TABLE OF CONTENTS

1. INTRODUCTION............................................................................................................1

2. RESEARCH METHODOLOGY......................................................................................2

3. HISTORY OF THE EUROPEAN UNION AND THE SUGAR INDUSTRY:......................4

3.1. SWAZILAND SUGAR INDUSTRY..............................................................................5

3.2. WHY FAIRTRADE IS NEEDED IN THE SUGAR SECTOR.......................................6

4. WHAT IS FAIRTRADE?..................................................................................................6

5. PRODUCER PERSPECTIVE.........................................................................................8

5.1. TWO MAIN ECONOMIC BENEFITS OF FAIRTRADE FOR PRODUCERS..............8

5.1.1 Guaranteed Fairtrade Minimum Price...................................................................9

5.1.2. Fairtrade Premium..............................................................................................12

5.2. STANDARDS AND CERTIFICATION.......................................................................15

5.2.1. FLO-Cert............................................................................................................16

5.3. EMPOWERMENT....................................................................................................17

6. CONSUMERS PERSPECTIVE....................................................................................19

6.1. MARKETING AND STRATEGY................................................................................19

6.2. MAINSTREAMING...................................................................................................20

7. ISSUES, PROBLEMS AND OBSTACLES....................................................................21

8. DISCUSSION...............................................................................................................23

9. CONCLUSION.............................................................................................................24

10. LIST OF REFERENCES..........................................................................................27

LIST OF TABLES:

Table 1: Types of evidence as identified by Yin....................................................................2

LIST OF FIGURES

Figure 1: Line graph indicating the Arabica coffee market 1989-2010: Comparison of

Fairtrade and New York Prices.............................................................................................2

Figure 2: World Raw Sugar Prices 1982-2012 (Monthly Averages).....................................2

Figure 3: A matrix of a decision-making structure within a cooperative in Swaziland…..19

1. INTRODUCTION

Fair Trade represents an important new approach to alleviating poverty of producers

based on a strategy of “trade not aid” (Fridell, 2010:459; Raynolds, 2000:301; Topik,

2010:146). The growing Fair Trade movement seeks to challenge historically unequal

international market relations, transforming North - South trade into an avenue of producer

empowerment and poverty alleviation (Raynolds, 2000:2; Reinecke, 2012:567). Markets

for Fair Trade labelled coffee and other items link ethically minded Northern consumers

with democratically organized groups of poor producers. This offers the disadvantaged

producers an opportunity to “increase their control over their own future, have a fair and

just return for their work, continuity of income and decent working and living conditions

through sustainable development” (FLO, 2013a; Raynolds, 2002:2).

Though the international market for Fair Trade products represents only a minor share of

global trade, it is growing rapidly. According to the Fairtrade Labelling Organisation,

shoppers spent £4.8 billion on Fair Trade products and over £80 million estimated

premium paid to Fair Trade producers from 2012-2013 (2013:12). The Fair Trade market

is poised to expand dramatically over the next decade as labelled commodities become

more widely available in mainstream markets and better known amongst consumers. The

Fairtrade label is the most recognised ethical label globally (FLO, 2013c:3). The products

that are available under the Fairtrade label are: Bananas, Cocoa, Coffee, Cotton, Flowers,

Fresh Fruit, Gold, Honey, Juices, Rice, Spices and herbs, Sports balls, Sugar, Tea, Wine

and Composite products (FLO, 2011d; FairtradeSA, 2013b).

Coffee, the first labelled commodity, remains the backbone of the Fair Trade system

(Tropik, 2004:147; Raynolds, 2002: 4; Bacon: 2004: 501) and will be used as an example

throughout this research assignment, with the Swaziland sugar industry as a case study.

The European Union and Swaziland sugar industry will be used to create context. The

next step will be to look at why Fairtade sugar is needed and define Fairtrade. Fairtrade is

then analysed from two perspectives: the producers and the consumers. From the

producers’ perspective, the two main economic benefits will be examined as well as the

standards and certifications required and the empowerment that Fairtrade offers. From the

consumers’ perspective, the focus will be on the marketing and strategy used to compete

and create demand as well as mainstreaming initiatives. Lastly, an analysis will be

conducted on issues, obstacles and challenges present in the Fairtrade model.

The primary research question that will be answered is: Is Fairtrade a potential alternative

solution to poverty alleviation for small-scale producers and their communities based on

the principle of trade not aid? Is Fair Trade able to transform the livelihood of producers by

alleviating poverty through the everyday shopping of consumers? Will Swaziland Pilot

experiment with Fairtrade become a tool of upliftment and poverty alleviation in the small

landlocked country?

2. RESEARCH METHODOLOGY

The primary question that will be answered throughout this report using qualitative

techniques is: Is Fairtrade a potential alternative solution to poverty alleviation for small-

scale producers and their communities based on the principle of trade not aid? Research

into existing journals, case studies and impact studies on Fairtrade was conducted to

attain an overall understanding of the Fairtrade model and its potential to alleviate poverty.

To develop a holistic view, Swaziland Fairtrade initiative is reported in conjunction to

developed Fairtrade sugar countries such as Belize, Malawi and Paraguay to demonstrate

the potential of Fairtrade sugar over time. The use of primary and secondary data was to

ensure different levels and types of information.

Due to Fair Trade in Swaziland still being in the early stages of development, no published

documents were available for analysis. Thus, all information gathered regarding Fairtrade

in Swaziland was gathered from communication with Fairtrade representatives in

Swaziland and these findings are discussed throughout this report. These primary

research techniques consisted of attending Fairtrade conferences and conducting semi-

structured interviews with representatives of Fairtrade who are involved with the pilot

experiment of the Swaziland Sugar Association. With regard to the semi-structured

interviews, there were a few standard questions but deviation was permitted based on the

answers received and thought processes. This facilitated probing and relied on developing

a dialog between the interviewer and the participant. The representative was informed

prior to the interview of the overall themes that would be covered to ensure that the

representative had the knowledge required for the interview as well as facilitated the

discussion. Ms. G. Dlamini is the primary officer responsible for Fairtrade in Swaziland and

works for the sugar association. The interview was to provide the practical aspects of

Fairtrade implementation and was conducted on the 23-10-2013. James Mwali and Peter

Oldham are representatives from the Fairtrade Labelling Organisation and are liaisons

between FLO and Fair Trade certified producers. This conference was conducted on the

2013-09-16 with the primary purpose of discussing Fairtrade in Swaziland.

