AgriNova Sugar SA Business Plan › Section 3 › Industry & Macro-Economic Context

This section provides the macro-economic and industry context within
which AgriNova’s strategy is set. It draws on official industry data
published by the South African Sugar Association (SASA), SA Canegrowers,
the South African Sugar Millers’ Association (SASMA), the United States
Department of Agriculture Foreign Agricultural Service (USDA FAS), and
the Department of Agriculture, Land Reform and Rural Development.

3.1 Global Sugar Industry

The global sugar industry is a USD 175 billion+ commodity and trade
complex producing roughly 183 million metric tons of raw-value sugar
each year. Brazil and India together account for approximately 40% of
world production; Thailand, the European Union, China, the United
States, Pakistan, Mexico and Australia comprise the bulk of the
remainder. Sugar trades on the New York #11 (raw) and London #5
(refined) futures exchanges and is one of the most liquid agricultural
commodities globally.

Demand growth is structural but modest, at roughly 2% per year,
driven by population and income growth in emerging markets, partially
offset by health-led substitution toward lower-calorie sweeteners in
developed markets. The most significant medium-term demand vector is the
expansion of ethanol blending mandates in fuel — particularly in Brazil
(E27), India (E20) and an expanding cohort of African markets — which
simultaneously diverts cane from sugar to ethanol.

Figure 12

Sugar prices have experienced significant volatility over the
2018–2025 period. After a multi-year period of below-cost prices in the
late 2010s, raw sugar surged to over 22 US¢/lb in 2023 driven by
Brazilian crop concerns and Indian export restrictions. The 2024–2025
period saw prices retreat as supply normalised. The medium-term outlook
(2026–2028) is for prices in the 19–21 US¢/lb range — sufficient to
reward efficient producers but insufficient to subsidise high-cost or
under-invested capacity.

3.2 South African Sugar Industry — Structure and Scale

Figure 1

South Africa is consistently ranked in the top-25 of approximately
120 sugar-producing countries on cost competitiveness, reflecting a
combination of relatively favourable agronomy, mature milling
infrastructure (more than 150 years of industrial development), an
integrated cane-payment system (the Recoverable Value or RV system), and
proximity to deep-water export ports at Durban and Richards Bay.

Production is concentrated in two provinces. KwaZulu-Natal accounts
for approximately 80% of cane volume and is overwhelmingly rain-fed — a
structural exposure to rainfall variability. Mpumalanga produces the
remaining 20% under irrigation, supported by the Komati and Crocodile
river systems and dam infrastructure that includes the Maguga dam (which
is shared with Eswatini). Yields in the irrigated Mpumalanga catchment
typically exceed 80 t/ha, materially above the 55–65 t/ha range typical
of rain-fed KwaZulu-Natal.

Figure 11

3.3 Industry Structure & Cane Payment System

The South African sugar industry operates under a uniquely integrated
framework. The South African Sugar Association (SASA) sets a notional
sugar price each season and manages the division of industry proceeds
between growers and millers using a 64:36 split. Producers (growers) are
paid according to the Recoverable Value (RV) of the cane they deliver to
mills — measured at the SASA Cane Testing Service — while millers are
compensated according to their share of total industry sugar
production.

This RV system aligns the interests of growers and millers around
delivering the highest-quality cane (high sucrose content, low ash,
prompt delivery to limit sucrose loss). It also creates a uniform
national price discipline and minimises the kind of grower-miller
disputes that can be destabilising in less-integrated jurisdictions.
AgriNova will participate fully in this system at both the cane and
milling levels.

3.4 Production Trends and Recent Performance

South African sugar production in marketing year 2023/24 was
approximately 2.10 Mt; for 2024/25 USDA FAS estimated approximately 1.95
Mt, reflecting a year-on-year drop of about 7% driven by adverse weather
and below-trend cane deliveries. The marketing year 2025/26 is forecast
at approximately 2.07 Mt — a roughly 6% rebound supported by improved
late-summer rainfall and adequate dam levels for the irrigated
Mpumalanga area.

