4 March 2008
Maputo — The Mozambican Agriculture Ministry signed in Maputo on Monday an agreement with the European Commission, under which this institution is to finance the second phase of "accompanying measures" to cope with the reform of the European Union's sugar regime.
The document, signed by Agriculture Minister Soares Nhaca, and the chief of the EC delegation in Mozambique, Glauco Calzuola, grants six million euros (about nine million US dollars) for a three year period, starting in 2008.
Nhaca said that this money will be used to continue and expand activities identified by the Agriculture Promotion Centre (CEPAGRI), during the first phase of the "accompanying measures", in 2006, to bring the sugar sector into line with the new realities of the world market.
The idea of the plan is to improve the results in the Mozambican sugar industry, with an increased involvement of small scale cane producers in supplying raw material to the four operational sugar mills. Other objectives include increasing the productivity of the labour force of the sugar companies, and ensuring that Mozambican staff occupy skilled positions in the factories, many of which are still held by foreigners.
"To maximise the impact of the use of these funds, partners in this programme, including farmers, workers, the sugar companies, and the government, are planning to use this money as seed capital to attract additional funds to expand the areas cultivated by small farmers, not only for the production of sugar cane, but also food crops", said Nhaca.
"With this convention signed, we expect the European Union to disburse the money in time to ensure that we can fully carry out the planned activities", he added.
The "accompanying measures" are the sweet icing on a bitter cake. Despite promises that the EU sugar protocol would last "indefinitely", sugar producers in the ACP (African, Caribbean and Pacific) group of countries, find that their European partners are unilaterally abolishing the protocol, supposedly because it has become illegal under World Trade Organisation (WTO) rules.
Under the EU reforms, the price of sugar is likely to collapse - good news for European consumers no doubt, but not for ACP sugar producers. Calzuola put a positive gloss on this, claiming that the reform seeks "to strengthen the competitiveness and market orientation of this sector, guaranteeing it a viable future in the long term".
Over a four period, the EU's guaranteed price for refined sugar would fall by 36 per cent, said Calzuola - despite this, he was confident that the European market would remain more attractive than the international free market, particularly for ACP sugar producers such as Mozambique "who will continue to enjoy preferential access to the European Union market".
He stressed that the Commission has pledged that, as from 2009, countries such as Mozambique, which participate in the EBA (Everything but Arms) agreement, will be able to export their sugar to Europe without any quota restrictions, and free of all duties. In other words the price has fallen sharply, but the Mozambican companies can export to Europe as much sugar as they can find buyers for.
The "accompanying measures", Calzuola added, were designed by the European Commission to help sugar producers adapt "to the new market realities, with the main objective of increasing their competitiveness internationally, while at the same time increasing their contribution to the economic and social development of the communities that live in sugar producing areas".
CEPAGRI had drawn up "a strategic adaptation plan" for Mozambican sugar. For the preliminary phase of this plan, the European Commission had disbursed 562,000 euros. Now came a further six million euros, which was on top of an annual sum of 15 million euros allocated by the Commission to the Ministry of Agriculture.
Calzuola promised further funding for the third phase of the adaptation plan, in 2010-2013, but the sum involved had not yet been determined, "and will depend on the performance of the plan in the first two phases".
Complementary measures already under way or at an advanced stage of planning, he added, include "a regional research programme to produce genetic material and cane field management techniques better adapted to Mozambique's agro-climatic conditions".
Calzuola claimed that the European Commission's programme is "one of the most concrete and tangible forms of supporting the efforts undertaken by the Ministry of Agriculture to promote food security and economic growth, through a modern marked-oriented and competitive agriculture".
Mozambique's hope is that its four sugar companies will be able to offset the decline (and eventual abolition) of the guaranteed price by a massive expansion in exports to the European market. Currently the companies produces 240,000 tonnes of sugar a year. About 150,000 tonnes supplies the domestic market, and the rest is exported, mostly to Europe.
Within the next four, the projection is that sugar production could reach 500,000 tonnes, most of which would have to be exported. But there is no guarantee that Europeans will buy hundreds of thousands of tonnes of Mozambican sugar, since every other ACP sugar producer will also try to take advantage of the quota and duty free conditions, not to mention the competition from Europe's own beet sugar producers.
One area of expansion is the use of sugar cane as a biofuel. Calzuola noted that the EU envisages a substantial increase in the use of biofuel, and would thus be "an important market for countries such as Mozambique who can produce ethanol from sugar cane".
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