Case studies are designed to bring out the details from the viewpoint of the participants by

using multiple sources of data. Yin (1994) listed six sources of evidence for data collection

in Table 1 for case study protocol: documentation, archival records, interviews, direct

observation, participant observation, and physical artifacts. Not all sources of evidence

need be used in every case study (Yin, 1994). In this study, the last three types of sources

are not relevant because they are not used.

Table 1: Types of evidence as identified by Yin

Source of Evidence Strengths Weaknesses

Documentation stable - repeated review unobtrusive - exist prior to case study exact - names etc. broad coverage - extended time span

retrievability - difficult biased selectivity reporting bias - reflects author

bias access - may be blocked

Archival Records Same as above precise and quantitative

Same as above privacy might inhibit access

Interviews targeted - focuses on case study topic insightful - provides perceived causal

inferences

bias due to poor questions response bias incomplete recollection reflexivity - interviewee expresses

what interviewer wants to hear

Direct Observation reality - covers events in real time contextual - covers event context

time-consuming selectivity - might miss facts reflexivity - observer's presence

might cause change cost - observers need time

Participant Observation

Same as above insightful into interpersonal behavior

Same as above bias due to investigator's actions

Physical Artifacts insightful into cultural features insightful into technical operations

selectivity availability

Source: Yin (1994:80)

Different types of cases are identified by Yin (1993) and an exploratory case will be used

for this case because it is often considered as a prelude to social research. Due to the

limited time frame, needed to ensure that maximise the information attained which case

studies enable. This is due to selectivity and the need for comprehensive understanding of

the system under analysis which is Fairtrade. A single case was used to challenge the

theory (Yin, 1994) of Fairtrade as a form of poverty alleviate through “trade not aid”.

 

3. HISTORY OF THE EUROPEAN UNION AND THE SUGAR INDUSTRY:

This research paper is developed against the background of the European Union and the

Sugar Industry.

Since 1968, as part of its Common Agricultural Policy (CAP), the EU operated a system of

production quotas, based on high internal prices with import tariffs to limit competition

(Marković et al, 2012:485; FLO, 2013b:6).

From 1975, the EU Sugar Protocol gave preferential market access to 18 African,

Caribbean and Pacific (ACP) countries, eight of which are classified by the UN as Least

Developed Countries (LDC). The protocol guaranteed duty-free quotas for 1.3 million

tonnes a year (Richardson & Ngwenya, 2013:265; FLO, 2013b:6), and high prices

equivalent to those paid to EU beet farmers. It also allowed duty free access for 300 000

tonnes a year on average from ACP countries and India under the special preferential

Sugar Agreement. An additional quota of 85,000 tonnes, mostly from Brazil and Cuba,

was agreed with a reduced duty of €98 per tonne.

In 2001, the EU introduced the Everything But Arms (EBA) arrangement, which gave

goods from all 48 LDCs, duty-free, quota-free access to the EU (Richardson & Ngwenya,

2013:266; Young & Peterson, 2013:498; FLO, 2013b:6). Import duties of €339 per tonne

for raw sugar and €419 per tonne for white sugar were applied to imports outside these

preferential arrangements. In 2006, reform of the EU Sugar Protocol began with full

liberalisation of the EU sugar market scheduled for 2015 (Escarte, 2013:1; FLO, 2013b:6).

This included the elimination of production quotas in Europe with preferential ACP country

tariffs to be phased out.

From 1 October 2012, price guarantees for ACP sugar were removed and replaced with a

negotiated market-related price (Richardson, 2012:7; FLO, 2013b:6). Reduced prices are

forcing many domestic producers – and some foreign ones – out of business. The EU has

committed to providing ACP producers with financial compensation, known as ‘sugar

protocol accompanying measures’, to help them invest in restructuring their sugar

industries. On-going reforms and restructuring is resulting in significant adjustments in the

sugar industry.

3.1. SWAZILAND SUGAR INDUSTRY

The origins of Swaziland's sugar industry can be traced back to an irrigation project in the

lowveld area at Big Bend in 1956. In 1960, the construction of a second mill further north

at Mhlume was underway. The industry took a quantum leap in 1980 with the

commissioning of a third mill at Simunye. By the end of the 1992/93 season, Swaziland's

sugar production had been pushed to 471 000 tons - nearly 90 times the output of the

fledgling industry of the 1950s (SSA, 2013a).

The operations of the Swaziland sugar industry are managed by the Swaziland Sugar

Association (SSA). SSA's primary function is to promote efficient production as well as

marketing initiatives for Swaziland’s sugar (SSA, 2013a). The number of smallholder

growers, mostly on Swazi Nation Land, has grown significantly in recent years. This

phenomenon lends itself to a solid ground for Fairtrade. In addition to this, is the fact that

40% of Swazis live below the poverty line, surviving on less than US$1.25 per day (WFP,

2013; Unicef, 2013) indicating the need for poverty alleviation mechanisms such as

Fairtrade.

The sugar industry in Swaziland is a substantial contributor to the GDP of Swaziland.

Swaziland Sugar industry revenue increased from E3,1 billion in 2011/12 to over E4,0

billion in 2012/13 according to the SSA annual review (2013b). Swaziland has generally

benefitted from sales to preferential markets in the past, in addition to the domestic (South

African Customs Union-SACU) market. The exposure to the low-priced world market has

reduced gradually over the years as a result of improved access to preferential markets,

particularly the EU. As a result of this access, Swaziland Fairtrade sugar sales will be

focused on the EU markets.

