Analysing the competitive performance of the Eswatini sugar industry

Thesis (MScAgric)--Stellenbosch University, 2021.

ENGLISH SUMMARY : The primary objective of this study was to analyse the competitive performance of the Eswatini sugar industry, since 2001, and developing strategic recommendations for improved competitiveness of this industry. A five-step analytical framework was applied based on the Volrath-Porter approach recently followed by Boonzaaier and Van Rooyen (2017), Barr (2019) and Mtshiselwa (2020) for competitiveness analysis in southern African agribusiness. Step 1 of the analytical framework involved defining competitiveness in the context of the Eswatini sugar industry. In this study the term was defined as ‘the ability of sugar industry to be competitive by trading production in domestic and international markets and achieve sustainable business growth whilst striving to earn at least the opportunity cost of resources’ (Freebairn, 1986, Van Rooyen, Esterhuizen & Botha, 2011; Dlikilili & van Rooyen, 2018). This definition provides a base for the analysis and measurement methods used. The second step of the study was the empirical measuring of the competitive performance using the relative trade advantage (RTA) technique (Vollrath, 1991) as a measure of competitiveness. The data used was sourced from two reliable sources viz. FAOSTAT and ITC Trademap from 2001 to 2019. From these measurements trendlines were established and three phases were identified and analysed. Phase 1 shows generally increasing competitiveness with RTA figures (2001-2006) ranging from 1.5 to 2.9 for the FAO and 1.8 to 4.6 for ITC. During phase 2, (2007 - 2012) it showed a fluctuating “bubble type” trend by first increasing until 2009 and declining gradually to 2012. The competitive performance was noted with RTA values for FAO ranging between 3.8 to 3.4 inter alia due to economic meltdown and removal of the preferential trade arrangements benefitting Eswatini. Phase 3 shows recovery and sustained increasing competitiveness from 2013 onwards with rising RTA values of 3.4 to 5.2 for ITC and 2.9 to 4.9 for FAO. The Eswatini sugar industry was also compared with its rivals internationally by measuring the RTA values over time (2001 to 2019) using the ITC data. Average RTA values from the past five years - allowing to compare relative competitiveness of an industry in context of the economy of the respective country - were obtained for the following respective countries: Brazil (5.04), Thailand (4.61), South Africa (3.56), Mozambique (2.09), Kenya (3.01), Malawi (2.03) and Zimbabwe (2.75). Brazil and Thailand showed to be the most competitive as opposed to the other countries. Eswatini (3.82) was found to be generally competitive when compared to its African competitors after South Africa. From these results it was concluded that an in-depth analysis was required to consider the various factors impacting on the competitive performance of the Eswatini industry, which was conducted in steps 3 and 4. The third step of the study involved ascertaining factors that influence the competitiveness of the sugar industry. Factors enhancing or constraining the competitive performance of the sugar industry of Eswatini were identified and analysed through qualitative methods by using focus group discussions and interviews with experts and executives along the sugar industry value chain. Through the Eswatini sugar executive survey (ESES), 48 factors influencing the competitiveness of the industry were identified and responses recorded on the Likert-scale (with 1 – constraining; 3 – neutral; and 5 – enhancing). Step 4 of the study grouped the 48 factors influencing the competitive performance of the sugar industry into six Porter Competitive Diamond determinants. In general, the sugar industry rating score indicated four enhancing determinants being the demand conditions (3.54/5), related and supporting industries (3.45/5), government support and policy (3.41/5) and lastly the strategy structure and rivalry (3.36/5). The production and chance factors revealed to constrain the industry with 2.83/5 and 2.42/5 values, respectively. Principal component analysis (PCA) was carried out to identify variations and consensus in the views of respondents with regard to factors identified for each determinant. The results revealed that there were variations in opinions regarding the 48 factors. It is worth mentioning that the PCA results should be considered with care as the sample size was not optimal. The different value chain components/players, grouped into two clusters which were primary producers and agribusiness, were analysed to obtain the variation in views within the chain. It was observed that the producers rated competitiveness performance lower than the agribusiness actors, as such there were differences in views among the respondents along the chain. The last step applied the findings from the previous analysis, which reflected alignment between the producers and the agribusiness. It investigated proposed strategies that could be applied to enhance or sustain the competitiveness of the sugar industry. Industry strategies were formulated in collaboration with industry role players to improve competitive performance of the industry. In view of this, the importance of collaboration between all the value chain actors should be strengthened through information and business intelligence sharing, technological innovations and policy development and coordination between industry and government. New product development also needs attention to counter ‘anti-sugar movements’ and to grow local market demand. It was also proposed that the industry employ risk management strategies that will help to deal with the uncertainty of fluctuations of currencies. Emphasis was put on the role of government for continued negotiations and exploration of new markets for the industry as it contributes immensely to the economy. Research on climate change was mentioned to improve competitiveness of the industry in future as it will help mitigate the effects on the sugar cane production. From the analyses and findings of the research, some recommendations were made for further studies to improve the measurement and analysis of competitive performance of the Eswatini sugar industry. This included full value chain analysis, with representative participation of the different functional groupings, to conclude an in-depth investigation on the performance of various role players in the value chain, the linkages between sugar smallholders and the value chain. Also cost benefit application to support economically viable and financially affordable infrastructure development such as irrigation infrastructure and water storage facilities and road and bridges was recommended to expand the scope; and to consider the role of government policy on competitiveness performance.

