Davies endorses Itac’s recommendation of increase in sugar import duties

15th August 2018 By: Simone Liedtke - Writer

Trade and Industry Minister Dr Rob Davies has endorsed the International Trade Administration Commission of South Africa’s (Itac’s) recommendation for an increase in import duties on sugar to $680/t.

While the level is not at the maximum bound rate, as initially requested by the industry in the application, the $680/t will provide the immediate relief urgently required by the industry and sufficient trade protection against the surge of imports, the Minister said in a statement on Tuesday.  

The tariff forms part of a set of measures considered by government, in collaboration with the industry, to improve the sustainability of the industry and its future growth prospects. 

Sugar production contributes about R14-billion to South Africa’s gross domestic product and the industry employs 85 000 people directly, and a further 350 000 indirectly through food processing and other sectors.

The advised tariff follows an application launched by the South African Sugar Association (Sasa), in February, for an increase in the dollar-based duty from $566/t to $856/t and an intensive investigation by Itac.

In its determination of an appropriate level of protection, Itac considered, besides others, the domestic cost of production, with major cost drivers including fertiliser and chemicals, electricity, transport and labour.

The investigation to arrive at the recommendations was an independent process by Itac, which included consultation and submission of inputs by all affected stakeholders.

REQUEST RATIONALE

The sugar industry, through Sasa, outlined and advanced the industry-specific challenges that motivated its application to increase the dollar-based reference price (DBRP) to mitigate some of the challenges.

According to the submission made by Sasa, the challenges facing South Africa’s sugar industry is largely affected and influenced by the influx of duty paid imports, the current level of DBRP of $566/t, which is claimed to be inadequate and below cost of production, as well as the implementation of the health promotion levy.

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

The task team was mandated to seek rapid solutions to the challenges facing the sugar industry, with a focus on short-, medium- and long-term plans.

Short-term interventions to complement the trade support include a brief analysis of the global sugar market, as well as monitoring import trends and the commitments by the upstream and downstream users.

Medium- to long-term interventions, meanwhile, include a competitiveness improvement programme, diversification, deepening transformation, as well as amendments to the Sugar Act of 1979.

Meaningful improvement of the price paid to small-scale growers for cane delivered, as well as an industry resolution to deal with challenges associated with the current daily rateable deliveries for small-scale growers and ensuring access to new cane varieties for small-scale growers, are among the reciprocal commitments declared as a product of discussion and agreement between Sasa and the South African Farmers Development Association (Safda).

Also included in these commitments, is the improvement of cane transport systems for small-scale growers.

In addition, Coca-Cola Beverages South Africa (CCBSA) has also announced that it has an agricultural development fund that could be accessed for specific projects by members of Safda.

The foundation is managed by the Mintirho Foundation, which was formed to promote the development of historically disadvantaged farmers and small suppliers of inputs in the CCBSA value chain through the funding of sustainable businesses. 

The foundation was formed as a result of the Competition Commission conditions agreed upon as part of the large mergers between Coca-Cola bottlers in South Africa, whose industrial policy imperatives acknowledge the necessity of a development trajectory that sustains growth and job creation, as well as the need for structural change or the ability of the economy to constantly generate new fast-growing activities characterised by higher value addition and productivity.