The percentage of sugar produced from each ton of cane (the ‘sugar
recovery’ or ‘mill yield’) is estimated at 11.7% — slightly below
historical highs but consistent with industry averages over the last
decade. AgriNova’s operational plan targets a recovery of 12.0–12.3% by
Year 4 through targeted mill upgrades and improved cane quality from the
outgrower programme.

3.5 Domestic Demand and Market Composition

South Africa is a net sugar producer in normal years. Domestic
consumption is approximately 1.6 Mt p.a., of which industrial users
(food and beverage manufacturers) account for roughly 60% and household
and HoReCa channels for the remainder. Approximately 70–76% of national
sugar output is marketed within the Southern African Customs Union
(SACU) — comprising South Africa, Botswana, Lesotho, Namibia and
Eswatini — under a tariff-free arrangement.

The remainder is exported to global and regional markets. Export
channels include Africa (Kenya, Mozambique and East African Community
markets), Asia (Indonesia and Bangladesh in select years) and the United
States under that country’s sugar Tariff-Rate Quota (TRQ). South Africa
typically secures an annual TRQ allocation in the range of 24,000–30,000
RV-MT, which historically has been a premium-priced export channel;
however, the imposition of US in-quota tariffs (10% from April 2025,
raised to 30% in August 2025) has materially reduced the attractiveness
of this channel.

3.6 Imports and Trade Protection

Sugar imports into South Africa surged dramatically during 2025. SA
Canegrowers reported that between January and August 2025 deep-sea sugar
imports reached 149,099 tons compared with 35,730 tons during the same
period in 2024 — a 317% surge year-to-date, equivalent to a 400%+ pace
by year-end. The main exporters were Brazil and India, both of which
subsidise their domestic and export sugar industries.

Figure 3

In response, the South African Revenue Service (SARS) raised the
customs duty on sugar to R3,646.80 per metric ton in August 2025 —
protecting domestic producers against imports priced below the
Dollar-Based Reference Price (DBRP). However, even at this elevated
tariff, heavily subsidised imports continue to enter the South African
market, particularly through SACU members such as Eswatini that benefit
from intra-SACU duty-free trade.

3.7 The Sugar Master Plan and Health Promotion Levy

The Sugar Master Plan, signed in 2020, established a framework for
industry stakeholders, government and large food and beverage
manufacturers to support the local sugar industry. Phase 1 of the Plan
(concluded in March 2023) achieved an increase in domestic sugar
consumption of approximately 280,000 MT — close to the 300,000 MT target
— and provided pricing certainty by listing producer prices at or below
CPI inflation. Phase 2, granted block exemption from the Competition Act
on 13 August 2026, extends and deepens the framework with additional
procurement undertakings from major manufacturers.

Working in the opposite direction, the Health Promotion Levy (often
called the ‘sugar tax’), introduced in April 2018 at a rate of 2.21
cents per gram of sugar above 4 grams per 100ml in sugar-sweetened
beverages, has been cited by industry and SA Canegrowers as a material
driver of demand contraction in the sugar-sweetened-beverage segment.
Industry advocacy is focused on a freeze and ultimately a phase-out of
the HPL.

3.8 Macro-Economic Context (South Africa)

South Africa’s macro-economic environment in 2026 is characterised by
GDP growth in the 1.4–1.8% range, headline inflation broadly within the
South African Reserve Bank’s 3–6% target band, a repo rate that has
begun a measured cutting cycle from its 2024 peak, and a ZAR/USD
exchange rate fluctuating in the R17.50 – R19.20 range. Eskom-related
load shedding has stabilised significantly compared to the 2022–2024
period, though grid constraints continue to support the case for
distributed self-generation.

The investment policy environment is supportive of the AgriNova
thesis: the lifting of the self-generation licensing threshold (in
stages from 1 MW to 100 MW and now effectively unlimited subject to
grid-code compliance), the launch of the Risk Mitigation Independent
Power Producer Procurement Programme (RMIPPPP), the structured
introduction of wheeling tariffs, and explicit National Treasury support
for biofuels all favour a multi-asset agro-industrial play.

Key Macro Indicators (consensus 2026)

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