Rob Davies aids embattled sugar industry with higher import duty

22 Aug 2018

Rob Davies aids embattled sugar industry with higher import duty

Business Day, 15 August 2018
By Linda Ensor

Trade & industry minister Rob Davies has come to the aid of the embattled sugar industry, approving an increase in import duties on sugar. But although the minister approved the increase of the duty from 6/ton to 0/ton, it is lower than the 6/ton the South African Sugar Association (Sasa) had requested from the International Trade Administration Commission (Itac) in February.

While benefiting sugar producers, the hike in the import duty will hit hard retailers and industrial users such as soft-drink manufacturers. Sasa chair Suresh Naidoo said on Tuesday that the increase granted by Itac would provide some level of protection for the industry but was not sufficient to cover the cost of production. He said Sasa leadership was still analysing the Itac report and would respond comprehensively later.

Sasa requested Itac to investigate an increase in import duties in the light of a flood of sugar imports mainly from Brazil, the United Arab Emirates and Swaziland. The association argued that the current duty provided inadequate protection as it was below cost of production. The impact of the health promotion levy, known as the sugar-sweetened beverage tax, also had to be considered.

About 2,000 members of the sugar industry descended on the department of trade & industry’s campus in Tshwane in June to highlight the plight of the industry, which they said was on the "brink of collapse" due to the flood of imports. "While the level is not at the maximum bound rate as initially requested by the industry in the application, the 0/ton will provide the immediate relief urgently required by the industry and sufficient trade protection against the surge of imports," Davies said.

"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. Itac, in its determination of an appropriate level of protection, considers, among others, the domestic cost of production.

"The major cost drivers include: fertiliser and chemicals; electricity; transport; and labour," he said.

Davies noted that the sugar industry was a significant contributor to the SA economy and was a major employer in sugar-growing areas such as KwaZulu-Natal and Mpumalanga. Sugar production contributes about R14bn to GDP and the industry employs 85,000 people directly and a further 350,000 indirectly.

Davies said a sugar value-chain task team comprising representatives of the beverage industry, retailers, Sasa officials, small-scale farmers and manufacturers and officials from the Industrial Development Corporation had been formed in May to identify ways of supporting the industry while keeping prices for consumers affordable.

Some of the team’s short-term interventions to complement the increase in duties include an analysis of the global market of sugar, monitoring import trends and commitments by the upstream and downstream users. Medium-to long-term initiatives would include a programme to improve competitiveness, diversification, deepen transformation and amend the Sugar Act and sugar agreement.

Meanwhile, Sasa and the South African Farmers Development Association had agreed that there would be a meaningful improvement in the price paid to small-scale growers for cane delivered, an industry resolution to deal with challenges associated with daily rateable deliveries for small–scale growers, access to new cane varieties for small-scale growers, and the improvement of cane transport systems for the country’s small-scale growers.