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Punished during the Mozambican civil war (1977-1992), with almost all the destroyed factories and abandoned cane fields, the sugar industry has recently repositioned itself in terms of gross domestic product (GDP) contribution of the agricultural sector.
After the major setback in the so-called “16-year war”, the turnover of the sugar industry in Mozambique reached record levels, thanks to government assistance and a series of foreign direct investments that catapulted the sector.
Between 2011 and 2015, the turnover of this industry corresponded to an average of nine per cent of agriculture’s GDP.
Despite this effort, the support of the government is increasingly essential for the national sugar industry, given the distorted world market, which opens the door to unfair competition in the sector.
In view of the distortion on the international sugar market, the KPMG report issued in 2016 stated that without maintaining the current levels of additional intervention of the Executive, “domestic sugar mills would be unable to compete with each other and in international markets, of the Marromeu and Mafambisse sugar mills”.
KPMG noted that this scenario would ultimately lead to a decrease in production levels, resulting in socio-economic losses.
Most sugar-producing countries have incentive-state mechanisms and subsidies on production and the expulsion of surpluses (via export subsidy).
“Unprotected markets against the effects of the elimination of surpluses are vulnerable to disruptions of domestic sugar industries,” the report says of the positive contribution of the sugar industry in Mozambique, which the government should continue to stimulate for its sustainability and competitiveness on the international market as it prepares for future market normalization.
A withdrawal of compensatory measures may affect the positive results already achieved by players in the sector, such as a decrease in production levels.
At least two sugar mills (Tongaat Hulett-Açucareira de Moçambique and Tereos-Companhia do Sena) will not maintain their operations, as they are more susceptible to considerable losses.
In terms of socio-economic impacts, if the government opts for the withdrawal of incentives, it foresees job losses (almost 17,000 people fell into unemployment), less income and investments in social areas may decrease by 65 per cent.
SUGAR IMPORTATION REGIME IN SADC
While some current opinion supports the elimination of incentive mechanisms and subsidies to the Mozambican sugar industry, Southern African Development Community (SADC) countries have been strengthening measures to protect their industry.
South Africa maintains a price-based regime with tariffs based on the difference between the world price and a reference price. The reign of eSwatini (Swaziland), on the other hand, maintains a regime based on the reference price in dollars, with tariffs based on the difference between the world price and a reference price.
Tanzania maintains import controls by restricting imports to deficit levels and applies a duty of 100 per cent or $460 per tonne.
Zimbabwe applies a rate of 10 per cent and over $100 per metric tonne. Imports are furthermore restricted by means of an import licensing agreement.
Malawi restricts imports through import control measures and also charges a 25 per cent import duty on world market imports. Angola, a country with a significant sugar deficit of around 80 per cent, still limits imports through import control measures and also charges an import tax of 20 per cent, plus a two per cent import tax on sugar.Source: O País
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