Importers fear job losses, but sugar producers laud duty

21 Nov 2014
Business Report, page 1
Nompumelelo Magwaza

South Africa’s decision to raise the dollar-based reference price of sugar by 58 percent means importers will have to pay tariffs on shipments of the sweetener for the first time in four years, an industry association said.

The country’s International Trade Administration Commission increased the reference price to 6 a metric ton on April 4, from 8 a ton, the Pretoria-based ITAC said in an e-mailed statement. Duties need to be paid on imports if sugar traded on NYSE Liffe in London is lower than the local reference, it said.

The previous benchmark “offered no protection to the local industry,” South Africa Sugar Association Executive Director Trix Trikam said in an e-mailed response to questions today. While the new level “will provide a measure of protection for the sugar industry” current world sugar prices and exchange rates mean “there is a possibility that the tariff may not curb imports,” he said.

Sugar fell for three straight years through 2013, slumping 42 percent on NYSE Liffe in the period after growers from Brazil to Australia raised output, leading to a global surplus and making it cheaper to import and harming South African producers.

The country is Africa’s biggest producer of sugar and its retail price is among the lowest globally, according to Trikam. Imports cost the nation, which produces a surplus and enough to satisfy local demand, 50 million rand ( million) a month, the association said on Oct. 22.

Sugar rose 1.1 percent to 4.80 a ton at 3:16 p.m. in London and was at 0.40 on Jan. 3. Subtracting this from the new South African reference price, the duty is 6 a ton or 1.32 rand a kilogram (2.2 pounds), the ITAC said in its report. The formula for calculating the tariff excludes the average cost to transport the sweetener by sea to South Africa and includes a so-called distortion factor.

The sugar association had asked the commission to more than double the reference price to 4.34 a ton, which would have resulted in a duty of 3.39 rand a kilogram, the ITAC said.
Tongaat Hulett Ltd. (TON) is South Africa’s biggest sugar producer by market value. Last year, Chief Executive Officer Peter Staude said the country should give better protection to producers in the wake of low global prices.