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Tuesday, 21 October 2014

Africa’s Sugar Ambitions Turn Sour

For much of the past decade, African and foreign sugar companies have pumped billions of dollars into projects in an attempt to tap the sweet tooth of the continent’s new middle class. Today, mills in many countries are grappling with unsustainable stockpiles. The glut has forced companies to reduce output, put on hold new sugar projects and shutter mills. The culprit: cheap imports. African nations import about 5 million metric tons of sugar every year, from countries such as Brazil, China and India. The imports—generally heavily subsidized—are sold at prices lower than the cost of producing sugar locally, prompting African countries to shun sugar from their neighbors. The International Sugar Organization recently forecast that the world would be oversupplied with sugar for a fifth year in a row at the end of the 2014-15 season that began Oct. 1. 

Now it looks like Africa’s sugar woes may just be beginning. Part of the original motivation for expansion was to get access to the European Union market. But by 2017, the EU, which buys about 35% of its sugar from Africa, will eliminate preferential trade policies that have previously paved the way for imports from the region, further eroding a vital market for African mills. The EU is seeking to encourage freer sugar markets. Some analysts argue that continent itself offers the prospect of relief from financial pain.