Sugar Value Chain in Zambia: An Assessment of the Growth Opportunities and Challenges

Abstract

The main objective of this study was to identify the major actors in Zambia's sugar value chain and to assess the growth opportunities and constraints faced by the sub-sector. The study results show that the sugar subsector accounts for about 4% of the Gross Domestic Product and 6% of total national exports in Zambia. The sugar industry in Zambia is a monopolistic market structure dominated by one firm, Zambia Sugar Plc., which contributes over 90% of the total national sugar production. Zambia is one of the lowest cost producers of sugar globally. Growth in the sugar industry therefore holds great prospects for economic diversification and employment creation. Despite being a low cost sugar producer, growth of the sub-sector is constrained by high transaction costs. These include high fuel, electricity, transportation and distribution costs. Legislation on Vitamin A fortification of sugar also increases production costs and is a significant barrier to entry for potential entrants. Moreover, water rights and insecurity associated with customary land tenure have also emerged as major issues requiring attention to enhance investments into the sector. The situation is aggravated by lack of an articulate sugar sector policy to provide strategic guidance for sector development. In order to attract private sector investment and enhance growth; government policy should assure water rights and land tenure security for establishment of sugar plantations. There is also need to clarify government policy on bio-fuels as well as to review the export strategy to reduce dependence on EU markets and explore alternative regional markets.

Outgrowers and Livelihoods: The Case of Magobbo Smallholder Block Farming in Mazabuka District in Zambia

“…24 Key drivers of the growth in the Zambian sugar sector are its contribution to the economy through increased foreign exchange earnings, growth of the Gross Domestic Product (GDP), economic diversification from copper mining, wage-employment creation and rural development. The sugar sector contributes around six per cent (US$45 million) 25 of the country's foreign exchange earnings, 26 second only to the copper industry. 27 Sugar also contributes about four per cent of the country's GDP and, in a country with a very high unemployment rate, the industry is hailed as a major direct formal wage-employment generator, offering around 11,000 jobs, with total dependants probably exceeding 75,000.…”

The social construction of “shared growth”: Zambia Sugar and the uneven terrain of social benefit

“…Prior to the expansion, Zambia Sugar was already responsible for 98% of Zambia's sugar production (Kaizen Consulting International, ). By 2014, following the phase of expansion covered here, the company accounted for 4% of national gross domestic product and 6% of Zambian exports (Kalinda & Chisanga, ). Its significance to the Zambian economy, long preoccupied with diversifying away from its heavy reliance on mining, is thus highly significant.…”

Economy-wide implications of biofuel production in Zambia

“…In Scenario 2, 80 per cent of the share of sugarcane crop for bioethanol use is sourced from smallholder farmers and 20 per cent comes from commercial crop producers. The bulk of sugarcane produced in Zambia, approximately 60 per cent, is currently grown by large-scale farmers (Kalinda and Chisanga 2014). Smallholder farmers are expected to enjoy larger positive welfare effects given their higher labour intensity.…”

“…Almost 400 smallholder farmers participate in sugarcane production through outgrower schemes, specifically the Kaleya Smallholder Company, Maggobo, and Manyoyo schemes. Smallholder sugarcane output is currently sold to Zambia Sugar Plc, the largest sugar producer in Zambia Kalinda and Chisanga 2014). Plans by Kafue Sugar to develop its own outgrower model should see the number of smallholder sugarcane farmers in Zambia increase (Kalinda and Chisanga 2014).…”

“…Smallholder sugarcane output is currently sold to Zambia Sugar Plc, the largest sugar producer in Zambia Kalinda and Chisanga 2014). Plans by Kafue Sugar to develop its own outgrower model should see the number of smallholder sugarcane farmers in Zambia increase (Kalinda and Chisanga 2014). Sugarcane farming is largely irrigated, with smallholder farmers receiving water supply from core estates as part of the services provided through the outgrower schemes.…”