I B E M O B A M P U M AL NGA CANEGRO National Energy ......A National Energy Regulator of South...

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OBA National Energy Regulator of South National Energy Regulator of South Africa Africa

Proposed Eskom Electricity Price increase of 35% per Proposed Eskom Electricity Price increase of 35% per annum for three yearsannum for three years

JJ MurrayJJ Murray

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The South African sugar can The South African sugar can industryindustry

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OBA MAP OF MPUMALANGA SUGAR MAP OF MPUMALANGA SUGAR INDUSTRYINDUSTRY

Lake Matsamo

Maguga Dam

Mountainview Dam

Kruger National Park

Naas

SWAZILAND

NKOMAZI

White River

Nelspruit

Crocodile River

Komati River

Lomati River

Kaap River

Malelane

Barberton

Malelane Mill Hectorspruit

MOZAMBIQUE

Komati Mill

Komati River

Komatipoort

Kaapmuiden

LegendRoads

Rivers

Railway

Int Border

Komati Mill Cane

Malelane Mill Cane

Thembalethu Home Based Care -Current Service Footprint

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The South African sugar industryThe South African sugar industry

38 000 Sugar Cane farmers 38 000 Sugar Cane farmers –– 1 000 000 dependants 1 000 000 dependants 20 000 000 tons of sugar cane and roughly 2 500 20 000 000 tons of sugar cane and roughly 2 500 000t of sugar annually. 000t of sugar annually.

Market 60% locally and the remaining 40% is exported making the Market 60% locally and the remaining 40% is exported making the industry a significant earner of foreign exchange.industry a significant earner of foreign exchange.

The crop is produced off 310 000ha of arable land The crop is produced off 310 000ha of arable land with 24% of the area reliant on supplementary with 24% of the area reliant on supplementary irrigation. irrigation. 68 000ha farmed by Small Scale Growers.68 000ha farmed by Small Scale Growers.Direct employment amounts to 85 000 people with Direct employment amounts to 85 000 people with indirect employment estimated at 350 000 people in indirect employment estimated at 350 000 people in a predominately rural environment. a predominately rural environment.

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The Mpumalanga sugar IndustryThe Mpumalanga sugar Industry

Two sugar mills supplied by 1360 farmers Two sugar mills supplied by 1360 farmers producing a crop off 45 000 ha under irrigation. 1150 producing a crop off 45 000 ha under irrigation. 1150 of these farmers are Small Scale Growers producing of these farmers are Small Scale Growers producing off 10 000 ha. off 10 000 ha. Mpumalanga produces roughly 4 000 000 t of sugar Mpumalanga produces roughly 4 000 000 t of sugar cane and 450 000t of raw and refined sugar. cane and 450 000t of raw and refined sugar. The industry supports both direct and indirect The industry supports both direct and indirect employment and a number of associated industries employment and a number of associated industries including:including:

cane cutting and transportcane cutting and transportfertilizer and chemical supply and application, fertilizer and chemical supply and application, Farm supplyFarm supplyAnimal feed and fuel companiesAnimal feed and fuel companies

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Relative Cost proportionsRelative Cost proportions

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Comparative IndicesComparative Indices

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OBA Response to tariff increases: Response to tariff increases: Scenario 1Scenario 1

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Small Scale Growers Small Scale Growers

Mpumalanga has 1350 Small Scale Growers producing roughly Mpumalanga has 1350 Small Scale Growers producing roughly 650 000 t off 10 000 ha. 650 000 t off 10 000 ha. These SSGThese SSG’’s are marginal producers and MpCGA and Tsb s are marginal producers and MpCGA and Tsb Sugar Ltd have initiated a project to address their Sugar Ltd have initiated a project to address their sustainability. sustainability.

Employed a full time consultant to project manage (Booker Tate)Employed a full time consultant to project manage (Booker Tate)Raised over R6 mil grants for seed cane schemes and social facilRaised over R6 mil grants for seed cane schemes and social facilitationitationRaised over R12 mil grants for rehabilitation of irrigation infrRaised over R12 mil grants for rehabilitation of irrigation infrastructure astructure Started our own bank (Akwandze Agricultural Finance Started our own bank (Akwandze Agricultural Finance –– R100m) to finance R100m) to finance this sector. this sector.

SSG are already failing to keep up with the tariff hikes. The SSG are already failing to keep up with the tariff hikes. The proposed tariff increases will result in the failure of this entproposed tariff increases will result in the failure of this entire ire initiative and the collapse of the sector. initiative and the collapse of the sector.

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Results of Tariff increaseResults of Tariff increase

Average electricity costs range between R1500 Average electricity costs range between R1500 ––R2000/ha. The proposed increases will raise costs R2000/ha. The proposed increases will raise costs to R4950/ha. Income projections cannot keep up to R4950/ha. Income projections cannot keep up with cost increases. with cost increases.

Growers can make changes to mitigate increasesGrowers can make changes to mitigate increasesIncrease volumes pumped during off peak times Increase volumes pumped during off peak times -- soil types soil types capital requirementscapital requirementsReduce irrigation Reduce irrigation –– crop stress and loss of revenue crop stress and loss of revenue Adapt irrigation infrastructure Adapt irrigation infrastructure -- bigger volume pumps and drip bigger volume pumps and drip irrigationirrigation

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Results of Tariff increase (cont)Results of Tariff increase (cont)

Cane Supply will be affected. Cane Supply will be affected. Without significant funds for capital improvements economic Without significant funds for capital improvements economic growth in the sector will be affected. growth in the sector will be affected. Small Scale Growers will be severely affected by the increase inSmall Scale Growers will be severely affected by the increase intariff.tariff.

Milling companies may re evaluate their investment Milling companies may re evaluate their investment in milling capacity as their ROI decreases. The in milling capacity as their ROI decreases. The closure of a mill would be disastrous in this rural closure of a mill would be disastrous in this rural area. area. The proposed increases impact on the sustainability The proposed increases impact on the sustainability of the industry of the industry

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ConclusionConclusion

35% Eskom tariff hikes over three years will: 35% Eskom tariff hikes over three years will: Reduce farmers returns to unsustainable levels Reduce farmers returns to unsustainable levels Ensure the collapse of the 1350 Small Scale Farmers in the Ensure the collapse of the 1350 Small Scale Farmers in the Nkomazi who farming 10 000ha.Nkomazi who farming 10 000ha.

Mill and supplementary services sustainability Mill and supplementary services sustainability With a reduction in cane supply one sugar mill will become With a reduction in cane supply one sugar mill will become marginal. marginal. Demand for supplementary services will declineDemand for supplementary services will decline

Job losses and a decline into poverty result as one Job losses and a decline into poverty result as one of the only opportunities to rise above poverty in of the only opportunities to rise above poverty in the Nkomazi region is withdrawn. the Nkomazi region is withdrawn.

I B E M O B A M P U M AL NGA CANEGRO National Energy ......A National Energy Regulator of South...

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