scale and emerging farmer communities are especially vulnerable to these difficult economic conditions, making sustained cane farming in these communities very difficult.
How are small farmers faring compared to large-scale growers?
Over the past few seasons, small-scale grower yields have worsened relative to large-scale grower yields. Poor economic circumstances could have caused the decline, which then creates further economic difficulties and causes a downward spiral. It was within this context that the Supplementary Payment initiative was launched. In absolute terms, small-scale growers’ total cane production has decreased by an average 6% per year. From 2006/07 to 2007/08, as a result of production conditions, small growers’ cane production declined 10%, while that of other growers declined 2%.
How many small farmers have folded?
Survey results show that for the period 1996/97 to 2006/07, cane production by small-scale growers has declined by some 1,6 million tons (45%), translating into a loss of real annual revenue of about R290 million in cash-strapped areas. The number of registered small-scale growers has decreased overall by 22,7%.
Why did this happen?
Reasons for this serious decline have been cited as, primarily, the economics of cane growing, coupled with consecutive years of poor cane prices for primary producers, and adverse weather conditions. Despite a programme aimed at the training and development of the small-scale grower sector, factors such as poor cane contractor performance and service, relatively high contracting rates and the limited availability of capital, together with the withdrawal of the cane supply support that milling companies traditionally provided in some regions, have exacerbated the problem. The revenue from cane is an important contribution to the household income in these deep rural areas, and the support received by small-scale growers from industry structures and the Supplementary Payment Fund (SPF) help them remain in business.
Is the SPF helping?
The SPF was launched in 2006 and, with funds of some R22 million a year, is the most significant single development initiative in the sugar industry for many years. This initiative is funded jointly by large-scale growers and millers and is focused on revitalising the small-scale grower sector
How much has the SPF paid out?
About R22 million was paid to 23 917 growers in 2006, and so far this season R24 million of R26 million has been paid to 19 337 growers.
Is it sustainable for farmers to rely on the fund to keep afloat?
In the harsh light of economic reality, a small-scale grower won’t earn a living from cane alone. However, from a socioeconomic perspective, cane growing generates in excess of R450 million in the deep rural regions each year and contributes positively to the wellbeing and stability of the communities in the cane-growing regions. It’s one of government’s objectives to create these opportunities in the rural areas. The SPF has made a positive contribution to the revenue stream for small-scale growers. This has helped to initiate a reversal of the decline in small-scale grower production, and provide times for small-scale grower communities to structure their farming operations to benefit from economies of scale through consolidated farming projects. In short, without the positive contribution to the rural economy from this sector, matters would be much worse. Small-scale growers should be kept in business, but encouraged to farm in more efficient farming entities.
What would the consequences be if the fund was not there?
In some instances, the revenue received from the SPF is the small-scale grower’s main source of income after input, finance and contractor costs have been deducted. If this was removed, it would make the returns from the small-scale farm extremely marginal under current circumstances.
What other initiatives have helped small growers survive?
With the implementation of the VAT system in 1990, the sugar industry highlighted the problem faced by small-scale sugarcane farmers and recommended the introduction of a flat rate, which would compensate for the VAT incurred by these farmers on their inputs. The scheme was included under the VAT act and since then, small growers have benefited from the flat VAT rate payments as compensation for VAT incurred during their farming activities. With the introduction of the Diesel Refund System in 2001, small-scale growers again found themselves in a position where they couldn’t claim this benefit. The diesel rebate system was deployed, which sets a rate of diesel rebate per ton of cane and is added to the flat VAT rate payments. The total paid by the combination of these schemes is in the order of R40 million a year. Black empowerment company Gijima and banks, such as Land Bank, are now providing money for small-scale grower projects.
Do you feel positive about their future?
Yes. While current financial conditions are extremely difficult, the importance of small-scale grower production to the rural economy and surrounding communities can’t be underestimated. For these reasons alone, small-scale growers must be encouraged to remain in production, where appropriate.