Fairtrade in Swaziland has been in commencement since 2008 with the first farmers being

certified in 2012. According to the Swaziland Sugar Association (SSA, 2013b) annual

report for 2012-2013, 7% of smallholder growers have been certified. The delay between

commencement and the first certification was due to the nature of the compliance

standards that the farmers had to achieve. The producers needed to buy into the Fair

Trade concept to make the necessary changes required to meet these standards. Another

factor was the cooperative model in Swaziland; currently there are 72 individual farmer

associations. For Fair Trade implementation, the SSA relied on the strategy of using

existing associations that were willing to be part of Fairtrade. To this a new association of

3 individual farmers was added with Fairtrade certification.

3.2. WHY FAIRTRADE IS NEEDED IN THE SUGAR SECTOR

The global sugar sector and Swaziland Sugar Sector faces many challenges such as price

volatility, competition from substitutes such as alternative sweeteners, health

consciousness that “bans” sugar and the impacts of climate change. These factors

contribute to poverty in the communities that grow sugar cane. A recent challenge that is

likely to adversely affect the sugar industry in Swaziland is the liberalisation of the EU

sugar market: On the 1st October 2012, EU import quotas were removed and guaranteed

EU prices withdrawn (FLO, 2013b:12). ACP producers now face increased competition for

sales from non-ACP countries, including larger-scale producers such as Brazil. Countries

that lose access to these higher-priced preferential EU markets will have to sell their

products on the world market. Fairtrade will protect these Swaziland sugar producers from

having to sell their product at a lower price to the world market by selling to the Fairtrade

niche market: a premium product, at a sustainable price with a premium attached.

4. WHAT IS FAIRTRADE?

There is not a single, official definition of Fair Trade which is followed by everybody. Each

organization has developed its own definitions, which, nevertheless, are quite similar and

address more or less the same issues. Some examples are: 

Fairtrade is a market-based approach to social and environmental development for

producers through the use of standards and a price floor (Johannessen & Wilhite,

2010:525; Valkila, 2009:3018).

Fair Trade is an international commodity production and distribution in “equitable

social relations,” developing a more stable and advantageous system of trade for

agricultural and non-agricultural goods produced under favourable social and

environmental conditions (Raynolds, 2000:297; Howard & Jaffee, 2013:75).

Initially Fair Trade was viewed as a part of trade, but now it is viewed as an alternative

form of trade (Fridell, 2010:461; Reed, 2008:12). Fairtrade is also not a legal agreement

between countries such as World Trade Organisation (WTO) free trade; instead, it is a

voluntary partnership between producers, sellers and consumers. Due to Fair Trade

products competing with other brand products in the conventional markets, Fairtrade

ensures that only the best quality product is provided. Ethics and quality are the driving

forces of Fairtrade. Consumers will purchase Fairtrade products either for ethical reasons,

for quality reasons, or both. 1

5. PRODUCER PERSPECTIVE

The producers are the main focus of Fairtrade. Fair Trade supports producers in securing

better long-term deals, contributing to greater sustainable development in developing

countries and improved terms of trade (Doherty et al, 2013: 167; FLO, 2011a). Producers

are required to keep to their side of the bargain by aiming to provide safe and healthy

working conditions (Smith, 2010:11; Howard & Jaffee, 2013:75; FLO, 2011a). In addition to

this, producers are expected to conduct their production in a way that results in the least

possible environmental damage.

Fair Trade initiatives open up new avenues of communication by providing producers

greater access to market information, technical expertise, and other resources (Reed,

2008:4; Smith, 2010:18). This communication establishes important ties of social

connectivity which is crucial for the success of Fair Trade. This allows strong, long-term

bonds between producers, importers, and labelling organizations to be developed for a

more successful Fairtrade future. In Swaziland, the SSA is acting as the link between

these different bodies and encouraging consumers to meet with the producers to reinforce

1 FAIRTRADE VERSUS FAIR TRADEFor the purpose of this research assignment, a distinction must be made between “Fairtrade” and “Fair Trade”. “Fairtrade” (one word) is the leading fair trade movement in the agricultural sector. It is the name and brand (the Fairtrade Label), and the mechanisms this organisation uses, whereas, “Fair Trade” (two words) refers to the concept of ethical trading (Fairtrade Canada, n.d.; Fairtrade Label, n.d.; Traidcraft, 2013).

this link.

As we delve deeper into the producers’ perspective, the following aspects will be covered:

Firstly, the two main economic benefits: guaranteed minimum pricing and a premium

benefit. Secondly, the Fairtrade standards set by FLO and enforced by FLO-Cert. Lastly, a

look into the empowerment of the producers.

5.1. TWO MAIN ECONOMIC BENEFITS OF FAIRTRADE FOR PRODUCERS

Small producers are often at the mercy of unscrupulous brokers that bargain with prices

for a larger profit. In the Sugar industry, the global market forces determine whether there

is success or failure. FLO has created two main economic benefits in Fair Trade for the

producers to ensure sustainability, namely: guaranteed minimum pricing and price

premium.

5.1.1 Guaranteed Fairtrade Minimum Price

According to Reinecke, Fair Trade assumes that the bargaining price amongst producers

and consumers is not fair because the bargaining power is unequal; therefore, the

minimum price was created (2012: 567).

The ‘‘fair’’ price is one of the reasons that producers are attracted to the Fairtrade model.

Fair price is calculated by the Standards Unit at FLO and the process for agreeing

international Fairtrade standards follows the ISEAL Code of Good Practice for Social and

Environmental Labelling (FLO, 2013c) where stakeholders (including producers, traders,

NGOs) participate in the research and consultation process and final decision making.

Even though there is no minimum price for sugar, in Swaziland it is informally guaranteed

through the pricing mechanism of the Swaziland Sugar Association which will be

discussed in further detail below.

This price aims to ensure that producers can cover their average costs of sustainable

production (Johannessen & Wilhite, 2011: 527; Reinecke, 2010:571) by setting a price

floor to ensure that a product cannot be sold at a price below what Fairtrade Labelling

Organisation (FLO) deems as an appropriate Cost of Sustainable Production (CoSP). It

acts as a safety net for farmers at times when world markets fall below a sustainable level.

Without this price floor, farmers are at the mercy of volatile markets.

