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Local Consequences of international actions

Local Consequences of international actions. How changes to the EU Sugar Protocol impact on the rural poor in Swaziland. IFAD (2001) Population in absolute poverty: billions. The paradox of rural development.

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Local Consequences of international actions

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  1. Local Consequences of international actions How changes to the EU Sugar Protocol impact on the rural poor in Swaziland

  2. IFAD (2001) Population in absolute poverty: billions

  3. The paradox of rural development • UN Millenium Goal is to half world poverty by 2015 but aid to the places where most of the absolute poor live is falling in real terms. • Value of aid to agriculture in late 1990s was only 35% in real terms of the value in late 1980s. (IFAD)

  4. Swaziland is a member of the African Caribbean Pacific Group (ACP) • 1975: Lome Agreement one of whose Protocols applies to Sugar. (18 of the 77 ACP countries are signatories of the Sugar Protocol)

  5. ACP Sugar Protocol Signatories

  6. Why is the ACP Sugar Protocol important? • ACP sugar producers have a guaranteed quota to the EU. • The EU pays the same price to ACP sugar cane producers as it does to its sugar beet producers. • Since 1975 these prices have averaged between 2 to 3 times higher than world market prices.

  7. The ACP has therefore functioned as a form of development aid to rural areas

  8. Income transfers to ACP countries from Sugar Protocol premium: 1980-1990: Transfer as a % of GDP • Mauritius: 9.52 • Guyana: 8.93 • Swaziland: 6.97 • St. Kitts: 6.38 • Zimbabwe: 0.24 • Tanzania: 0.06

  9. Who have been the main beneficiaries in Swaziland? • Large estates Made up 97 per cent of production in 2000

  10. The importance of the Swaziland sugar industry to the economy: 2003 • 18 per cent of GNP • 11 per cent of wage employment • 16 per cent total export earnings • 55 per cent of agricultural earnings

  11. Location of the sugar industry sugar mills Sugar Mills Mhlume Simunye Big Bend .Simunye The sugar industry Is located in the Low veld: Requires irrigation Most irrigation on title deed land: 63,600 TDL 3,400 SNL

  12. Resource base for the rural population on Swazi Nation Land • Majority rely upon rain-fed farming • Rainfall is seasonal and highly variable, especially in the low veld • The low veld contains a large number of soils suitable for irrigation • Average farm size on SNL from 1-1.7 hectares (halved since 1967)

  13. The need for rural development • GDP per capita US$1,300 per annum: 2001 (Lower middle income country) • But: • 80 per cent of rural population live close to absolute poverty • 63 per cent rely on river water for drinking • 30 per cent have no toilet of any type • Infant mortality rate 91/1000/annum (Africa 80) • Life expectancy 1996: 57 • 2000: 40

  14. The key resource to tackle rural poverty in the lowveld • Water

  15. The role of sugar in developing Swazi Nation Land • Enables farmers without title deed to land to borrow to finance irrigated sugar projects • Since 2001 the main area has been the Komati Downstream Development Project associated with the Maguga Dam on the Komati River

  16. KDDP Locality Map Drikopies Dam PDA Pigg’s Peak Tshaneni Maguga Dam Mhlume Nkomazi

  17. The Project PDA 25 000 persons on 27 000 ha 6 000 ha of irrigation costing E 350 Million Mhlume Mill Extra 80 000 Tonne sucrose Expansion costing E 300 Million Maguga Dam 83 Million cu m of water E 400 Million

  18. Sugar Cycle Quota is a Contract

  19. Assumption behind the project • Access to ACP market at higher than world prices

  20. Proposed changes to the EU Sugar Regime • “Sugar was the only remaining sector where there had been no change for 30 years” Frans Fischler July 2004 • Cut in sugar prices paid to EU beet producers by one-third • Removal of the existing quota system • To be implemented by 2008-09

  21. Project funding • Farmers Associations borrow from commercial banks • Typical borrowing: Intamakuphila FA: 130 members: Borrowed US$2.1 million • Interest rate 17 per cent per annum • 300 ha’s

  22. Assumptions in business plan: 2001 • Average yield 115 tons per hectare sugar cane • Average sucrose price 1600 E per ton sucrose • Average sucrose content 13.5 per cent

  23. Actual performance to date • 90-100 tons per hectare • 1200 E per ton • 13 per cent sucrose • Thus the finances are already unable to meet full loan repayments • Many FA’s are worse off because they are further than 26 kms from the mill (the economic distance to haul sugar cane on gravel roads)

  24. EU sugar price regime changes • By 2007 EU sugar prices expected to drop by 37 percent

  25. Consequences for farmers association members • Unable to repay loans in time allocated. (Normally 7-8 years) • Unless some land allocated for subsistence crops, widespread hunger and indebtedness because no income from sugar cane sales • Financial stress undermines the social cohesion that is vital for the efficient running of a communally managed irrigation scheme.

  26. Project achievements • Depends on the model being followed Model 1: Convert all rain-fed farming to sugar cane Model 2: Convert most rain-fed farming to sugar cane and allocate some irrigated land for food security Model 3: Allocate each homestead an irrigated home garden

  27. Outcomes Model 1: Significant reduction in food security, especially for the poorest Model 2: Provides some food security for those with least alternative incomes Model 3: Enables many to produce significant increases in irrigated crops in addition to sugar cane.

  28. Model 3: Home gardens • Each FA member allocated 0.5 ha around the home • The garden is irrigated • The homestead is given potable water plus a flush toilet to a septic tank

  29. Further evidence of social benefits from irrigation • Increasing range of crops for subsistence and sale • Experimentation with new crops

  30. Benefits to diet

  31. Diversification by FA’s

  32. Consequences of diversification • Undermines the contract between FA and bank as no opportunity to divert revenues before the farmer receives them • Alternative crops require more effort in marketing than sugar cane • FA’s association sales undermine those from home gardens • Any large-scale failure to repay loans undermines future irrigation projects in the Lower Usuthu and elsewhere in the Swaziland low veld.

  33. What should be the EU’s response? • Provide soft loans to FA’s during their repayment period

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