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The Sugar Worker, November 2002. News from the Sugar Sector.

Posted to the IUF website 01-Dec-2002

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume IV, Number 11
November 2002

Contents





Tanzania: TPAWU Signs CBA at Kilombero

After two and a half years of pressing Illovo Sugar to negotiate, the Tanzania Plantation and Agricultural Workers Union (TPAWU) succeeded in reaching a new Collective Bargaining Agreement in Kilombero in mid November, retroactive to July 2002 and in effect for 24 months.

The CBA recognizes TPAWU as the labour organisation that represents workers at Kilombero's two plantations and mills (Ruembe and Msolwa). There are about 850 permanent workers and close to 2000 seasonal workers in the company. The CBA stipulates that wage negotiations will start in the second week of February and new wages will be in place by the first day of April of each year. Wage negotiations will cover all workers within the Kilombero bargaining unit, which comprises workers in grades A1 to C2 according to the Paterson system of job classification. Among the criteria used in negotiating wages are production costs, trends in sugar prices and cost of living. Parties are obliged to submit information and statistics relevant to the wage negotiations.

Membership in the union is on voluntary basis and member dues will be collected through payroll. In case that TPAWU organises at least 50 percent of the labour force, the employer would collect fees from non-members to cover services provided by the union.

The workweek is of 45 hours on a seven-day cycle, and overtime paid according to labour legislation.

After their sixth month of pregnancy, female workers are to be assigned to lighter tasks and specifically night shifts will be avoided, will enjoy paid leave for medical consultation and granted two one-hour breaks each day to tend to their children until they reach the age of one-and-half years.

Agreements in the areas of Health and Safety cover training and education programs, record keeping of accidents and near misses, workers compensation, and programs on HIV/AIDS. The company will provide training and all relevant documentation on the use of chemical products and pesticides, as well as adequate protection equipment to workers. The CBA is to be registered with the Industrial Court.

In related news, the Tanganyika Planting Company Ltd. (TPC) recorded a USD 1.2 million-profit in the 2001/02 harvest, on 50,000 tonnes of sugar produced. TPC management sources said that the company had problems in cane loading and transportation that prevented the mill from processing another 75,000 tonnes of cane. The company plans to spend about USD 6.3 million in capital investment to rehabilitate the mill during the coming harvest, which is expected to reach 55,000 tonnes of sugar. TPC will stabilise production at about 72,000 tonnes of sugar starting in 2005.

Vietnam: Production Increasing Despite Problems

Vietnam expects a production of 1.1 million tonnes of sugar in the 2002-03 harvest, a 13 percent increase over the previous crop, said the Ministry of Agriculture and Rural Development (MARD) in early November. Exports are estimated at between 150,000 and 200,000 tonnes.

Despite the improvement in production, the industry continues facing basic problems; among them, inadequate cane supplies and smuggling of sugar. A spokesperson for the Vietnam Sugar Association (VSA) said the industry lost an estimated USD 23.8 million in 2001-02 because of a prices crisis and smuggling of sugar. According to the Association, when the mills were established there was not a proper consideration of the availability of growing areas and the position and perspective of would-be cane farmers. The Association added that even when some cane-growing projects had capital available, they were not "seriously" implemented because the lack of technology and marketing support.

The smuggling of sugar, mostly from Thailand and China, has increased recently, in part because competition for scarce cane is increasing cane (and sugar) prices. The smuggled sugar evades a 40 percent import and 10 percent value-added taxes, and undersells domestic sugar by between 10 to 15 percent. Domestic prices are about USD 400 per tonne (US 18 cents per pound).

In May 2002, the MARD said that 25 out of the 38 state-owned sugar companies continue operating at a lost and have accumulated losses for VND 2.1 trillion (USD 141.5 million). MARD officials said that between five and ten of the 25 companies will have to merge because of their economic problems; their other option is closure. Only three of the state-owned companies (Lam Son, La Nga and Bien Hoa), have participation of private sector groups (they are "equitised"). There are 44 mills in the country, 38 are state-owned and 6 have strong participation of foreign companies.

According to the Ministry of Planning and Investment ten sugar companies have foreign capital but only six are in operation. The six in operation, according to MARD, had accumulated losses for USD 60 million by the end of 2001. The foreign companies participating in the Vietnamese sugar industry are:



The French Groupe Bourbon offered to sell a portion of its Tay Ninh stake to employees and farmers within the "equitisation" model that the Vietnamese government is encouraging, a model that is expected would strengthen the long-term cooperation between the different sugar groups helping to stabilise the industry. Groupe Bourbon invested USD 70 million in Tay Ninh and also provided farmers with USD 4.7 million to grow 15,000 hectares of cane, set up irrigation systems and build road infrastructure. In the 2001-02 crop, its fourth campaign, the company plans were to process some 800,000 tonnes of cane and produce 60,000 tonnes of sugar. In related news, Dow Jones reported that Bourbon offered to sell 51 percent stake in the Gialai sugar company to its partner, Ayon Ba Sugar Co., because the company was "losing money." Bourbon invested some USD 16.5 million in the Gialai, established in 1997.

