Analysis of determinants of South Africa's sugar production and export performance within the tripartite free trade area : a case of raw and refined sugar

Abstract

This study was conducted with the aim of investigating the trends and determinants of South Africa’s sugar production and exports within the TFTA between 1996 and 2014. The specific objectives of the study were (1) to identify trends in South Africa’s sugar production and exports within the TFTA between 1996 and 2014; (2) to determine the drift rate in South Africa’s sugar exports within the TFTA between 1996 and 2014; (3) to investigate the correlation between South Africa’s sugar production and exports between 1996 and 2014; and (4) to determine the factors that affect production and exports in South Africa’s sugar industry in order to identify the industry’s major challenges and opportunities for sustained performance. The secondary data, obtained from the Economic Analysis and Agricultural Statistics Directorate of the Department of Agriculture, Forestry and Fisheries (DAFF), were used to meet the first three objectives of the study. The primary data, obtained by means of a survey questionnaire and interviews with key stakeholders, were used to meet the fourth objective of the study. A 7-point Likert scale was applied to indicate the degree to which each of the determining factors are perceived to affect the performance and resulting competitiveness of the sugar industry. The Johansen test and Porter’s Diamond Model were the analytical techniques used in the study. The results of the analysis of the secondary data revealed continued fluctuations in sugar production in South Africa between 1996 and 2014. On the basis of this, the researcher rejected the hypothesis that there is no trend in South Africa’s sugar production. It was therefore concluded that seasonal variations accounted for these fluctuations in the sugar industry. As determined using the Johansen test, drift rate variations came to 51%, indicating that there is potential for growth in South Africa’s sugar exports. This was confirmed by the results of the bivariate correlation between production and exports which clearly indicated a positive relationship between the two and prompted the researcher to accept the hypothesis that there is a positive relationship between the production and export of sugar. In determining the factors that influence South Africa’s sugar production and exports, a number of obstacles to competitiveness success were identified. With regard to sugar production, applying Porter’s Diamond model revealed that the major constraints experienced by respondents in the study area were the availability of skilled labour; cost of doing business; level of infrastructure development; cost of infrastructure; water availability; climatic conditions; soil quality; rainfall patterns; availability of financial services; access to credit; crime; and HIV/AIDS. In terms of exports, tariffs were found to be the major constraint along with certain of the abovementioned factors. While the majority of respondents view macroeconomic policy and trade policy as export constraints, South Africa’s labour, B-BBEE and competition policies are seen as neither constraining nor supportive. Product design; packaging; labelling and pricing; as well as the manager’s willingness to export; level of education and training; length of time in the business; experience; and language had a positive effect on competitive success.