ECONOMY-MAURITIUS: Officials Try to Sweeten a Sugar Price Reduction

By IPS Correspondents Reprint | | Print |

Nasseem Ackbarally

PORT-LOUIS, Dec 9 2004 (IPS) - Mauritius is bracing itself for upheaval in the national sugar industry, this as a 37 percent drop in the price of sugar exports looms. The price decrease, expected at the beginning of next year, will result from reduced trade preferences under the Sugar Protocol that was signed with the European Union (EU) in 1974.

Thanks to this protocol, Mauritian farmers have benefited from sugar prices that were three times higher than those offered on the world market. Almost 500,000 tonnes of sugar are exported to the EU annually, accounting for 17 percent of Mauritian export revenues.

Now, the price is due to fall from 672 dollars to 418 dollars per tonne. For the 30,000 small sugar producers on the island, the reduction will mark the end of an era.

“Life will no longer be the same,” says Jugdut Rampersad, who farms a 6.5 hectare plot on the eastern side of the island. “My sugar income not only helped support my family but also gave me enough to send my children to college abroad.”

As with Rampersad’s children, so with many others. Profits from sugar have been used to train the lawyers, doctors and engineers who played a significant role in Mauritius’ growth.

The sugar industry has also spurred rural development to the extent that outlying areas no longer lag behind towns and cities as far as living standards are concerned. Agriculture and Food Technology Minister Nando Bodha said recently, “We don’t just export sugar; it is the bedrock upon which our civilization is built.”

“The industry is going to die a slow death in Mauritius if the (trade) proposition is not modified,” observes Baldeo Ramdin, a farmer who has already seen sugar producers abandon their fields or sell them to residential and industrial developers.

But, Eric Mangar of the Food Self-sufficiency Movement, a non-governmental organisation, believes Mauritians will also have themselves to blame if financial hardship sets in next year.

“They have not done much in the past three years, never mind the past decade, to improve the competitiveness of the sugar industry to protect it from the consequences of a loss of sugar revenue – and a loss of jobs in the thousands, especially in rural areas,” he says.

It was only in 2001 that the Mauritian government launched an initiative, at a cost of about 110 million dollars, to save the sector. The main objective of this programme was to lower production costs by reducing the number of employees and centralizing the operations of the island’s sugar processing factories.

The initiative succeeded in reducing the plants from 17 in 1997 to 11 in 2002. Another factory is supposed to shut down towards the end of this year, and up to three more in 2005.

Only seven or eight big factories will remain on the island by 2008. These will have the capacity to crush bigger quantities of sugar cane, and produce electricity from bagasse (a by-product of the cane). The factories will also produce charcoal.

The past four years have also seen about 10,000 of the 20,000 workers in the sugar industry leave under a voluntary retirement scheme. According to the Mauritius Sugar Authority, a government body that supervises development projects in the sugar industry, this has allowed the sector to reduce its salary bill by 25 percent.

Nonetheless, the industry remains about 200 million dollars in debt, says the island’s chamber of commerce. “The Mauritian sugar industry therefore has no choice. It must…reduce its production costs as soon as possible, before the end of the year,” notes Bodha.

The minister visited Europe in October to lobby for a more gradual phasing out of trade preferences.

“We’re not against (trade) reforms,” he says, but adds “These have to be introduced over time so that price decreases are minimized and compensated for. This is the opinion of ACP countries.” The ACP (African, Caribbean and Pacific) states are a group of countries that have been accorded preferential trade status with the EU to encourage their development.

Bodha hopes that his efforts will result in a price decline for sugar which is lower than the 37 percent currently anticipated, and that this decrease will not take effect until 2006 or later. The ACP nations might also benefit from a compensation scheme for lost revenues, as a proposal to this effect was made by France recently to the European Commission.

In the meantime, Mauritius is exploring how by-products of the sugar industry such as electricity and ethanol production can be used to ever-greater advantage. Bodha has also floated the idea of producing plastic from sugar cane fibre.