Fair Trade also offers flexibility with the Fairtrade minimum because when the market price

is higher than the Fairtrade minimum, the buyer must pay the higher price (Fridell,

2010:464; Raynolds, 2000:301). This is extremely advantageous for Fairtrade producers

because no matter the circumstances, they will always benefit from market conditions. A

prime example of the Fairtrade minimum price can be demonstrated by the coffee industry

history and Figure 1 below.

In the coffee industry, the world market has always been characterized by its high price

volatility (Johannessen & Wilhite, 2011:527; Lewin et al., 2004:104; FLO, 2011b). This

volatility prompted international governments to negotiate the first International Coffee

Agreement (ICA) to stabilize the coffee market in 1962. Unfortunately, negotiations for the

1989 version of the International Coffee Agreement collapsed, causing coffee prices to

drop to less than US$ 0.8 per pound. In October 2001 a thirty year low was to devastate

farmers. In what is now known as the ‘Coffee Crisis’. Coffee prices fell to an extreme low

of US$ 0.45 per pound. The result of the Coffee Crisis was economic devastation for many

coffee-producing countries. Over 100 million growers, processors, traders and retailers

dependent on coffee were affected (Reinecke, 2011: 568; Biggs et al., 2011; FLO, 2011b).

Figure 1 below is a line graph indicating the Arabica coffee market from 1989 to 2010. This

graph illustrates a comparison of Fairtrade minimum prices and New York normal market

prices.

Figure 1: Line graph indicating the Arabica coffee market 1989-2010: Comparison of Fairtrade and

New York Prices

Source: Reinecke (2012: 569); Fairtrade International (2011b).

As demonstrated above it is clear that in the volatile coffee industry, producers who did not

have the benefit of Fairtrade price floors would have been adversely affected by the price

drops. The participation in Fair Trade networks helps to reduce farmers’ livelihood

vulnerability (Ruben & Fort, 2011:571; Bacon, 2004:498)

The coffee industry is the backbone of Fair Trade and thus we can draw similarities

between the coffee and the sugar industry. In both industries the trade agreements were

terminated ie. International Coffee Agreement (ICA) and the Sugar Protocol. Both

industries are commodity products in which the producers are not reaping the benefits of

trade, both are characterised by volatile markets as well as both Fair Trade products sell

premium products to the market (Escalente, 2013: 2-3; Bacon, 2005:504).

The sugar industry is often characterised as a volatile industry and is demonstrated in

Figure 3. Between 2004 and 2006, prices more than trebled, to 18 cents/lb, and then fell

by half within a year. More recently, prices soared to a 30-year high of 36 cents/lb during

February 2011 before plummeting to around 20 cents/lb in 2012 – a fall of 45%. Reasons

for the price fluctuations from 2008-2012 are as a result of deficits and surpluses in sugar

production and the use of sugar cane for the production of ethanol as an alternative source

of energy. Production deficits in 2008-2010 were followed by surpluses in 2010-2012 as

sugar crop areas expanded as a result of the previous year’s deficits. A further substantial

surplus is forecast for 2012-13. Surpluses stem predominantly from world production

exceeding consumption and export availability exceeding import demand.

Figure 2: World Raw Sugar Prices 1982-2012 (Monthly Averages)

Source: World Bank-GEM (2013a); FLO (2013b:7).

Sugar price volatility is largely the result of changes in production – especially by large

players such as Brazil and India (Jolly, 2012:182; FLO, 2013b:7) – but is also due to the

nature of the industry. As well as being major sugar producers, Brazil and India are also

major sugar consumers, and their export volumes are secondary to the needs of domestic

processors.

A large difference with the Fair Trade sugar is the fact that there is no guaranteed

minimum price. This is because of the complexities of price setting in the sugar sector.

According to Fairtrade Labelling Organisation (2013b:15) the sugar sector is characterised

by structural differences in sugar supply chains, government-set prices and distortions

caused by international trade regimes. The conclusion was that it would be more effective

for sugar prices to be negotiated between producers and traders rather than through the

minimum price mechanism. A review of this is set for 2013 and according to James Mwali

(2013), a FLO representative; a Fairtrade minimum price for sugar is likely to be

implemented.

The Swaziland Sugar Association sells the Swaziland sugar into preferential markets due

to its quality and certification by international bodies. This enables the sugar to be sold at

above average market prices and this acts as a natural price floor. Even when there is

interest in Fairtrade products in alternative markets but at a lower price, the SSA does not

compromise by selling at the lower price. In this way, the sugar producers who are not

certified by Fairtrade are not disadvantaged.

5.1.2. Fairtrade Premium

In addition to the Fairtrade minimum price, there is an additional sum of money, called the

Fairtrade Premium. This money goes into a communal fund for workers and farmers to use

to improve any of these three conditions: social, economic and environmental (Porter &

Kramer, 2011:10; FLO, 2011c:3).

In Swaziland, the Fairtrade premium is allocated proportionately at the end of the harvest

year to the different producers based on a ratio calculation. Due to the limited amount of

Fairtrade sugar sales of only 10 000 tonnes, substantial premiums are not currently being

obtained. This results in the premium being mostly used to cover the fees required for

Fairtrade certification. More developed sugar Fairtrade countries are Belize, Malawi and

Paraguay. These countries can be used to demonstrate the accrued benefits that can

result from the Fairtrade premium over time.

5.1.2.1. Socio-Economic Fairtrade Benefits

Small-scale farmers benefit from Fair Trade by enjoying slightly higher and more stable

incomes than producers not forming part of the Fairtrade network. This is predominantly

due to the Fairtrade price minimum that has been set. This is particularly apparent in the

coffee case, in which it was reported that only members of Fairtrade certified cooperatives

could survive on an income derived solely from coffee growing in years when global

market prices were lower (Ceval: 2012:2; Reinecke, 2011:569; Raynolds, 2000:304).

Furthermore, Fairtrade facilitates training programmes in producer organisations such as

assistance with financial accounting. The difficulty with these training and development

programmes is the literacy rate, which is often very low (Ceval, 2012:3; Johannessen &

Wilhite, 2011: 536; Smith, 2010:11). Fairtrade attempts to improve the terms of trade for

producers by promoting long term relationships, prepayments of harvests and market

access.

