Sugar import tariff changes in pipeline

28 Nov 2014

Business Day, page 2
By Carol Paton

A CHANGE to the import tariff on sugar is imminent. A new regime has been processed and passed on to the South African Revenue Service (SARS) for implementation, Minister of Trade and Industry Rob Davies said on Tuesday. The move signals a more favourable view towards raising tariffs to protect local production by the department and the International Trade Administration Commission of SA (Itac) — the government body that investigates trade remedies. An Itac recommendation to Mr Davies last year led to an increase in tariffs on imported chicken.

Local sugar producers have complained for several years that the industry is at risk from dumped sugar from Brazil, Guatemala, India and others — due to overproduction and subsidies the world price is significantly below production cost. Last year the South African Sugar Association applied to Itac for a higher dollar-based reference price on imports. This would effectively put an import tariff in place. The association’s spokeswoman, Jennifer Crawford, said on Tuesday the "dumped price" on the world market and the low dollar-based reference price applied by Itac meant no import tariff had been in place. This was unusual, she said, as most sugar-producing economies use tariff protection against imports.

Mr Davies said he could not disclose the new tariff before it was published in the government gazette for implementation by SARS. However, the fact that the application has been processed and passed onto SARS indicates that there will be a change to the tariff regime. Also speaking at a media briefing by Cabinet ministers in the economic cluster of ministries at Parliament yesterday, Minister of Rural Development and Land Reform Gugile Nkwinti said the government wanted to cut down on food imports to keep food prices under control.

"For instance, we are looking at how to regulate the importing of sugar. We can’t flood the South African market with imported sugar when we grow sugar here," he said. Mr Nkwinti said chicken, sugar and maize should "really not be imported". While Mr Nkwinti framed the rationale of his argument in the context of keeping food prices in check, there has been heated debate among retailers and local producers over the effect on consumers of tariffs on imported chicken. Retailers have warned that consumers would pay significantly higher prices, especially on frozen chicken pieces.

But the same may not be true for sugar tariffs. Analyst Anthony Geard of Investec Securities, said in Business Day last week that a move against cheap imports "should be positive for the (local) sugar sector" without a material effect on prices. While sugar prices in the domestic market are well above those in the world market at the moment, Mr Geard says it seems sugar importers are absorbing most of the import margin, which means consumers have not benefited much. If the tariff protection is not implemented, "jobs could be at risk at black-owned millers and cane growers", given that the sector is a highly empowered one, he said.