Serbia: Privatisation of Sugar Industry

On 28 June the Serb government put up for sale a 70 percent stake in each of the sugar factories located in Crvenka, Kovacica, Zabalj, Bac and Pecinci, which have a combined annual production of 200,000 tonnes of sugar. There were only two bidders and the government, reported Reuters, started direct talks with the Greek Hellenic Sugar on the sale of Zabalj and Crvenka; while the other three were eventually sold to MK Commerce from Novi Sad.

Hellenic Sugar acquired the Zabalj factory but then run into difficulties in the Cvrenka deal, when the workers objected the sale because they had not enough information on the severance payments. Hellenic had put an offer for 11.9 million euros: to pay 2 million, invest 7.8 million and another 2.1 million euros in a social program (USD 1.00 = EUR 1.01). Hellenic had also offered to keep all workers in the next five years, following rules on privatisation, and a 5 percent wage increase beginning in 2003. The privatisation minister said that Hellenic Sugar, not its subsidiary Balkan Sugar, should sign the contract, which prevents it from reselling a majority stake in the company in the next five years.

If Hellenic withdraws its offer, the process would be annulled. In that case, the privatisation agency said other options might include a new sale within the year or an auction with no obligations on the buyer; e.g., workers would not be guaranteed employment or training programs. The latter option appears related to official comments that workers' and trade unions' demands are discouraging investors from buying state-owned companies. The government might consider, for instance, cutting to one year the five-year period during which the new owners have to keep all workers.

The privatisation of Crvenka run into other problems as well. The Invest-in-Serbia.com said on 20 November that a government commission accused the financial advisor to the sale, consultant PriceWaterhouseCoopers, of failing to provide relevant new data to the sale. Sugar production, the commission argued, might increase substantially in 2002 and such performance would have affected the asking price. A week later, on 27 November, Serbia announced that it would resume negotiations on the sale of Crvenka only if Hellenic agrees to pay a "significantly" higher price, said Reuters. The news agency added that by then the consultant firm had advised rejecting the original offer and to call for a new tender. Hellenic Sugar is the sole sugar producer in Greece, a member of the EU, with some 330,000 tonnes of annual production.

Fiji: Restructuring Plan Approved

The Fijian government announced on 27 November that the sugar industry would be restructured by 1 April 2003, with the four state-owned sugar mills becoming individual companies and owned by cane growers, mill workers and indigenous Fijian landowners. The government will retain a small stake in each company. The restructuring proposal, with a price tag of USD 138 million, has been on the table for almost a year.

The European Investment Bank, the Asian Development Bank and commercial banks would support the restructuring plan, which needs to "clearly" be a business plan, not a social program, some sources said. The government is aware that the restructuring would mean job losses. There are about 20,000 Fijians, among farmers and workers, whose jobs depend directly from sugar; almost a quarter of the islands' total population of 850,000 people depends directly or indirectly on sugar. It is not clear what political strategy would be in place to face the social impact of the restructuring.

The government has been under heavy pressure to restructure the industry, which depends on substantial government financing. The Fiji Sugar Corporation (FSC) lost USD 17.4 million in the recent two harvests, said FSC managing director, and the support from the government, through loans and guarantees, ends on 31 March 2003. Fiji's Primer Minister said that the government would continue guaranteeing loans for the industry, within the process of reform, for the next 10 years.

Industry sources said that cane farmers do not longer see the industry as viable and many are willing to quit cane cultivation. In addition, problems in renewing sugar land leases might explain a drop of 25 percent in cane production, according to Fiji's Sugar Commission. The chairman of the Commission said that the Native Land Trust Board has renewed only 1,800 of about 4,000 native sugar leases that have recently expired. No details were given on the size of the non-renewed cane area.

While these national factors continue brewing, the EU/ACP sugar arrangement, under which Fiji receives premium prices on exports to the EU, came under attack by Australia and Brazil. Remunerative export markets, Fijian sources feel, are not longer secure.

South Africa: New Factory Planned

A USD 200 million new sugar project in Makatini (KwaZulu-Natal) would soon be approved, according to local sources. The new project would include developing 15,000 hectares of cane lands and building a factory with an annual production capacity of 145,000 tonnes of sugar (refined and specialty sugars). The factory can start operations in 2007. The project has the financial backing of the Development Bank of Southern Africa, the World Bank and the local Land Bank. Feasibility studies would be submitted to the government by mid December.

Officials said that the Makatini project is a priority for the government, which sees it also in the context of the black empowerment schemes being introduced in all economic sectors. In the sugar industry there are close to 50,000 farmers, 48,000 of them are black farmers, working around 85,000 hectares of land and contributing with less than 20 percent of the cane. The remaining 2,000 farmers, with some 400,000 hectares, are white commercial farmers. The Makatini project includes training programs for new black farmers. (In the mining and petroleum industries, the government has set targets of 26 percent and 30 percent of black ownership respectively.)

