Determinants of Competitiveness of the Swaziland Sugar Industry

Abstract

The issue of abolishment of trade agreements preferences pose a great threat to the sugar industry in Swaziland. Using both the Relative Trade Advantage and Porter`s 1990 National Diamond concept, the major objective of the study was to examine the comparative advantage of the sugar industry in the global market with the aim of establishing the contributing factors and constraints to the competitiveness of the Swaziland sugar industry. The Relative Trade Advantage (RTA) method developed by Balassa was used to determine Swaziland global comparative advantage of the sugar industry. The study found that the Swaziland sugar industry had a relatively highly comparative advantage in the global market in terms of producing sugar. The results from the regression model indicated that global sugar market prices, exchange rate and export values had a significant influence on the Swaziland Relative Trade Advantage indices. The Porter`s (1990) National Diamond model analysis revealed factors that enhance competitiveness of the sugar industry include compensation of management, business approach to human resource, relationship and networking, telecommunication and internet service, availability of credit and availability of unskilled labour as well as production of high quality products. Some factors that have a major constraining effect on the competitiveness were the small local market size, cost of financing business, cost of transport, cost of supply of inputs, public sector effectiveness on service delivery and exchange rates. Therefore, the government in consultation with the industry representatives should consider development and implementation of an industry policy strategy for the sugar industry intended to ensure its survival. Other strategies would be to improve efficiencies at both field and factory levels as well as diversification or value addition on the product.