AFRIKAANSE OPSOMMING : Die hoofdoel van hierdie studie was om die mededingendheidsprestasie van die Eswatini-suikerbedryf sedert 2001 te ontleed en strategiese aanbevelings vir die verbeterde mededingendheid van hierdie bedryf te ontwikkel. 'n Vyf-stap analitiese raamwerk is toegepas op grond van die Volrath-Porter-benadering wat onlangs gevolg is deur Boonzaaier en Van Rooyen (2017), Barr (2019) en Mtshiselwa (2020) vir mededingendheidsanalise in Suider-Afrikaanse agribesigheid. Stap 1 van die analitiese raamwerk behels die definisie van mededingendheid in die konteks van die Eswatini-suikerbedryf. In hierdie studie is die term as volg gedefinieer: 'Die vermoë van die suikerbedryf om mededingend te wees deur die produk in plaaslike en internasionale markte te verhandel, volhoubare sakegroei te behaal, en te streef om ten minste die geleentheidskoste van hulpbronne te verhaal' (Freebairn, 1986, Van Rooyen, Esterhuizen & Botha, 2011; Dlikilili & van Rooyen, 2018). Hierdie definisie bied 'n basis vir die studie se analise- en meetmetodes. Die tweede stap van die studie was die empiriese bepaling van die mededingendheidsprestasie deur gebruik te maak van die relatiewe handelsvoordeel (relative trade advantage (RTA)) tegniek (Vollrath, 1991) as 'n maatstaf vir mededingendheid. Die data wat gebruik is, is afkomstig van twee betroubare bronne, nl. FAOSTAT en ITC Trademap van 2001 tot 2019. Uit hierdie data is tendenslyne vasgestel en drie fases is geïdentifiseer en ontleed. Fase 1 toon oor die algemeen toenemende mededingendheid met RTA-syfers (2001-2006) wat wissel van 1.5 tot 2.9 vir die FAO en 1.8 tot 4.6 vir ITC. Gedurende fase 2 (2007-2012) het dit 'n wisselende "borreltipe" -tendens getoon deur eers tot 2009 toe te neem en geleidelik te daal tot 2012. Die mededingendheidsprestasie is aangeteken met RTA-waardes vir FAO wat wissel tussen 3.8 en 3.4, onder andere as gevolg van ekonomiese ineenstorting en die opheffing van die voorkeurhandelsreëlings ten bate van Eswatini. Fase 3 toon herstel en volgehoue toename in mededingendheid vanaf 2013 met stygende RTA-waardes van 3.4 tot 5.2 vir ITC en 2.9 tot 4.9 vir FAO. Die Eswatini-suikerbedryf is ook internasionaal met sy mededingers vergelyk deur die RTA-waardes oor tyd te meet (2001 tot 2019) met behulp van die ITC-data. Gemiddelde RTA-waardes van die afgelope vyf jaar - om relatiewe mededingendheid van 'n bedryf in die konteks van die ekonomie van die onderskeie lande te vergelyk - is vir die volgende lande verkry: Brasilië (5.04), Thailand (4.61), Suid-Afrika (3.56), Mosambiek (2.09), Kenia (3.01), Malawi (2.03) en Zimbabwe (2.75). Brasilië en Thailand was die mededingendste teenoor die ander lande. Die analise het aangedui dat Eswatini (3.82), na Suid-Afrika, oor die algemeen mededingend is in vergelyking met sy Afrika-mededingers. Die gevolgtrekking uit hierdie resultate is dat 'n verdere ontleding nodig is om die verskillende faktore wat die mededingendheidsprestasie van die Eswatini-industrie beïnvloed, in ag te neem, wat in stap 3 en 4 gedoen is. Die derde stap van die studie het betrekking gehad op die bepaling van faktore wat die mededingendheid van die suikerbedryf beïnvloed. Faktore wat die mededingendheidsprestasie van die suikerbedryf van Eswatini verbeter of beperk, is deur middel van kwalitatiewe metodes geïdentifiseer en ontleed deur fokusgroepbesprekings en onderhoude met kundiges en bestuurders in die waardeketting van die suikerbedryf te gebruik. Deur middel van die Eswatini suiker uitvoerende opname (Eswatini sugar executive survey (ESES)) is 48 faktore