Escalating fuel, fertiliser costs batter sugar industry :: News

Eswatini's sugar industry—a cornerstone of the country's agricultural economy and a significant foreign exchange earner—is facing mounting pressure from surging operational costs in early 2025. Escalating fuel and fertiliser prices are compressing profit margins across the sector, raising questions about sustainability and competitiveness in regional and global markets.

The kingdom produced approximately 600,000 tonnes of sugar in 2024, making it one of Southern Africa's top producers. However, the sector's reliance on energy-intensive processing and fertiliser-dependent cultivation has exposed it to volatile commodity markets. Current fuel prices have climbed 15-22% year-on-year across the region, while fertiliser costs remain 18-25% above 2023 levels—a dual shock that is straining both large mills and smallholder outgrowers.

## Why Are Input Costs Rising So Sharply?

Global energy markets remain volatile following geopolitical tensions and OPEC+ production decisions, pushing diesel and petrol prices higher across Southern Africa. Eswatini imports nearly 100% of its petroleum products, meaning the kingdom has no domestic buffer against international shocks. Simultaneously, global phosphate and nitrogen fertiliser supplies face supply-chain constraints stemming from conflicts in key producer regions and elevated shipping costs. Local retailers have passed these costs directly to farmers, reducing incentives for increased production just as harvests near.

## What Does This Mean for Mill Profitability?

Sugar mills operate on thin margins in competitive markets. Processing costs—including fuel for boilers, transport, and milling—typically account for 30-40% of total production expenses. A 20% fuel surge translates directly to 6-8% margin compression, which is significant. For smallholder outgrowers, who supply 40% of Eswatini's cane, fertiliser cost inflation is equally disruptive. Many have already reduced application rates, risking lower yields in 2025–2026 harvests.

The sector's export-oriented model intensifies these pressures. SADC trade preferences and preferential access to EU and US markets hinge on competitiveness; if Eswatini's production costs diverge sharply upward from competitors in Mauritius, South Africa, or Brazil, buyers may source elsewhere.

## How Are Industry Players Responding?

Large integrated producers—Ubombo Sugar and Royal Swaziland Sugar Company dominate the market—are absorbing some cost increases through operational efficiency and hedging strategies. Smaller mills and outgrowers have fewer options and are lobbying government for fuel subsidies or tax relief. However, Eswatini's fiscal space is constrained; the IMF-backed stabilisation programme limits subsidy expansion. Some farmers are exploring intercropping or diversification, though cane remains the highest-value crop for most.

Industry associations are advocating for regional energy cooperation and bulk fertiliser procurement to reduce unit costs. Without intervention, production may flatten or decline, eroding Eswatini's role as a regional sugar hub and threatening 10,000+ direct jobs in mills and ancillary services.

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