Actual socio-economic benefits of Fairtrade in the developed sugar industry countries are

as follows: In Malawi, benefits that have accrued as a result of the premium according to

FLO (2013b:19) were 30% direct cash payment to farmers to help pay for necessities and

40% for initiatives to ensure the sustainability of the business (annual plough-out and

replant, replacement of vital machinery etc). In Paraguay, benefits that have accrued as a

result of the premium according to FLO (2013b:20) resulted in members deciding to use

50% of the Fairtrade premium as a cash payment to bridge the gap between harvests

when incomes are at their lowest.

5.1.2.2. Social Fairtrade Benefits

Fairtrade Premium income is often used for projects in the communities, thus benefitting

the wider population and having an impact that extends beyond the members and workers

of the certified organisations (Ceval, 2012:4; Howard & Joffee, 2013:4; FLO, 2011a). This

applies in particular to education, where direct support of educational institutions such as

schools for pupils, includes indirect impacts such as improved accessibility to the schools.

Further, one of the key aspects of the impact of Fair Trade, is the organisation of rural

zones. This is where the process, unique to Fairtrade, of how the Fairtrade Premium

income is managed and used, plays a crucial role. Due to Fairtrade, small-scale farmers

and workers have the opportunity to be directly involved in the planning and

implementation of development projects by the use of the premium income which is

decided upon democratically by producers within the farmers’ organization, or by workers

on a plantation (Ceval, 2012:5-6; Smith, 2010:10; FLO, 2011a, 2011c:3). This means that

the local population is ultimately involved in these projects. Determining the use of the Fair

Trade premium may itself strengthen democratic decision-making processes.

Actual social benefits of Fairtrade in the developed sugar industry countries are as follows:

In Belize, benefits that have accrued as a result of the premium according to FLO

(2013b:21) were student grants – to enable children to continue their education; school

grants – for repairs and improvements; grants to churches, youth groups women’s groups

and a community library; welfare grants to poor families, the elderly and disabled for

medical costs; funeral grants and water tank system installed in one community. In Malawi,

benefits that have accrued as a result of the premium according to FLO (2013b:19) were

30% for community projects (support to water and electricity supply, health centres,

schools, roads etc). Access to clean water is literally a lifesaver and three bore holes have

been financed using the premium to provide access to clean water. An exciting water

project is underway in Salumeji village to bring tap water to farmers’ homes. In Paraguay,

benefits that have accrued as a result of the premium according to FLO (2013b:20) were a

new office with a clinic and community hall for 100 people; repairs or improvements to

members' houses and roofs; replace latrines with newly-built bathrooms and toilets and

improved access to running water.

5.1.2.3. Environmental Fairtrade Benefits

It was found that, as a result of the relevant standards and the regular, independent

monitoring of these, Fair Trade promoted sustainable production methods. Fairtrade’s

environmental standards have emphasized making products without harming the

environment. Standards were introduced such as the requirements that attempts be made

to protect forests and wildlife habitat, prevent erosion and water pollution, reduce chemical

fertilizer and synthetic pesticide use, and compost wastes (Raynolds, 2000:300; Ruben &

Fort, 2011:570). In order to implement this, Fairtrade will continue working at different

levels: Supporting the producers by educating and training them to meet Fairtrade’s social

and environmental standards as well as providing the tools needed for producers to fulfil

these standards and elaborate on their own development plans. Providing producers the

technical tools needed to face environmental and climate change challenges; Providing

financial services to producers to face and adapt to environmental and climate change

challenges (FLO, 2011c:3; Ceval, 2012:7; Smith, 2010:11)

Actual environmental benefits of Fairtrade in the developed sugar industry countries are as

follows: In Belize, according to FLO (2013b:21) the benefit that has accrued as a result of

the premium was the implementation of an on-going project to distribute subsidised

fertilizers, essential to increase cane quality and quantity but which many farmers were

unable to afford and a successful pest . In Paraguay, the benefit from the premium

according to FLO (2013b:20) was a partial payment to be invested back into the sugar

cane fields in order to improve soil fertility.

5.2. STANDARDS AND CERTIFICATION

Application of Standards is a major industry in its own right within the Fair Trade

movement. Fairtrade Labelling Organisation (FLO) is one of the main standard setting

agencies. In the late 1980s, European alternative trade organizations began labelling fair

trade products to facilitate their entry into conventional markets. Three fair trade labels,

TransFair, Max Havelaar, and Fairtrade Mark, were successfully introduced in different

parts of Europe (Moore, 2004:74; Johannessen & Wilhite, 2011:527). In 1997 these

labelling efforts were united under the umbrella NGO, Fairtrade Labelling Organizations

International (FLO), which was responsible with harmonizing the somewhat different fair

trade standards and creating a single fair trade market (Hira & Ferrie, 2006:108-109;

Raynolds, 2000:301).

FLO has established basic fair trade principles and procedures and specific certification

requirements (Hira & Ferrie, 2006:108; Bacon, 2004:501):

• A price that covers the cost of production

• A social premium to provide funding for development projects based on socio-

economic, environmental and social

• A partial payment in advance to avoid small producer organizations falling into debt

• Contracts that allow long-term production planning

• Long-term trade relations that allow proper planning and sustainable production

practices

• Environmental standards promoting best agricultural practice focusing on minimised

and safe use of agrochemicals, proper and safe management of waste, maintenance

of soil fertility and water resources, and no use of genetically modified organisms.

• A democratic decision-making process must be in place, with all members having an

equal right to vote on key issues.

• Forced labour and child labour are prohibited.

The above mentioned standards are your basic pre-requisites in place by FLO, but listed

below is the additional Fairtrade Standards specific for sugar growers: (FLO, 2013;

Howard, 2013:75)

Producer organisations are paid a Fairtrade Premium of $60 per tonne ($80 per tonne

for certified organic) to invest in community, business and environmental projects.

In Swaziland, these standards have improved the general management of the

smallholders by providing focus; has forced these cooperatives to ensure that procedures

are being followed and traceability is occurring throughout the production process. An

example of this is ensured payment of employees and the record keeping thereof. These

standards also provide structure within these organisations by assigning different

responsibilities to individuals for the different aspects required by the certification.

