The Continental Free Trade Area (CFTA) in Africa was conceptualized during the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union (AU) in January 2012, which adopted the decision to establish a free trade area by 2017. The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. It will also expand intra-African trade through better harmonization and coordination of trade liberalization and facilitation across the Regional Economic Communities (RECs) and across Africa in general. The AfCFTA is also expected to enhance competitiveness at the industry and enterprise level through exploitation of opportunities for large scale production, continental market access and better reallocation of resources.
But how will Africa’s sugar industry fare under the AfCFTA regime? The amount of sugar trade currently going on between African countries is relatively huge and several countries are planning new projects. The continent runs an annual 10m tonnes sugar deficit and imports more than 75 per cent of its sugar from Brazil. It imports smaller amounts from the EU, UAE, Thailand and Guatemala. South Africa and Egypt dominate production on the continent with a combined 4m tonnes, but new production planned by Ethiopia, Nigeria and Sudan is set to further boost production levels in Africa. Africa consumes about 19m tons with Intra-African sugar trade worth about 32 per cent of all African sugar exports and is set to rise further primarily due to increasing local consumption and the impact of the EU sugar reform, which closed a preferred market outlet.
Sugar, a commodity that has received increased attention in recent years, provides an avenue for Nigeria to improve its diversification strategy. Nigeria’s sugar production barely accounts for 2 per cent of its demand. This has resulted in an annual sugar import bill of over $500 million, the largest import bill for the commodity in sub-Saharan Africa.
Aware of the challenges as well as the unique opportunities offered by the sugar industry, the Nigerian government in 2012 approved a national sugar road map called the Nigeria Sugar Master Plan (NSMP). According to the National Sugar Development Council (NSDC), the NSMP is a strategic road map designed to make the Nigerian sugar industry transform into a world class multi-product sugarcane industry. The NSMP provides a framework for setting goals, defining key actions and generating and allocating resources to fund programmes in the industry over a 10-year period.
With Nigeria currently striving to improve its sugar production levels using the Backward Integration Plan (BIP) as outlined in the NSMP, the only sugar import allowed is raw sugar for refining. This is primarily designed to protect the market for the refiners to enable them plough back profits to their BIPs, a state of affairs that will be threatened by AfCFTA, which explains why sugar refiners are among the motley of manufacturers who oppose its ratification. This position, though not without some justification, is however shortsighted, in the long run. While there are obvious risks, there are also huge opportunities, if the country can get its act together. For Africa as a whole, lowering the trade barriers between African countries to allow freer sugar trade is just a first step; putting up protective measures against sugar imports from outside the continent will be key to ensuring a vibrant continental sugar industry, but it is also necessary to ensure domestic production capacity matures to meet local demand. Investments in infrastructure and strengthening of legal instruments nationally to enhance ease of doing business while protecting both domestic and foreign investors are some of the key enablers that African governments that signed up to the agreement must deal with, if the laudable aims of the free trade paradigm would stand any chance of being achieved.
Africa exported about 960,000mt of raw sugar in 2017, about a third of all exports were within Africa and the rest was exported out of Africa. This means there is an opportunity for raw sugar producers to export part of their production to Nigeria within the context of a few clear conditions, which may include; Competitive pricing in the context of world market prices; No abuse of Rules of Origin and Mechanism for a raw for whites swap trade between Nigeria and African producers of raw sugar.
About 50% of local raw sugar exported within Africa (140,000mt), could be swapped for white sugar from Nigerian refiners. This amount represents about 10% of the total raw sugar Nigeria currently imports from Brazil, which could be sourced from Madagascar, Malawi, South Africa and Uganda in a swap trade agreement.
However, these must be counter balanced with Nigeria’s objective of achieving self-sufficiency within the shortest possible time by protecting the nascent sugar industry in the country in line with Part V, Article 24 of the AfCFTA agreement that seeks to protect infant industries.
A new idea being promoted by African members of the International Sugar Organization, ISO, leveraging on the ratification of the AfCFTA is also noteworthy. They are advocating the establishment of an African Sugar Development Task Force (ASDTF), which seeks to adopt the template of other African initiatives like the Comprehensive Africa Agriculture Development Program (CAADP) launched in 2003, and the Program for Infrastructure Development in Africa (PIDA), launched in 2012 by NEPAD, to evolve continent-wide strategies that identify opportunities and challenges facing African sugar production and trade. We believe such strategies can only reinforce and accelerate the visions and plans of African nations with sugar self-sufficiency road maps like Nigeria, Sudan and Ethiopia.
The ratification of the AfCFTA may just be what the Nigerian sugar producers need to re-commit themselves and resolve to transform to global or at least key intra-African market players. Nigeria can only benefit from the stated objectives of the initiative, which include, to develop a continental sugar plan (CSP), untapping Africa’s natural resources to achieve continent-wide self-sufficiency in sugar, maximizing the utilization of the industry’s by-products and contributing to the sustainability of Africa’s economy and well-being of African people through a sugar-based economy.
Source: African News Agency