Sugar import tariff rise 'will lift output'

28 Nov 2014

Business Day
Amanda Visser

THE import tariff for sugar has been increased 58% from 8 a ton to 6 a ton from last Friday, following a recommendation by the International Trade Administration Commission (Itac).

The increase was implemented despite objections by retailers, importers and the trade and industry ministry of Botswana.

They said the application by the South African Sugar Association (Sasa) would lead to price increases and have negative effects on downstream industries.

Sasa asked for "a fair level of protection" and wanted an increase of 113% to 4 a ton to prevent the negative effect of increased imports on the financial sustainability and competitive position of the domestic sugar industry.

The application for the big increase was supported by 65 entities, including farmers, logistics and energy firms, as well as manufacturing companies and associations.

Chief commissioner Siyabulela Tsengiwe said on Friday although the World Trade Organisation’s maximum bound rate on sugar was 105%, the commission had to consider the effect of such an increase on consumers and downstream industries, which use sugar as the main input in their products.

Mr Tsengiwe said the price-impact analyses the commission considered showed that there would be no considerable price-raising effect, but the price disadvantage experienced by the domestic industry would be removed.

The tariff increase would lead to increased production and profitability, Mr Tsengiwe said.

Six importers of sugar, namely, Sugar on Tap, Akila Trading, Matrix One-Two-One Commodity Marketing, Flava Foods and River Edge Trading 4 submitted that an increase in the dollar-based reference price (DBRP) of sugar to the requested level would eliminate all sugar imports and put their companies out of business.

The commission found in its investigation that on average imports constituted about 7.6% of the total Southern African Customs Union market from 2009-12.

However, provisional data showed that sugar imports have increased from 7.6% to 18.6% of the market in the Southern African Customs Union.

Mr Tsengiwe said the spike in import volumes in the latter part of last year coincided with the finalisation of the commission’s investigation. "Once the new tariff dispensation is implemented this is expected to normalise," he said.

The commission considered four scenarios in making an appropriate tariff determination.

It said it could not support Sasa’s request for a "radically altered formula", where the industry would in effect be setting the tariff in future.

Rural Development and Land Reform Minister Gugile Nkwinti said earlier the government wanted to cut down on food imports to keep food prices under control.

He said the government could not allow imported sugar to "flood the South African market" when the country grew its own sugar.

He said chicken, sugar and maize should "really not be imported".