On 15 August the Trade and Industry Minister announced that he had endorsed Itac’s recommendation for an increase of import duties on sugar to US$680/ton. This follows an application launched by SASA to Itac in February 2018 for an increase of dollar-based duty from US$566/ton to US$856/ton and intensive investigation by Itac.
Itac, in its determination of an appropriate level of protection, considers, among others, the domestic cost of production.
The major cost drivers include: fertiliser and chemicals; electricity; transport; and labour. As per Itac regulations, the Trade and Industry Minister is empowered legally to support or not to support the recommendations submitted by Itac.
The investigation to arrive at the recommendations is an independent process by Itac which included consultation and submission of inputs by all affected stakeholders. While the level is not at the maximum bound rate as initially requested by the industry in the application, the US$680/ton will provide the immediate relief urgently required by the industry and sufficient trade protection against the surge of imports. The tariff forms part of a set of measures considered by government, in collaboration with the industry in order to improve the sustainability of the industry and future growth prospects.
The sugar industry is a significant contributor to the South African economy and is a major employer in sugar-growing areas like KwaZulu-Natal and Mpumalanga. Sugar production contributes about R14 billion to gross domestic product and the industry employs 85 000 people directly, and a further 350 000 indirectly through food processing and other sectors. The sugar industry, through the South African Sugar Association (SASA), has outlined and advanced the industry-specific challenges that motivated its application to increase the Dollar-Based Reference Price to mitigate some of the challenges.
Coca Cola Beverages South Africa (CCBSA) has announced that it has an agricultural development fund that could be accessed for specific projects by members of SAFDA. The fund is managed by the Mintirho Foundation that 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 merger between Coca-Cola Bottlers in South Africa. South Africa’s industrial policy imperatives acknowledge the necessity of a developmental trajectory that sustains growth and job creation, as well as structural change or the ability of the economy to constantly generate new fast-growing activities characterised by higher value addition and productivity.
