LABOUR-SWAZILAND: Merger of Sugar Firms will Result in Job Losses

By James Hall Reprint | | Print |

James Hall

MBABANE, Oct 23 2001 (IPS) - Vusi Simelane, a seasonal cane cutter at Mhlume Sugar Company, is unhappy about the proposed merger of Swaziland’s two largest sugar corporations, Mhlume and Simunye Sugar Estate.

“To hear everyone talk, you would think it is a wonderful idea, except for those of us who stand to lose our jobs,” he says.

But even in a country where unemployment stands at 45 percent by finance ministry estimate, it is hard to find an economist who has something bad to say about the proposed merger.

“The new company that will result will provide economics of scale that will boost the overall industry,” a Central Bank source said.

Cane cutter Simelane feels his fate rests with the Swaziland Agricultural and Plantations Union (SWAPU), which opposes the merger on the basis of what the union predicts will be a 30- percent job loss suffered when the two companies join their workforce. At the height of their operations, the companies employ more than 10,000 people.

However, politics are involved. The agriculture union represents the power base for the Swaziland Federation of Trade Unions (SFTU), which is the most powerful organised opposition to the royal rule of Swaziland’s monarchial government that will decide on merger approval by year’s end.

Opposition political parties are banned in Swaziland, and labour unions are the only entities free to hold membership meetings. But the police will not hesitated to ban or break up a worker’s federation meeting if they detect a political agenda.

The Mhlume workers’ compound’s soccer stadium is the venue for the federation’s annual May Day celebration, which is used as a platform to condemn royal rule. It is doubtful that the facility will be available to the workers’ federation once the Mhlume- Simunye merge goes through, as the finance ministry expects to happen.

The royal conglomerate Tibiyo TakaNgwane, whose interests in the combined sugar operation will be held in trust for the Swazi nation, is not going to allow its lucrative investment to be compromised by “political hooligans”, according to one palace source.

And sugar, known as “Swazi gold”, is a most lucrative investment that by all accounts is paying off well.

Swaziland’s sugar exports reached an all time high of 269,513 tonnes in 2000, according to revised figures from the latest quarterly report released by the Central Bank of Swaziland. The figure compares to the previous record, 217,338 tonnes shipped in 1999.

Higher exports were achieved despite a 1.2-percent decline in production cause by excessive rains at the beginning of the 2000/2001 cropping season, which delayed harvesting. Sugar production dropped to 527,582 tonnes from 534,183 tonnes produced in 1999/2000.

Central Bank governor Martin Dlamini explains how profits were not affected while production fell: “Higher sugar sales were attained this past year by selling excess product on the world market after trade treaty quotas were filled with the European Union, the United States and the Southern African Customs Union.”

In the case of the European Union, the price paid for Swazi sugar is sometimes higher than the world price, according to an industry source.

“With commodities like sugar, world price fluctuations can devastate a developing industry, and Swaziland as a developing country is given a cushion of support by the EU for the commodity that is the kingdom’s top export,” he says

The Swaziland Sugar Association has reported a 3.9-percent rise in industry earnings during the 2000/2001 season, to E664.7 million (73 million U.S. Dollars) from E639.6 million (70 million U.S. Dollars) the previous year.

Profit would have been higher had the Euro, with which Swazi sugar is purchased, had not declined against the dollar. Swaziland benefited by a drop in production announced by the sugar- producing countries Australia, Brazil and Thailand.

“Whenever major producers cut back on output in the face of declining prices, the lesser competition helps little Swaziland, whereas if we ceased production entirely, our contribution would not be sufficient to affect world sugar prices,” says the Central Bank source.

Local sales dropped by 6.7 percent, from 275,793 tonnes to 256,310 tonnes, due to the year’s production decline. Most local sugar is consumed by two industrial users, the canning industry and a soft drink concentrates factory.

Both Mhlume and Simunye sugar estates are being tight-lipped with figures about their impending merger, such as anticipated combined revenue. Their reticence may have to do with the sensitive matter of job loss.

But for worried workers like Simelane, a look at industry prospects should be encouraging. The Swaziland Sugar Association has announced a long-term goal of boosting production to 757,000 tonnes per annum by 2010. This will be far beyond the capacity of Mhlume/Simunye to achieve, and will be accomplished only by an expansion of sugar growing cooperatives like the Vuvulane Irrigation Scheme and small-scale concerns currently being launched by Swazi farmers.

Their efforts have been hampered by lack of irrigation water, but this will change late this year with the availability of water from the Maguga Dam, Swaziland’s largest public works project nearing completion in the northern Hhohho Region.

Production capacity will be expanded, with more jobs resulting, at an ethanol plant at Simunye to take advantage of higher alcohol prices. Swazi ethanol is primarily exported to the United States.

“Future prospects for the Swazi sugar industry hinge largely on the ability to maintain our preferential markets where prices are favourable,” says the Central Bank source.

There are not now any human rights or labour disputes that might endanger these treaties, and for Swaziland’s chief export, these trade treaties with the developed world are truly “Sugar Daddies”.