5.2.1. FLO-Cert

The certification of these standards is carried out by an autonomous unit within FLO called

FLO-cert. This organisation operates independently from any other Fair Trade interests

and follows, as appropriate, the ISO 65 standards for certification bodies (FLO, 2011;

Raynolds, 2002: 410).

In Swaziland, the certification process begins with a written application to FLO-CERT from

the producer cooperative, with the support of the SSA. If the application is accepted, the

organisation will be physically inspected against Fairtrade standards by a FLO-CERT

inspector based in Cape Town. The inspector’s report is then considered by the FLO-

CERT Certification Committee which takes the final decision on whether or not to certify.

Producers are issued with a certificate valid for 3 years, and follow an annual re-

inspection. 

For each area there are minimum requirements that a producer organisation must meet in

order to be certified. There are progress requirements that the certified organisation must

demonstrate permanent improvement over time (FLO-Cert, 2013). For example, a

minimum requirement is a ban on the use of agrochemicals in the FLO list of prohibited

materials. A progress requirement is the on-going reduction in the use of non-permitted

agrochemicals. This helps support the producers and helps them to gradually improve

their practices. The Swaziland Sugar Association has dedicated permanent extension

officers continuously in touch with the producers, examining the soils and giving

recommendations on irrigation, fertilization and spraying procedures. Overall these officers

educate the producers in all aspects of good farming practices including the Fairtrade

principles. This is another indication of the capacity building initiatives that are occurring in

Swaziland.

Where Swaziland producers have difficulties in continuing to meet minor Fairtrade

standards, they are provided with the support and designated timeframe to enable them to

meet these requirements rather than being automatically or immediately excluded from the

system. Producer groups that fail to meet minimum Fairtrade standards are first informed

of the reasons for their non-compliance and given time to rectify the situation within a

specified period of time. If the group fails to take the required corrective actions within the

prescribed period, then the group is suspended from trading under Fairtrade terms for a

fixed period during which they are again requested to undertake the corrective actions. If

they still fail to take the necessary actions to become compliant, the producer group is

ultimately decertified and barred from trading under Fairtrade terms (FLO, 2013b).

In Swaziland with regard to the certification requirements, the farmers have done certain

things in a particular manner for a number of years and they view the way they have

always done things as being correct. To convince the farmers that they need to change

has been and continues to be a practical challenge.

5.3. EMPOWERMENT

Empowerment has become a fundamental element of Fair Trade. A unique aspect to Fair

Trade is that the producers have an equal say in the running of the business. The

Standards Committee consists of six members. This includes two Labelling Initiative

representatives, two producer representatives and two trader representatives (Reinecke,

2010:571: FLO, 2013c). This enables producers to have an equal say in the standards that

are affecting them and provide the practical perspective to the standards.

Fair Trade organizations have the potential to be the agents of empowerment, this is done

through the means of democratic decision-making (Ceval, 2012:5-6; Smith, 2010:10) that

occurs with the facilitation of the price premium. This enables the producers to

democratically decide on the aspects on the community or organisation that the Fair Trade

premium will be used for.

In Swaziland, no individual organisation can be certified as an individual Fairtrade

producer; these producers must form part of a cooperative. There is a first grade level

whereby individual organisations elect for example 3 members each to form a board for

their cooperative. This board is then called the second grade level. This board is there to

monitor and provide internal control within the cooperative. Within this board, a premium

committee is formed that has the responsibility to ensure the premium is being utilised for

the voted purpose (see diagram below). The way this premiums use is voted for is by the

individual organisations communities independently decide what they would like the

premium to be used for. For example, the community 1 decides they would like a

community centre or a school, they then vote within that community for a school. The 3

representatives from the individual organisations go back to the board and the premium

committee will ensure the premium is utilised for a school.

The Swaziland Sugar Association has no say in the communities’ votes or what the

premium is used for; their facilitation in conjunction with FLO representatives is capacity

building to ensure effective decision making occurs within these communities. In Belize, an

example of this facilitation offered by FLO is “Fairtrade officials directed us in creating

social programs. They gave us ideas and frankly said a larger percent of the premium

should be dedicated to social programs” (Escaante, 2013:6). Additional consumer

empowerment in Paraguay is the cooperative began building a first-of-its-kind producer-

owned mill (FLO, 2013b), partly financed by the Fairtrade Premium, will significantly

improve the lives of sugar farmers, workers and their communities.

Figure 3: A matrix of a decision-making structure within a cooperative in Swaziland.

Premium committeeCooperative Board Formed

Individual organisation 1

Community 1School/Community

Centre

Individual Organisation 2

Community 2

Individual Organisation 3

Community 3

First Grade Level

Second Grade Level

Source: Ms. G. Dlamini (2013)

6. CONSUMERS PERSPECTIVE

Consumers of Fairtrade certified products are given the opportunity when buying products

with the Fairtrade Mark to improve the livelihoods of farmers and workers in developing

countries through their everyday shopping (Loureiro & Lotade, 2005:129; Fairtrade

International, 2011a). A look into the marketing and strategy needed to enter into these

consumer markets is analysed as well as the mainstreaming initiatives.

6.1. MARKETING AND STRATEGY

The emphasis of Fairtrade marketing is attempting to make consumers more ethical in

their purchases as well as raising the consciousness of producers (Topik, 2010:146;

Moore, 2004:82). Creating greater transparency between the grower and the end

consumer—informing the sugar user about the lives of the sugar cane growers. From a

marketing perspective it is, therefore, important to transmit to consumers what the benefits

are to the Fairtrade producers as well as their communities from their everyday purchasing

of Fair Trade products. Marketing must try to create awareness and help consumers to

make an alternative purchasing decision, predominantly an ethical purchasing decision.

Fair trade goods do reveal the conditions under which they are produced and traded and

important bonds are formed (Tropik, 2010:147).

Brand building and information dissemination are required in order to educate the

consumer and create awareness of the producers conditions and to the affect that the

consumer can make a socially beneficial purchase. According to Whatmore and Thorne,

this emphasis on public education links consumers more directly to producers, building

potentially powerful two-way networks that span the consumer/producer divide (1997).

