TASK TEAM TACKLES TARIFF AND OTHER CHALLENGES


Cedric Mboyisa




A Sugar Value-Chain Task Team has been set up to deal with challenges facing the sugar industry and come up with short-term and long-term solutions.


The establishment of the task team was adopted during a stakeholders meeting hosted by Economic Development Minister Ebrahim Patel and Trade and Industry Minister Rob Davies in May in Tshwane. The meeting was attended by the sugar industry leadership – comprising South African Sugar Association (SASA), growers (South African Farmers Development Association and South African Cane Growers’ Association) and millers (South African Sugar Millers’ Association). The other attendees included downstream users of sugar such as Coca Cola, Tiger Brands, supermarket giant Checkers, Industrial Development Corporation (IDC) and senior government officials from Agriculture, Forestry and Fisheries Department.  The ministers were accompanied by their senior staff including Directors-General and an adviser.



The recommendations of the task team would be forwarded to the ITAC which is currently processing the industry’s application for an increase in the reference price from $566 to $856.


It was Minister Patel who proposed that a task team be established. It is envisaged would conduct its work in an expeditious manner. The recommendations of the task team would be forwarded to the International Trade Administration Commission of South Africa (ITAC) which is currently processing the industry’s application for an increase in the reference price from $566 to $856. The team will discuss if the requested $856 is the only solution or if there could be some middle ground in terms of the figure. The task team is also mandated to look at other options or solutions other than the tariff increase. Minister Patel said a consensus reached by the task team would carry an enormous weight when ITAC makes a decision. The task team is made up of four representatives from the sugar industry and four from downstream users of sugar. Minister Patel stressed that well considered and thoughtful proposals would get the support of Cabinet.


On the agenda of the stakeholders meeting were the challenges facing the sugar agricultural sector, interventions needed, discussions and charting of a way forward. The meeting was co-chaired by both ministers, with Minister Patel being the driving force. In his opening remarks, Minister Patel pointed out the meeting had been convened after a cry from farmers regarding the devastating effect of sugar imports flooding our shores. He said this had led to the erosion of the local market, a situation which had a potential or possible ramification of rendering cane growing unviable and could result in job losses. He pointed out he was aware of the industry’s application to increase the reference price from $566 to $856.


He said the meeting must discuss problems facing the industry and come up with possible solutions. He encouraged participants to determine if increasing the tariff was the only solution or there were other options. “Dig a little deeper,” he told those in attendance. He said the “optimal outcome” should be the one embraced by everyone (in the sugar value chain). He also stressed the issues of viability and transformation in the sector. He made it very clear ITAC was proceeding with the tariff application independently. Minister Davies said it would be the last time the tariff increase issue was entertained if the industry were to be granted the maximum protection it had requested, and that the industry would have to look at other options pertaining to its viability and stability. He acknowledged that “good progress” had been made in terms of transformation in the industry.


SASA Chairman Suresh Naidoo and Vice-Chairman Hans Hackmann kicked off the proceedings by giving an overview of the sugar industry, its challenges and interventions needed as a matter of urgency. They made it clear the industry was on its knees and the only solution at this juncture was the urgent review of the tariff and its increase to an appropriate level to offer adequate protection to local producers against imports from subsidised countries. 



Speaking on behalf of SAFDA, its Executive Chairman Siyabonga Madlala said the industry was on the precipice of collapse as small-scale growers were getting negative statements due to the crippling effect of imports, which went over the unprecedented 500 000 ton mark in the 2017/2018 season.


Speaking on behalf of SAFDA, its Executive Chairman Siyabonga Madlala said the industry was on the precipice of collapse as small-scale growers were getting negative statements due to the crippling effect of imports, which went over the unprecedented 500 000 ton mark in the 2017/2018 season. He also revealed that over a ten-year period the industry had lost 30 000 small-scale growers, with just over 20 000 now remaining. SACGA Chairman Graeme Stainbank said it was a dire situation that the industry found itself in as the result of low duty. He said he had been receiving calls from the banks which were very concerned about the current situation. He made it unambiguously clear that the industry needed an increased tariff sooner than later as the situation was getting worse and needed to be arrested as soon as possible. SASMA Chairman Martin Mohale also echoed the concerns of industry players, citing fears of closure of mills and loss of jobs if the situation persisted. Adrian Wynne said the industry was in crisis and in need of an urgent intervention.


Coca Cola CFO doubted if increasing the tariff would solve the problem. “We need to get under the skin of what is the problem. Collectively, we need to step back and think what is happening here. Where is the problem?” He said what the industry was asking for in terms of a tariff increase was from 160% to 250%. He said the company had a R400 million fund to advance transformation and it was willing to assist small-scale growers. Tiger Brands also expressed its willingness to assist small-scale farmers. The company said it spent R1 billion on sugar per year, and committed to buying only local sugar, especially during the crisis of high volumes of deep sea imports.


IDC said they placed a high premium on transformation, and that it was even more important in the agricultural sector. They were also eager to lend a helping hand, even citing instances where they had worked with or assisted the industry before. In his response, Minister Davies said listening to discussions was very useful and illuminating. However, he said the biggest lacuna was the lack of information regarding the current state of the sugar industry worldwide as it is a distorted market. 



Cedric Mboyisa

Cedric is the Communications & Media Manager, External Affairs, South African Sugar Association.



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