September 4 2019

Local producers have warned that the sector is near collapse and have suggested that tariffs need to be raised

An association that represents the interests of the local sugar industry has insisted that tariff protection is necessary to sustain the livelihoods of those dependent on the sector. The local sugar industry generates an income of about R14bn a year and is responsible for at least 350,000 jobs.

SA sugar producers have previously warned that the sector was on the verge of collapse and suggested that tariffs needed to be increased. But earlier in September, department of trade and industry officials suggested in parliament that the government is unlikely to back further tariff hikes in the sugar industry, saying the protectionist strategy needs to be phased out in favour of one based on competitiveness.

In July, trade and industry minister Ebrahim Patel said the government’s underlying philosophy was that protectionism on its own was not a sufficient means to ensure a long-term future for any industry.

Last week the SA Sugar Association (Sasa) and leaders from its member organisations met with Patel and agriculture, land reform and rural development minister Thoko Didiza to discuss the development of a master plan for the future sustainability of the sugar sector.

Sasa chair Hans Hackmann said despite the obvious need for enhanced competitiveness and diversification of its product mix, sugar would remain a significant part of the future plan for the industry. For as long as the world market for sugar remained distorted, tariff protection would be necessary to sustain the livelihoods of those dependent on the industry, he said.

The local sugar industry is in dire straits due to a number of serious challenges, including the significant decrease in local demand due to the sugar tax and the continued reduction of the industry’s share of the local market because of imports.

The potential path back to growth, according to proposals by the industry, include optimisation of the local sugar market and diversification into ethanol. A biofuels programme would lead to a more sustainable industry and reduce the increasing exposure to the loss-making sugar export market.

Also at the heart of the plan is a meaningful transformation of the industry that will see most of the cane being delivered to mills by black farmers, with increasing participation by them in the entire sugar and diversification value chain. Local industry players have also called on the government to tighten restrictions to prohibit sugar entering SA from neighbouring countries that are not subject to any duties.

In 2018, the International Trade Administration Commission — the organisation tasked with customs tariff investigations, trade remedies, and import and export control — agreed to raise the dollar-based reference price (DBRP), which is an import tariff levied on products that come into SA, from $566 to $680.

Local sugar producers had requested that the tariff be increased to $856 a ton. The DBRP is up for review in August 2021. Patel said the development of a sugar value chain action plan was a collaborative effort by all stakeholders. He stressed it was important for all participants to table submissions to the process.

Patel also said the solution for a sustainable sugar industry should not just be dependent on government support. He called on the industry as well as the downstream users of sugar to come up with meaningful contributions to solving the industry’s problems. Didiza urged the industry to clearly state the areas of possible growth or expansion, as well as provide detailed information on its proposals in this regard.