While producers draw on these networks to access expertise and other resources,

consumers use these networks as a framework for redeveloping trust in the social and

environmental origins of their purchases.

In Swaziland, the marketing and strategy initiatives are in the process of development. A

general strategy of the SSA is to not enter into lower priced markets, only aim at supplying

the preferential markets at above market prices. The SSA is endeavouring to sell the Fair

Trade sugar to intermediaries to add value by processing the sugar and using these

intermediaries to increase Fair Trade demand.

6.2. MAINSTREAMING

One business strategy that has been actively pursued by the Fair Trade movement has

been the mainstreaming of Fair Trade (Raynolds, 2009:1090; Moore, 2004:82). Associated

with this move into the mainstream, of course, was the need to provide a consumer

guarantee – hence the development of Fair Trade labels. Fair Trade labelling has played a

critical role in expanding markets for alternative commodities and establishing new

consumer producer links. Their brand mark is a form of quality identification to the

consumers (Raynolds, 2000:298; Moore, 2004:75).

This initiative is to combat the oversupply aspect and balance demand by establishing

consistent supply with larger organisations. Starbuck’s, Wal-Mart, Nestle´, Tesco,

Cadbury’s and Ben and Jerry’s are a few of the mainstream organisation Fairtrade has

partnered with (Doherty et al, 2013:162-163; FLO, 2013c). In Belize, a sourcing

partnership was established in 2008 between Belize Sugar Industries Ltd and Tate & Lyle

(Escalante, 2013:2; FLO, 2013b). This is a potential strategy for Swaziland to consider

because this would result in substantial benefits. A potential partnership is Conco Crescent

in Matsapha, Swaziland who produces Coca Cola’s syrup.

7. ISSUES, PROBLEMS AND OBSTACLES

The ultimate impact and sustainability of Fair Trade will depend on addressing these

broader issues, problems and obstacles discussed below:

The Fairtrade criteria are intended to guarantee a minimum price and premium to certified

producers; but the criteria are not aimed at ensuring a fair supply chain is maintained

(Johannessen & Wilhite, 2011:538-539; Murray et al., 2003:15-17). The key and obvious

problem with this system is that the market for fair trade is limited to those who are willing

to purchase or who have access to these products. This has resulted in an oversupply

(Hira & Ferrie, 2006: 108; Bacon, 2004:497) of Fair Trade products, whereby there is not

enough effective demand, in turn, limiting the expansion of the Fair Trade market.

This is particularly prevalent in Swaziland Fairtrade sugar production. In 2012-2013, 55000

tonnes was produced with annual sales of 10000 tonnes. This has resulted in an

oversupply with limited demand. Due to low demand, Fair Trade certified cooperatives are

selling a large portion of their produce in conventional markets. Thus, net contributions to

improved livelihoods remain limited since many farmers could not sell their entire harvest

(Ruben & Fort, 2011:570; Bacon, 2004:507) as Fairtrade certified products and thus do not

receive the total potential premium benefit. In Swaziland, only 18% of Fairtrade sugar is

being sold as Fairtrade sugar and thus the producers are only receiving 18% of their total

potential premiums. Thus, Fairtrade is moving towards mainstreaming their products in

order to increase this demand to balance the supply and demand of fair trade products.

However, a large criticism with mainstreaming is the risk of co-optation, dilution and

reputational damage to the fair trade movement (Doherty et al, 2013:162-163; Moore,

2004:82). This broader concept of dilution considers that Fairtrade bodies are influenced

by certain mainstream organisation to make regulatory decisions on their behalf instead of

the producers. The issue of ‘fair-washing’ or ‘clean-wash’, (Doherty et al, 2013:162-163;

Fridell, 2007) occurs when a company ‘derives positive benefits from its association with

the fair trade movement. This is the fear that mainstream corporations can derive many

positive reputational and financial benefits through limited engagement in other

sustainable development initiatives. According to the Fairtrade representative James

Mwali (2013), FLO will have the Fairtrade label and written below is the ingredient that is

Fairtrade certified to combat this fair-washing.

Many producers find that they have higher input costs as a result of the requirements to

adhere to Fair Trade Standards e.g. agrochemical specifications (Ruben & Fort, 2011:570;

Raynolds, 2002:11) that has resulted in an increase in expense. In Swaziland, this

increase in expense has resulted in the premium being used to finance the costs involved

in being certified; instead of the intended benefits of communal upliftment in social,

economic and environmental conditions.

In many cases, producers do not claim economic benefits of Fair Trade because they do

not understand the system and their rights to claim (Johannessen & Wilhite, 2010:536-

537; Murray et al., 2003:15-17). This task is difficult for people with low levels of education.

In Swaziland, due to the low literacy rate, Fair Trade has provided training and educational

upliftment to staff in charge of Fair Trade at the expense of FLO to not add additional

financial strain on the cooperatives. SSA’s primary aim is capacity building within these

cooperatives to ensure that producers are able to utilise the benefits that accrue from Fair

Trade to its maximum potential.

Fair Trade USA (FTUSA, formerly Transfair USA) announced in 2011 that it was resigning

from the international fair trade certification body, Fair Trade International (FTI), and that it

would begin certifying coffee produced on plantations, rather than only coffee from small

farmer cooperatives, as stipulated by FTI standards. (Howard, 2013:73; FLO, 2011c). This

decision has generated strong disagreements among firms regarding the direction the fair

trade system should take since a key aspect to Fair Trade is that only small cooperatives

are certified. In the sugar industry, there have been no talks of certifying larger plantations

since a large portion of sugar cane harvest comes from small growers organisations.

There are major benefits to be gained from Fairtrade if it is managed properly as well as

risks and obstacles. FLO is taking initiatives to overcome these obstacles and improve the

Fairtrade model.

