Trade and Industry Minister Rob Davies has endorsed the International Trade Administration Commission’s recommendation to increase import duties for sugar.
In a statement on Tuesday, the Minister agreed to the raising of import duties to US$680/ton.
This follows an application launched by the South African Sugar Association (SASA) to ITAC in February 2018 for an increase of the dollar based duty from US$566/ton to US$856/ton and an intensive investigation by ITAC.
ITAC, in its determination of an appropriate level of protection, considers, among others, the domestic cost of production.
Fertiliser and chemicals, electricity, transport and labour are among the major cost drivers.
As per ITAC regulations, the Trade Minister is empowered legally to only support or not to support the recommendations submitted by ITAC.
Inputs by role players
The investigation to arrive at the recommendations is an independent process by ITAC, which included consultation and submission of inputs by all affected stakeholders.
The Department of Trade and Industry (dti) said while the level is not at the maximum bound rate as initially requested by the industry in the application, the US$680/ton will provide the immediate relief urgently required by the industry and sufficient trade protection against the surge of imports.
“The tariff forms part of a set of measures considered by government, in collaboration with the industry in order to improve the sustainability of the industry and future growth prospects,” said the dti, adding that the sugar industry is a significant contributor to the South African economy.
The industry is also a major employer in sugar-growing provinces like KwaZulu-Natal and Mpumalanga.
Contribution of the sugar industry
Sugar production contributes about R14 billion to gross domestic product (GDP) and the industry employs 85 000 people directly, and a further 350 000 indirectly through food processing and other sectors.
The sugar industry, through the SASA, has outlined and advanced the industry-specific challenges that motivated its application to increase the dollar-based reference price to mitigate some of the challenges.
According to the submission made by SASA, the challenges facing South Africa’s sugar industry are largely affected and influenced by three factors, namely:
- The influx of duty paid imports;
- The current level of DBRP (US$566/ton), which is claimed to be inadequate and below cost of production (inadequate margins); and
- Implementation of Health Promotion Levy (HPL) also referred to as Sugar Sweetened Beverage Tax.
A sugar value chain task team comprising representatives from the beverage industry, retailers, SASA officials, small-scale farmers and manufacturers and officials from the Industrial Development Corporation was formed in May 2018.
The task team was formed in order to identify ways of supporting the industry whilst keeping prices paid by consumers affordable. The team was mandated to seek rapid solutions to the challenges facing the sugar industry focusing on short-, medium- to long-term plans.
The short-term interventions include a brief analysis of the global market of sugar; monitoring import trends and commitments by the upstream and downstream users.
Medium- to long-term interventions include a competitiveness improvement programme; diversification; deepening transformation and amendments to the Sugar Act of 1979 and Agreement, 2000.
Several commitments were made between SASA and the South African Farmers Development Association (SAFDA). The commitments include meaningful improvements of the price paid to small-scale growers for cane delivered, as well as an industry resolution to deal with challenges associated with current daily rateable deliveries for small-scale growers among others.
Agricultural Development Fund
Meanwhile, Coca Cola Beverages South Africa (CCBSA) has announced that it has an agricultural development fund that could be accessed for specific projects by members of SAFDA.
The fund is managed by the Mintirho Foundation that was formed to promote the development of historically disadvantaged farmers and small suppliers of inputs in the CCBSA value chain through the funding of sustainable businesses.
The foundation was formed as a result of the Competition Commission conditions agreed upon as part of the large merger between Coca-Cola Bottlers in South Africa.