Coca Cola said it was considering entering in a long-term contract on an unspecified volume of high quality refined sugar from the new mill. Coca Cola is one the largest sugar consumer in the region, accounting for about 300,000 tonnes in Southern and East Africa. (South Africa produces 2.6 million tonnes and exports about 1.6 million tonnes of sugar.)

In related news, the KwaZulu-Natal government and the Uthungulu district agreed to grant 500,000 South African rands (USD 1.00 = ZAR 9.25) to a pilot project in the production of organic sugar. The project would manufacture jaggery to be used as input in the production of organic sweets and sugar.

Coca Cola Demands Lower Sugar Prices

Coca Cola has demanded a 24 percent reduction in the price of sugar, from 3,280 to 2,500 rands per tonne (from USD 356 to USD 270) to ease the pressure on their costs and on consumers. Coca Cola said that prices have increased by 13 percent during 2002 and, if no solution were found by next February, it would buy sugar from other sources, mainly Brazil. Coca Cola argued that the South African Sugar Association (SASA) controls the entire sugar industry, including the fixing of local prices and, that, although South Africa is reckoned as one of the world's lowest cost producers, domestic prices are maintained high for the benefit of a small number of white cane commercial farmers. (According to a study by the trading house E.D.&F. Man quoted by Coca Cola, South African consumers pay around US 14.5 cents per pound of sugar.) Coca Cola also wants imports tariffs to be phased-out to allow cheaper sugar into the country.

Uganda: Child Labour in Sugar

A 17-year old boy lost his legs when a tractor run over him, reported The Monitor, a Kampala-based newspaper. The boy was working for a company that supplies cane to the Sugar Corporation of Uganda (SCOUL), owned by the Metha Group. Worker MP Joram Pajobo, general secretary of the National Union of Plantation and Agricultural Workers (NUPAW), described the case as Child Labour, and said SCOUL is responsible that none of companies with whom they contract employ children, and that all workers hired by those companies are registered and insured.

Meanwhile, authorities of the Uganda Stock Exchange (USE) approved the listing of 51 percent share of the state-owned Kinyara Sugar Works Limited, in the process of privatisation. The shares will be floated by the end of November, while the listing on the USE will be done by March 2003.

The process of privatising Kinyara got some political undertones with news that the Madhvani Group, owner of Kakira Sugars, the largest sugar company in the country, sponsored a lobbying group to press the government to change its strategy from selling the majority stake in Kinyara to the public to selling the stake to an strategic investor, in this case Kakira. In a press statement of 23 November, the Madhvani Group said it had been interested in the sale but decided to withdraw when the privatisation agency did not agree to one condition: not to renew the managing contract with Booker Tate without completing the privatisation process first. The group said that the new owners should decide on management. There are three companies in the sugar industry: SCOUL (Metha Group), Kinyara (state-owned and managed by Booker Tate) and Kakira (Madhvani Group).

Company News

Hungary: B�ghin-Say to Sell Factories

The new owners of B�ghin-Say said they would sell its three factories in Hungary to the German Nordsucker. The factories are the Szolnoki (5,400 tdc), the M�travideki (4,500 tdc) and the Szerencsi (6,000 tdc), which account for 36 percent of the domestic sugar production. The Hungarian industry, privatised in the early 1990s, is completely dominated by three West European companies. The two other companies involved are the Austrian Agrana (where the German S�dzucker AG has a 43.2 percent stake) and Eastern Sugar, a joint venture of Tate & Lyle and the French Saint Louis Sucre, the latter also a subsidiary of S�dzucker.

The Origny-Naples consortium, which includes the beet farmer cooperatives Union SDA and Union BS, recently bought 54 percent of B�ghin-Say from Edison, the Italian conglomerate. In related news, Brazilian sources reported that COSAN, the country's largest sugar and alcohol group and partner to Union SDA in Brazil, would negotiate a minority participation, about 3 percent, in the B�ghin-Say acquisition.

Australia: CSR to De-Merge Businesses

On 19 November CSR, the sugar and building conglomerate, announced its plans to de-merge its businesses into two different listed companies. The heavy building material operations would become the Rinker Group Ltd., and the sugar arm, CSR Ltd. The de-merger would be implemented in the first half of 2003 and is "the best options for shareholders," said the CSR chief executive.

CSR produces around 40 percent of Australia's total raw sugar. It has seven mills listed in Queensland: Macknade and Victoria (in the Herbert River District), Invicta, Pioneer and Kalamia, Inkerman (Burdekin River District) and Plane Creek (Mackay District). According to the company, the mills produced 1.433 million tonnes of sugar in the 2001-02 crop, compared to 1.776 million tonnes the previous year. CSR controls 50 percent of Sugar Australia, which is the country's leading refined sugar supplier and largest exporter of refined sugar. The other 50 percent of Sugar Australia is owned by Mackay Refined Sugar, a 50-50 venture of Mackay Sugar Cooperative and E.D. & F. Man. Sugar Australia's refineries are located in Mackay and Melbourne. CSR also owns 50 percent of New Zealand Sugar, a leading refiner in New Zealand. (Australia produces about 5 million tonnes of sugar, raw value, per year.)