The long-running dispute between local cane growers and beverage producers over the price of sugar imports has escalated beyond the sector’s master plan platform, with the International Trade Administration Commission (Itac) stepping in.
The intervention comes after Itac received two applications from industry stakeholders on the current level of the dollar-based reference price for imported sugar. The South African Sugar Association (Sasa) applied for a tariff increase from $680/tonne to $905/tonne to protect the local industry.
The Beverage Association of South Africa (BevSA) applied for a reduction from $680/tonne to between $552/tonne and $650/tonne, citing the adverse impact of current duties on beverage producers, bottlers, and consumers.
Itac commissioner Ayabonga Cawe told Business Times on the sidelines of a committee meeting in parliament this week that relations within the sugar master plan remained intact and would be strengthened by this process.
“I don’t think there will ever be a derailment of the master plan. As long as social partners, government, business, labour and communities are interested in using it as a platform for social dialogue. From time to time, there will be complications because you’ve got people in the room who have different interests.
“And I would take a view that the situation we have had, which has resulted in the combined evaluation that the commission has initiated, is actually an indication of the well-functioning of the master plan. It’s not an indication of the weakness of the master plan at all.”
Late last year, Business Times reported that the impasse around the dollar-based reference price for imported sugar created a rift between canegrowers and beverage producers that could potentially jeopardise the sugar master plan — a claim that Cawe and deputy trade minister Zuko Godlimpi have both denied.
Cawe said the master plan was used as a platform to arrive at some harmonisation of the view that led to the initiation of the process. He said it would be premature to make a determination of how long it would take for a final decision on the matter.
“We want about four to six weeks to receive comments. We have already set out, in the gazette, what each of the two parties, Sasa and the Beverage Association, would have wanted. We will take comments from the public, and then thereafter the traditional process of the commission will have to unfold.”
He said Itac would also welcome submissions from the department of health, as the department that administers the health promotion levy, and the National Treasury, which would determine any adjustments to the health promotion levy in the national budget as a tax proposal.
Sifiso Mhlaba, executive director of Sasa, said the association welcomed Itac’s decision to institute a self-initiated investigation and regarded this as a necessary and overdue intervention in response to the sustained surge in sugar imports that continues to undermine the local industry.
“The domestic sugar industry remains under severe and persistent pressure as a result of unchecked import penetration, with material consequences for production sustainability, employment and investment.
“Strategic trade protection, through an adequately calibrated dollar-based reference price, is a central pillar of phase two of the sugarcane value chain master plan. It is therefore imperative that the current process be concluded with urgency and rigour and that it results in meaningful protection that reflects prevailing cost structures and market realities.”
He said when Sasa applied for an upward review of the reference price in 2024, the local industry was hammered by cheap imports, as the last adjustment to the dollar-based reference price was in 2018 amid import surges from markets including Brazil.
“Over this period, the costs of production have increased substantially. In this context, Sasa expects Itac to ensure that the investigation is concluded without further delay, that its determinations are grounded in robust cost and market evidence, and that the outcome provides effective protection against injurious imports.”
Imports for the period April to November increased from approximately 60,000 tonnes in the previous season to more than 140,000 tonnes in the current season, representing a 136% year-on-year increase, resulting in the large-scale displacement of locally produced sugar and inflicting economic losses exceeding R1bn in less than a single season.
“This escalation in import penetration has materially eroded domestic market share, weakened price realisation for local producers, and intensified financial pressure across the value chain. The situation is bound to get worse due to the current insufficient tariff.”
These risks place an estimated 65,000 direct jobs and at least 1-million livelihoods at risk. Without adequate protection, the industry will be vulnerable to mill closures, growers going out of business and devastating consequences for the rural communities that depend on the industry, Mhlaba warned.
Without adequate protection, the sustainability of the industry will be at significant risk. This will likely lead to mill closures, growers going out of business and devastating consequences for the rural communities that depend on the industry. It is a scenario that is too ghastly to contemplate
— Sifiso Mhlaba, Sasa executive director
“The commission is acutely aware that its findings will directly influence investment decisions, employment outcomes and the long-term viability of cane growing and milling operations across the country.
“Without adequate protection, the sustainability of the industry will be at significant risk. This will likely lead to mill closures, growers going out of business and devastating consequences for the rural communities that depend on the industry. It is a scenario that is too ghastly to contemplate.”
The sugar industry is also grappling with questions surrounding the health promotion levy (HPL), which Mhlaba said cost the industry R1.2bn and threatened up to 300,000 jobs.
That said, the industry roundly believes that the HPL, which was conceptualised by the government to curb sugar consumption and the risks of diabetes, is likely to stay, as it provided the government with R10bn in revenue in 2023.
Finance minister Enoch Godongwana has held off on raising the HPL in recent budgets and is not expected to signal a hike in next month’s medium-term budget policy statement. While the tax has not yet been scrapped, the sugar sector has expressed gratitude that it has not been increased since its introduction in 2018.
Mpho Thothela, CEO of BevSA, said the association would not be making any comments during the Itac process.
“As this issue is currently subject to formal legal processes under Itac’s purview, we are strictly adhering to their established procedures and will only be able to provide further details once authorised to do so.”
Thomas Funke, CEO of SA Canegrowers, previously told Business Times that if BevSA succeeds in weakening or eliminating the tariff, they may enjoy a brief period of cheaper sugar imports, but at the cost of undermining a domestic industry that provides a stable supply.
“Weakening domestic production for short-term gain is not a strategy. It’s a long-term risk to beverage manufacturers themselves. Protecting local capacity is ultimately in everyone’s interest, including theirs.
“The dollar-based reference price is the key mechanism that guides the government on when to apply import tariffs on heavily subsidised sugar entering South Africa. It helps determine when foreign sugar is landing at prices that undercut local producers, threaten the industry, and put jobs at risk.”
He said the sugar industry is calling for the reference price to be updated so that tariffs can be triggered when imported sugar falls below the local cost of production, ensuring fair competition and protecting the sustainability of the sector, which supports 1-million livelihoods.
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