8. DISCUSSION

The findings with regard to Swaziland and Fairtrade sugars are as follows: Fairtrade in

Swaziland has been in commencement since 2008 with 7% of smallholder growers having

been certified in 2012-2013. There was a delay due to the nature of compliance with the

required standards, encouraging the producers to buy into the Fair Trade concept as well

as the cooperative formations. It was a wise decision to use existing cooperatives as well

as forming new associations. By using existing cooperatives, there was the benefit of

prevailing relationships and established structures.

The fact that there is no guaranteed minimum price does not affect Swaziland Fairtrade

sugar. SSA has a natural price floor mechanism which is determined internally and the

sugar is sold into the markets which are profitable. Due to the limited demand of Swaziland

Fairtrade sugar, a large portion has to be sold into conventional markets. This is not

necessarily a disadvantage to the producers since the SSA sugar price will always cover

the cost of sustainable production. The only perceivable disadvantage is that the premium

mechanism is not maximised. Most of the current premium is being utilised to cover the

costs of certification. This results in the dilution of the Fairtrade premium and the danger

lies in that current Fairtrade producers may become discouraged and opt out of the

program due to the expected benefits not being attained. This is indicative that the

Fairtrade model increases the input costs because of certification and thus requires a

minimum amount of sales prior to having distributable premiums. The SSA will need to

increase marketing and mainstreaming initiatives to drive the demand needed for the

potential premium to be obtained.

In Swaziland, it was found that the standards of Fairtrade helped the overall improvement

of the organisations. To mention a few: records had to be kept; traceability had to occur;

only certain agrochemicals were permitted and standards of procedures had to be adhered

to. FLO-cert has the minimum requirements but also the progress requirements. This

facilitated the organisations to constantly improve whether significantly or marginally. FLO-

Cert informed the producers of their non-conformances and offered the support with a

designated timeframe to make the necessary corrective action. This allowed continuity for

producers because they were not immediately excluded from certification but given the

opportunity to improve. This approach assisted with certification in the initial stages.

A crucial question to ask is will Fairtrade in Swaziland be sustainable?

Although market conditions may be uncertain, all the indicators show that it could be a

success. The indicators are:

A present stable well developed infrastructure and management

Production costs are one of the lowest in the world

The sugar fields in Swaziland are irrigated thus not susceptible to drought

According to Peter Oldham (2013), the population of Swaziland has stoic ethics

comparable with the people of Japan

Due to the sustainability potential, should the Fairtrade system be successfully

implemented in Swaziland, this can have significant benefits for the smallholder producers

as well as the surrounding communities. The potential for poverty alleviation in Swaziland

by implementing the Fairtrade model is definitely a feasible strategy. Reasons for this is

with their first year of certification, Swazilands sales of 10000 tonnes generated an annual

premium of US $600 000. This is currently used predominantly to cover the costs of

certification; nonetheless, the producers are still able to cover this additional expense. In

the future this situation will improve more and more with time. With the balance of 45000

tonnes of Fairtrade sugar being sold with a premium of US $60 into Fairtrade markets, this

would have the result of US $2.7 million/year being available to the Fairtrade producers.

This is a substantial amount in a country with merely 1.231 million people (World Bank,

2013b). This demonstrates that Fairtrade sugar could be a vehicle to alleviate poverty and

improve social, economic and environmental conditions in Swaziland.

9. CONCLUSION

Fairtrade’s crucial statement of “trade not aid” is one of the biggest drivers towards this

alternative form of trading. The principle behind this ensures that Fairtrade is not a once off

benefit but instead a sustainable benefit and upliftment tool for producers. Fairtrade

addresses the injustices of conventional trade, which traditionally discriminates against the

poorest, weakest producers. It enables them to improve their position and have more

control over their lives. The first economic benefit of minimum pricing ensures that no

matter the price in the market, producers will still be able to cover their average costs of

sustainable production. Without this, farmers are completely at the mercy and are often

affected by the volatility of the market. This ensures the survival and continuation of small

producers, that may have previously been excluded from the market had they not been

following a fair trade approach. A potential minimum pricing mechanism is to be

implemented but Swaziland Fairtraders were not adversely affected by the lack of

minimum pricing.

The second economic benefit is probably one of the most unique aspects of the Fairtrade

model-The price premium. This is the tool that ensures the upliftment of the organisation

as well as the community in which the organisation operates. Many benefits have resulted

from the premium and actual results such as training, operational equipment, educational

facilities, infrastructure development and democratic decision-making. This was clearly

indicated by the communal upliftment in developed Fairtrade certified sugar countries such

as Belize, Malawi and Paraguay. This is indicative that benefits can be acquired from the

Fairtrade sugar industry and alleviates poverty for sugar cane producers. Democratic

decision-making provides empowerment of producers and the overall communities in

which they operate.. Democratic decision-making ensures that the individuals in the

community are deciding on where the premium should be spent. This ensures that the

community is getting the benefits that they deem are important to them and not what is

perceived to be important by a foreign third party. Fairtrade does have issues and

obstacles that it needs to overcome, but these are not significant enough to negate the

benefits that this alternative form of trade is having on the producers. FLO is taking

initiatives to overcome these obstacles and improve the Fairtrade model.

Future research could be an in depth analysis at the standard setting and certification of

Fairtrade. Comparisons can be made between other ethical labels such as Organic

products. Research into ethical consumerism and the requirements of branding, marketing

and pricing of the Fairtrade Label. An investigation into pricing within the Fair Trade

movement would be useful with regard to the “fair” price and the costs that should be

considered to ensure the Cost of Sustainable Production is covered. A comparison

between traditional trade approaches and alternative trade approaches to alleviate

poverty.

Fairtrade is sensitive for it depends on the sentiment and ethics of the consumers. There is

no reason to doubt that consumers will continue to support and be prepared to pay a small

extra premium for superior quality products and communal upliftment that the Fairtrade

label guarantees. Fairtrade should maintain its commitment to quality, outstanding

administration and “hands-on” intensive education of small farmers, as well as, educating

the consumers on the benefits their everyday purchasing is having on these producers. In

the case of Swaziland, the Fairtrade model has the potential to alleviate poverty if they can

overcome the current limited demand. What started with humble beginnings in assisting a

few small farmers may well be one of the major answers in upliftment of communities and

the alleviation of poverty.

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