ALAN PEAT THE IMPORT of sweets has grown so much in the past five years that SA manufacturers have taken a serious battering – but the latest increase in duty by the Department of Trade and Industry (DTI) is not enough to beat the cheap sweets problem. Imports of sugar confectionery – which falls under duty tariff heading 1704.90 – have increased from 7 000-tons a year in 2002 to a total of 45 000-t in 2004, according to industry sources. The local market demand is about 112 000 tons, so these imports have escalated from 6.25% of this total to just over 40% in two years. The main culprit in this import market is Brazil, FTW was told, which now contributes about 70% of the total sweet imports to SA. And it has a number of benefits which have helped it knock international sweet prices for six. First, the strengthening of the exchange rate of the SA rand made imports cheaper, but Brazil has enjoyed a number of other factors which allows it to offer such low prices. With a heavily subsidised industry, the cost of sugar in Brazil, FTW was told, is about US$180/ton, whereas the SA sugar price is about US$400/t. Also, the Brazilian sweet manufacturing industry gets both government export subsidies AND export incentives as part of the authorities’ plans to encourage export-led growth. A final factor is that labour costs in that country are about one third of those in SA. All four of these benefits have led to traders identifying Brazil as a source of cheap imports, and boosted that country’s contribution to the total importation of sweets to SA. On top of that, said an SA sweet industry source, have been a number of sugar confectionery importers who have been evading the 25% import duty in this country by under-declaring the value of their products. Some have apparently been declaring prices as low To page 28 From page 1 as R1.50/kilogram, where the actual price was R6.50. “There is ample evidence of this sort of duty evasion,” according to an FTW source. The answer, according to reckoning by the SA Chocolate and Sweet Manufacturers’ Association (Sacsma), is a dual tariff – of either R1.80/kg or an ad valorem duty of 25%, whichever is higher. This would level the playing fields, and keep SA manufacturing prices on a par with the international average price. That global price, excluding the cut-prices in Brazil, was R7.20/kg, – and 25% of that average is calculated out as being equal to R1.80/kg. “This dual system,” FTW was told, “would eliminate that under-invoicing.” But, to the disappointment of Sacsma, the government thinking was different, and the International Trade Commission (Itac) went for a new one-off 37% duty – gazetted on December 30 last year. ITAC intended this to beat the dumping of low cost sweets falling under the tariff heading 1704.90, particularly those from Brazil and Colombia, FTW was told by an SA Revenue Service (Sars) source – excluding imports from either the European Union (EU) and the Southern African Development Community (SADC). But it fails to do this, an SA sweet manufacturing source told FTW, and only the dual tariff system would be effective. In the meantime, cut-price Brazilian sweet imports continue to carve chunks out of the business for the local producers.
