Dangote Sugar Intensifies Effort In Ensuring Self-sufficiency

By November 30, 2016 Investment News

Efforts are being made by Dangote Sugar Refinery (DSR) Plc to ensure self-sufficiency in sugar production in the country within the next four years.

Over the last year, Dangote Sugar has stepped up its opening of processing factories and assistance to farmers in a bid to dramatically increase output.

Nigeria is one of the world’s largest net importers of sugar, consuming significant amount of foreign exchange. Between 1955, Nigeria consumption rose from 43,000 tones to about 45,000 tones in 1974; by 1982 it rose to about 1MT/PA. Today Consumption in Nigeria is between 1.5 to 1.7MT/PA.

Global consumption is 24kg per capita. Africa 16.8kg, Asia 17.3 kg, America 43.8kg and Europe 36.7kg per capita respectively. Nigeria is around 7 to 9kg. The Nigerian Sugar Development Council (NSDC) was established as the government agency responsible for formulating sugar policies and strategies.

NSDC focused towards promoting private sector-led development. Government-owned sugar estates were privatized in 2005. Investment in local sugar production is hampered by the huge funds required to establish a sugar estate as well as the lack of long-term loans for investment purposes in the country. However, the management of these estates improved under privatization, which also mostly accounted for the marginal increase recorded in sugar production.

Sugar use in industrial activities such as manufacturing soft drinks, pharmaceuticals, biscuits, other beverages and confectionery products is also rising steadily despite higher international prices, and there is no competing High-Fructose Corn Syrup (HFCS) in the market. Demand for direct household consumption also remains strong. More that 90 percent of Nigeria’s sugar needs are met by import of raw sugar, shipped mostly from Brazil, which is then refined by the local domestic sugar industry. The bulk of the available refined sugar supply is also exported from Brazil.

It would be recalled that the Nigerian Sugar Master Plan (NSMP) was introduced in 2012, as the roadmap to national sugar sufficiency, which was designed to increase local sugar production, attain self-sufficiency, reduce dependence on importation as well as create job opportunities and increase prospects of contributing to the production of ethanol in 2020. Currently, more than 90 percent of all sugar consumed in Nigeria is imported raw, mostly from Brazil, and refined by domestic sugar refineries.

DSR is one of the top five Sugar Refineries in the world, with 1.44MT/PA capacity at a location and has begun its backward integration project with a 10-year sugar development plan, to produce 1.5 million metric tonnes per annum (MT/PA) of sugar from locally grown sugarcane. The project commenced with its acquisition of Savannah Sugar Company Limited (SSCL) at Numan, in Adamawa State and other Green Project sites across Nigeria.

Apart from the rehabilitation of Savannah Sugar’s plantation and factory infrastructure, the company’s growth strategy to farm more than 150,000 hectares of planted sugarcane by 2023 includes the creation of integrated plantation and refinery facilities at the following locations; Lau/Tau, Taraba State; Hadejia, Jigawa State; Zaria Kalakala, Kebbi State and Kpada, Kwara/Kogi States.

This phase also includes the rehabilitation and expansion of Savannah Sugar’s estate, which will be used as a model for the other locations.

A report by the US Department of Agriculture (USDA) notes that to date, Dangote Sugar Refining is the only company to have developed a sugar estate and expanding its raw sugar production capacity.

It noted that Dangote acquired 95 per cent equity stake in Savanna Sugar Company (SSC) showed its commitment to becoming a fully integrated sugar company via its backward integration strategy. According to USDA, Dangote Sugar will be the company with the largest competitive advantage.

Recently during the visit of the National Assembly, Committee On Industry, Trade & Investment to the company, the lawmakers commended the management of Dangote Sugar Refinery on its remarkable progress towards ensuring the success of the sugar backward integration project.

The committee chairman, Honorable Abubakar Moriki who led the team expressed satisfaction at the level of the backward integration programme the company has been able to achieve.

He also assured the company of friendly policy formulation especially in land acquisition which is geared towards self-sufficiency of sugar in 2020. He said: “We are aware that for a sugar business to succeed there has to be substantial mass land acquisition for the sugar cane to be planted. We will look at these challenges and others affecting the industry.”

‘‘We have the responsibility as the members of the House of Assembly Committee on Industry to oversee the Federal Ministry of industry, Trade and Investment and alongside the agencies, which the National Sugar Development Council is one of them, being the regulatory agency charged with the responsibility of monitoring the implementation of national sugar policy globally and to come out with all implementation strategies to make us realized sugar self-sufficiency after certain period of time.

“We are here to see what extent has the policy of National Sugar impacted on you as a player in the industry and whether there are some amendments to make the implementation smoother and faster. We have visited the production site at the Savannah Sugar Company, Numan, Adamawa State, which is a typical backward integration starting point where we saw how the sugar canes were being produced, the collaboration you have with the host community in terms of the Out Growers Scheme and job creation.”

“We are happy at the development seen in Numan, which portrays a successful privatization. The company was sold to Dangote in 2003, it was sold as a moribund company but during our visit to the company, we found out it was back on its feet with about 12,000 hectare of land put into cultivation of sugar cane.”

He also urged the management of the Dangote Sugar Refinery to ensure maximal capacity utilization as much as possible to be able to refine sugar here for the mean time and to be able to have mechanism to produce sugar also in the factory.

The group managing director of Dangote Sugar Refinery, Abdullahi Sule said Nigeria is one of the world’s largest net importers of sugar, consuming significant amount of foreign exchange.

He noted that Dangote Sugar Master Plan was to ensure five large sugar factories, 150,000 Ha of land under cultivation, 1.5 to 2.0 million MT/PA of refined sugar from locally grown sugarcane per annual and to generate over 100,000 jobs among others.

He pointed out that Dangote Industries Limited acquired Savannah Sugar in 2003 and Dangote Sugar being a subsidiary of Dangote Industries acquired 95 per cent stake in Savannah Sugar in December 2012, and have invested over N33.05 billion.

He added that at the end of the rehabilitation exercise, Savannah Sugar will increase its sugar production to 260,000 MT per annual of refined sugar from 26,500ha cultivated land, at 12,000TCD daily, 190 days crop length, increase factory from 3,000TCD to 6,000TCD and install a 12000TCD diffuser factory, employ about 15,000 direct and indirect (seasonal) employees, produce 10MW power for export during crop, 18,000,000 liter per annum fuel ethanol and 10,000 MT per annum Animal feed from the by-products.

Sule however said that some of the challenges facing the industry are government policies, lack of infrastructures, stringent financing, huge investment, lack of forex among others.

Also, the director of Stakeholder Management and Corporate Communications of Dangote Industries, Mr. Mansur Ahmed said that the company was committed to the backward integration commitment it signed with the Federal Government, saying the Savannah Sugar Company acquired by the company in Numan, Adamawa, had started producing and plans were on for expansion.

He said that the current economic challenges in the country notwithstanding, the company is poised to remain a leader in the sector.

Source: <Leadership NG>