Analyzing the impact of EU trade policy reform on the sustainability of smallholders sugarcane farming in Swaziland
Hlophe, Linda Cedric
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This study seeks to determine the impact of EU trade policy on the sustainability of smallholder sugarcane farming in Swaziland. Using the policy analysis matrix, the study analysed impacts of policy change on the profitability of smallholder sugar cane farmers of the Komati region in Swaziland. It also measured the level of government intervention in the area. Agriculture plays a major role in the lives of the majority of Swazis since most households rely on this sector as a major source of income, either as smallholder producers or as recipients of income from employment on medium and large-scale farms, and estates. Most rural Swazis participate in the sugar industry where they grow sugarcane, either as smallholder or medium-scale commercial farmers. The sugar industry is the largest in the agriculture sector in terms of income generation. Recent developments indicate that sustainability of the sugar industry in Swaziland is under threat due to developments in the world sugar market. Specifically, the European Union (EU) is reforming its sugar trade regime to conform to its obligation in the World Trade Organization. Such reforms will result in removal of all preferential trade agreements with all its trading partners including Swaziland, and this paints a bleak future for Swaziland smallholder sugarcane farmers who benefit from the high prices received from this market. Impacts of the EU sugar sector reforms on the sustainability of smallholder sugarcane farmers of Swaziland were investigated using the policy analysis matrix (PAM). Three PAMs were constructed; one analyzing the base case scenario; the second and third providing sensitivity analysis taking into account price changes. The results of the PAM base case scenario indicate that farmers were generally competitive (positive private profitability) and had potential for growing the industry. However, farmers were discovered to be inefficient (negative social profitability), indicating that there existed wastages in terms of resource use. The positive net policy transfers suggested heavy presence of government support, as a result; farmers made positive private profits. The other incentive indicators; subsidy ratio to producers (SRP), effective protection coefficient (EPC), nominal protection coefficient on inputs (NPCI) and nominal protection coefficient on output (NPCO) are positive, also confirm that farmers received some incentives from government to produce sugar cane during the year under review. The second and the third PAM, analyzing future impact of the EU reforms both show devastating consequences of the reforms. Both predict negative private and social profits. This is an indication that smallholder sugarcane farming in the Komati region will be unsustainable after the EU reforms. In fact, the second and third PAMs indicate that smallholder farmers of KDDP will not be able to survive without government support. Therefore, considering the contribution that smallholder sugarcane farming makes in the economy of Swaziland, and direct intervention in poverty reduction, it is important that Government consider various ways that can be employed to keep smallholder sugarcane farming viable in this area. Considering the fact that preferential trade with the European Union is coming to an end soon, it is imperative that Government explore alternative markets where Swaziland sugar can be sold at favorable prices. Smallholder farmers must also be assisted to improve efficiency so as to reduce production costs and improve revenue.