The recently endorsed International Trade and Administration Commission (ITAC) recommendation to adjust the sugar and increase import duty of US$680 per tonne will provide the immediate relief required by the industry and protection against the surge of imports, said Ncumisa Mcata-Mhlauli, chief director for agro-processing at the Department of Trade and Industry (the dti)
Mcata-Mhlauli together with ITAC representatives were briefing the portfolio committee on Trade and Industry on the sugar industry tariffs in Parliament.
According to Mcata-Mhlauli, tariffs forms part of a set of measures considered by the government in collaboration with industry in order to improve the sustainability of the industry and future prospects. She said holistic solutions are required to improve the sustainability of the sugar industry overall.
“In the long-term, the industry will have to diversify and expand into new industries. At the moment, the industry is currently protected by Dollar based reference price which according to the South African Sugar Association is not responsive enough to protect the local industry,” said Mcata-Mhlauli.
Hans Hackmann, vice-chairman of the South African Sugar Association (SASA), said, “We have done some work on the outcome of the US$680 tariff and we concluded that it is not sufficient to sustain our industry at this current level and within the next twelve months we probably can sustain the operation of the fourteen sugar mills only, I think our producers will earn negative margins and will be unprofitable.”
Hackmann added that in next three years, even if one assumes a significant improvement in world sugar market prices, a weak exchange rate (protecting the local market from imports and inflating the Rand value of exports), and a highly efficient industry with costs increasing at only five per cent per annum, a shrinking of the industry is inevitable.
The South African Sugar Association will engage with International Trade and Administration Commission and other relevant stakeholders to look at the long-term sustainability of the industry.