wat die mededingendheid van die bedryf beïnvloed geïdentifiseer en die antwoorde op die Likert-skaal aangeteken (met 1 - beperkend; 3 - neutraal; en 5 - verbeterend). Stap 4 van die studie het die 48 faktore wat die mededingendheidsprestasie van die suikerbedryf beïnvloed, in ses Porter Competitive Diamond-bepalers gegroepeer. Oor die algemeen het die suikerbedryf se graderingstelling vier bepalende faktore aangedui: Die vraagstoestande (3.54/5), verwante- en ondersteunende bedrywe (3.45/5), regeringsteun en -beleid (3.41/5) en laastens die strategiestruktuur en wedywering (3.36/5). Die produksie- (2.83/5) en toevallige faktore (2.42/5) waardes dui daarop dat die bedryf hierdeur beperk word. Om variasies en konsensus in die sienings van respondente te vind, met betrekking tot faktore wat vir elke determinant geïdentifiseer is, is hoofkomponentanalise (Principal component analysis (PCA)) uitgevoer. Die resultate het getoon dat menings oor die 48 faktore varieer. Dit is belangrik om kennis te neem dat die PCA-resultate versigtig oorweeg moet word, aangesien die steekproefgrootte nie optimaal was nie. Die verskillende sienings binne die waardeketting is ondersoek nadat die rolspelers in twee groepe, nl. primêre produsente en agribesigheid, verdeel is. Die analise het aangedui dat die produsente die mededingendheidsprestasie laer skat as die agribesigheidrolspelers. Daarom blyk dit dat daar binne die waardeketting verskillende menings is. Die laaste stap het die bevindings van die vorige analise toegepas, wat die belyning tussen die produsente en die agribesigheid weerspieël. Voorgestelde strategieë om die suikerbedryf se mededingendheid te verbeter of te handhaaf is ondersoek. Bedryfstrategieë is in samewerking met rolspelers in die bedryf geformuleer om die mededingendheidsprestasie van die bedryf te verbeter. Met dié is dit belankrik dat samewerking tussen al die waardekettingrolspelers versterk word deur die deel van inligting, tegnologiese innovasies, en beleidsontwikkeling en koördinering tussen die industrie en die regering. Ontwikkeling van nuwe produkte moet ook aandag kry om 'anti-suikerbewegings' teen te werk en om die plaaslike markaandeel te laat groei. ‘n Verder voorstel is dat die bedryf risikobestuurstrategieë gebruik om die onsekerheid gekoppel aan die wisselvalligheid van wisselkoerse te hanteer. Daar is klem gelê op die rol van die regering vir voortgesette onderhandelinge en die verkenning van nuwe markte vir die bedryf, aangesien dit 'n groot bydrae tot die ekonomie lewer. Navorsing oor klimaatsverandering is genoem om die mededingendheid van die bedryf in die toekoms te verbeter, aangesien dit die uitwerking daarvan op die suikerrietproduksie sal help verminder. Uit die ontledings en bevindings van die navorsing is 'n paar aanbevelings gemaak vir verdere studies om die meet en analise van mededingendheidsprestasies van die Eswatini-suikerbedryf te verbeter. Dit het ‘n volledige waardekettinganalise ingesluit, met verteenwoordigende deelname van die verskillende funksionele groeperings, om 'n diepgaande ondersoek af te handel oor die prestasie van verskillende rolspelers in die waardeketting, en die skakeling tussen suikerboere en die waardeketting. Daar is ook aanbeveel om kostevoordeel-toepassing te gebruik om ekonomies lewensvatbare en finansieel bekostigbare infrastruktuurontwikkeling te ondersteun, soos besproeiingsinfrastruktuur, wateropbergingsfasiliteite, paaie, en brûe om die omvang te vergroot; en om die rol van regeringsbeleid ten opsigte van mededingingsprestasie te oorweeg.

Masters