Mozambique going sweet for sugar

By Jose Tembe
BBC News, Maputo

Mozambique's government is planning to almost double its annual sugar production following soaring sugar prices and an abundance of available arable land.

It hopes favourable markets will increase export earnings and generate jobs.

Production is 300,000 tonnes a year but the plan is to increase this to 500,000 by 2012.

The country now has four of its five sugar mills producing at full capacity, even though they are undergoing expansion.

It's still too early to determine when we'll have the first drops of ethanol Agronomist Liria Nhaquila Ministry of Agriculture

This is in stark contrast to the time when they lay dormant during the 16 years of the destructive civil war that ended in 1992.

Almost 80 kilometres (50 miles) north of the capital, Maputo, one of the country's sugar mills whirrs; the blaring sound shows it is working full blast.

Persevered

The Maragra sugar company produces approximately 80,000 tonnes of sugar a year and employs some 4,000 people.

The company's general manager, Michael Buchanan explains that after its post-war revival, Maragra had a major setback brought about by the floods in 2000 - the worst in Mozambique's living memory.

Maragra's Michael Buchanan says the sugar industry is geared for growth

"Unfortunately the company had to spend a lot of money to rehabilitate the estate after the flood but we have persevered and we have seen the business coming through and starting to generate returns for its shareholders, so much so now that we are embarking upon an expansion project."

Mr Buchanan says that the Mozambican sugar industry, "is very much geared towards growth, largely because of the new preferential opportunity in the European market" and that "within, probably three or four years," it is anticipated that production will reach about 500,000 tonnes.

All-time high

And the extra 200,000 tonnes surplus he says, "will be sold on the export market."

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Mr Buchanan recognises that the world market offers better prices, at the moment, but says that the new European dispensation of unlimited duty-free access to the lucrative EU market under the Everything But Arms (EBA) initiative has brought a lot of benefits to the Mozambican sugar industry.

"What it means," he says, "is that the Mozambican sugar industry can now develop confident expansion plans, knowing that the market into which it would sell all that additional sugar is reliable, is steady and is not a big risk."

But risk cannot be underestimated.

Although, "at present, the world market is at all-time highs," Mr Buchanan says, he remembers times when the market price was well below the cost of production.

First drops?

Mozambique exports about 40% of its total annual production of over 300,000 tonnes of sugar, mainly to the European and US markets.

Mozambique exports sugar to Europe and the US

The country's four operational sugar mills currently employ some 35,000 workers, thanks to South African and Mauritian investments in the industry.

Agronomist Liria Nhaquila, who is in charge of the sugar sector in the Mozambican agriculture ministry, says after attracting investments in sugar production, the government is now encouraging investors to plant and to produce bio-ethanol:

"Sugar cane was one of the crops identified as potential for the production of ethanol. It's still too early to determine when we'll have the first drops of ethanol in the country. However, we already have investments on the ground, in this phase producing cane seeds in southern Gaza and central Manica provinces."

And if this is done in parallel with the building of infrastructures, including factories to process the ethanol, then Ms Nhaquila hopes the country will be producing ethanol come 2012.

Analysts reckon that there are huge opportunities in the area of biofuels in Mozambique.

However, they say there's still a degree of uncertainty regarding the actual duty and market structure.

Investors want guarantees of market and returns for the investment.