Service Contract No 2007 / 147-446 Strategic ... - Swaziland

contribute to poverty alleviation. Direct beneficiaries are, and will be, local farmingcommunities. For example, according to SWADE, based on a Socio-Economic Surveyconducted for LUSIP in 2005, by 2015 household food security for direct irrigationbeneficiaries is set to improve from 41 to 100%, and the income of households will increaseby at least 300%, from an estimated monthly average of E980.00. In addition, an even largerpopulation are expected to derive indirect benefits, through expansion of wage employmentand small enterprise opportunities arising from an increase in cash turnover in the localeconomy.In reality, however, there is cause for concern. Coupled with the price reduction by the EUand volatility with the € and South Africa Rand, sugar cane growers have generallyexperienced decreases in profitability of cane production over the last few years. Althoughthe price paid to sugar cane growers by the Swaziland Sugar Association (SSA) rose fromnear E1,200 per tonne sucrose (TS) in 2004 to near E1,800 TS in 2008 (RDMU, 2009j),profitability margins have generally decreased. The margin decline can be attributed toincreasing input prices, such as for fertiliser, and increasing operational expenditure, such astransport and electricity. Costs are surpassing revenue, and growers are finding it difficult toadequately service their loans. Spiralling into debt, farmers are struggling to remain in thesugar cane industry. Combined with these financial issues are the broader and indiscriminateenvironmental impacts. Stakeholders have already identified water availability and climatechange as being very likely to adversely affect cane production (See Key Aspect 1). Theseenvironmental challenges will further compound small cane grower problems particularly ifirrigation requirements are unable to be met consistently. Also drought will adversely affectsucrose yields thus decreasing small cane growers’ revenue.Many studies have been undertaken to ascertain problems facing cane growers. Forexample, in an analysis of the performance of individual smallholder cane growers carriedout by the RDMU in 2009, a decline in yields was attributed to factors “that are within thegrowers’ control, such as poor crop husbandry and pump failures …. to those the grower hasno control over, like escalation of input prices and lack of irrigation water due to drought” 16 .Performance of the small cane growers is affected in varying degrees by a range ofvariables17 . In a study undertaken by the RDMU amongst small cane growers, it was foundthat “the economic situation is most critical for growers that have planted a high percentageof their area to sugar cane, those with low levels of productivity and a high capitalinvestment” (RDMU, 2009j) 18 . However, there are very much few alternative crops that canprovide much higher and sustained income compared to sugar.Discussions with stakeholders have revealed a host of factors that people believe maycontribute (or in some instances have already contributed) to the failure of small- andmedium-cane growers. These include:16 RDMU (2009e) - Baseline Study Report (Individual Growers), which focused on gaining an insight on the croppingpatterns, yields of cane and other crops, irrigation equipment, loan obligations, labour availability and service supportextended to FAs, with the aim of identifying areas where interventions are needed, and measure the impact of theproposed EU and NAS interventions.17 These include, for example: the size of the cane acreage through limited economies of scale; the number of shareholdersrelative to the farm size; crop husbandry practices; the level of yields; the degree of specialisation or dependence on caneproduction; capital investment and loan repayments/indebtedness; business model (as an individual or a member of aFA); management and technical capacity; labour availability; and distance from water resources and mills.18 The study reflects that over the previous three years there had been a significant decline in yields owing to a number offactors. These range from those that are within the growers’ control e.g. poor crop husbandry and pump failures right up tothose the grower has no control over like escalation of input prices and lack of irrigation water due to drought. Thissituation affected the ability of the growers to adequately service their loans and also declare a dividend to their members.Despite the above conditions, growers are still determined to remain in sugar cane farming as it still seems attractivecompared with other cash crops and also given their massive investment.RDMU (Strategic Environmental Assessment of the National Adaptation Strategy) - Page 53