Page last updated at 00:01 GMT, Tuesday, 16 November 2004

Mozambique's sugar faces a new threat

Analysis
Orla Ryan
BBC News business reporter in Mozambique

Tony Currie
Tony Currie at the Maragra plantation

Mozambique's sugar industry is a miracle of reconstruction.

Nowhere is this clearer than at Maragra sugar plantation and mill, situated some 100km (62 miles) outside of Maputo.

The end of October signals the end of the sugar harvest and the well-ordered fields of green are quiet.

It is hard to imagine now, but when general manager Tony Currie arrived in 1998, he was greeted by chaos.

"Everything was overgrown, drains were blocked, electrical lines were down," he says.

The country had just emerged from years of civil war, between the government and South African-backed rebels.

Washed away

Illovo, the owners of Maragra and one of the world's largest sugar companies, started the slow work of rehabilitation, planting sugar cane, renovating the mill, training workers and rebuilding roads. Altogether investment totalled $30m (£16m).

One year after the company had planted its first cane, it started to rain.

With little advance warning of what was to come, Mozambique witnessed some of the worst floods in its history.

There was water as far as the eye could see, and it took Illovo four months and another $15m to clear up the aftermath of three days of rain.

Maragra before it was rehabilitated
When Illovo arrived, Maragra was a shell of its former self

When they rebuilt Maragra the second time, Mr Currie made sure they put in as much protection against future floods as they could. A marker remains, signalling how high the flood waters went.

Producers now want a different kind of protection, not against war or floods, but low world prices and proposed European market reforms.

Without this, the industry's 25,000 workers could lose their jobs, a disaster of a different kind for one of the world's poorest countries.

Sheltered from markets

Investors in Mozambican sugar already benefit from substantial market protection.

In the post-war years, the government wanted to give the sugar industry, a potentially big employer in poor rural areas, all the help it could.

South African and Mauritian investors could see potential in the Mozambican market - which was then importing all its sugar - but were wary of putting money in a battered industry and a country recovering from war. What they wanted was a tax on sugar imports to encourage people to buy local sugar.

To organisations like the International Monetary Fund (IMF), this was anathema.

What are we going to do, hold out our hands to donors for ever?
Filipe Raposo, sugar marketing company

If an industry cannot survive without protection, then is it really a viable business?

Without the protection, no one would have invested, says Filipe Raposo, the director of marketing for DNA, the company which sells Mozambican sugar abroad.

Flood waters
Illovo invested heavily but this money was washed away by the 2000 floods

"The investors incurred a huge amount of debt in order to build these projects," he points out.

"Africa is late in the race for globalisation, what are we going to do, hold out our hands to donors for ever? I don't think protectionism is a long term plan, (but) you do need some level of protection," Mr Raposo says.

The IMF did recognise there was a need to rekindle industry. Mozambique won its support for protection and implemented a variable import tax on sugar.

Now, sugar is one of the country's biggest employers. About 25,000 people earn their living from it, working either in the mills or the fields at one of the country's four sugar plantations, funded by some $350m worth of investment.

To Western ears, their wage sounds a pittance.

A mere $37 a month if you work in the field and $52 if you work in the factory. About half of what is needed to live for a month, sugar union Sintia says.

The wage is, however, above Mozambique's minimum wage and does compare favourably with Mozambique's 2003 per capita income of $210.

European reform

The country's sugar producers have come a long way in a relatively short time but for them to fully profit from this investment and for rural Mozambique to thrive, they have a lot further to go.

Mr Currie knows they need to become more efficient, a lot more efficient.

They sell about half of their sugar domestically, with the rest sold into the world market and Europe.

It costs Mozambique $330 to produce a tonne of sugar and it sells it for about half that price on the world market.

Flood wreckage
Three days of rain but it took four months and millions of dollars to clear up

But producers do get a better price on the European market under the ACP Sugar Protocol, where they can sell up to 10,000 tonnes at a guaranteed price of 632 euros ($817; £441) per tonne.

The European Commission is reforming its system of sugar subsidies and quotas and from next year, the price will start to fall and by 2008, the price will be 422 euro per tonne.

Anti-poverty campaigners and sugar producers do want Europe's sugar system to be reformed - as ultimately this should benefit producers from developing countries. Christian Aid says they want more time for developing countries, where sugar employs thousands of people, people who have few other alternatives.

Mr Currie accepts prices will fall, but wants the fall to be staggered to give him more time to be able to compete.

On the plantation in rural Mozambique, it is clear how globalised the business world has become.

He talks of how Maragra is less efficient than other sugar producers in the region.

He fears cheap Brazilian sugar, decisions from Brussels and China's demand for steel, which is pushing freight rates higher.

In the fields outside his office, there is little evidence of the floods. The biggest threat to its future lies not in the skies above, but in decisions made thousands of miles away in offices in Brussels.



SEE ALSO
WTO sugar ruling sparks EU appeal
15 Oct 04 |  Business
Polish sugar farmers fear subsidy cuts
29 Sep 04 |  Business

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