Sugar industry agrees on price restraint

The sugar industry recently met with the department of trade, investment and commerce (DTIC) to discuss the sector’s consumer price progress.

As part of the Sugar Master Plan, the industry committed to apprise the Minister of DTIC Ebrahim Patel every six months for the period of three years.

According to the industry Sugar Value Chain report, it promised that notional price and producer price increases to customers will not “exceed annual consumer price index increases”.

Patel’s spokesperson, Sidwell Medupe, said that since the adoption of the Sugar Master Plan, the industry had experienced a 15% growth in local sugar sales.

“The industry saw increases in purchases of sugar from both the retail and industrial sectors, which includes soft-drink manufacturers,” he said.

Over the past 20 years, annual sugar production in South Africa experienced continual sharp decline by 25%, from 2.75 million to 2.1 million tons per annum, according to the South African Sugar Association (SASA).

“The number of sugarcane farmers has declined by 60% during this period, and sugar industry related jobs are estimated to have reduced by 45%,” it previously said.

Part of the decline, dubbed the ‘perfect storm’ by the sugar industry, was driven by three factors: distorted global prices (that are below South Africa’s cost of production), low-priced tariffs-free exports from Estwatini into SACAU market and the Health Promotions Levy called sugar tax.

The sugar industry particularly lamented on the Eswatini producers tariff access to South African markets as they priced below local producers. Early in 2020, International Trade Commission of South Africa (ITAC) increased tariffs on Eswatini sugar imports but this according to the industry was not enough adequate.

Following the Master Plan blueprint agreement, the sugar industrial users and retailers agreed to procure 80% of sugar consumption from local sugar industry, with small scale sugar cane farmers benefitting as part of industry’s restructuring process.

SASA reportedly informed the Minister that it set aside R 1 billion (R 200m per year for five years) towards industry transformation “to provide additional support to small growers over and above the existing supplementary payment fund”.

This will now mean that Small Scale Sugarcane growers will be incorporated in the governance of SASA.

Against this, the sugar industry has set an ambitious target over the 3 years in restoring at an initial ‘150,000 tons of sugar offtake to the local sugar industry with the goal of increasing this to at least 300,000 tons’ in the same period.

“The industry will need to improve its competitiveness and ability to successfully export to new markets, while providing opportunities for small-scale farmers. The partnership with workers can be strengthened further. Work on new markets and industrial applications can provide a long-term growth drive for the sector. In this context, the development of a biofuels industry is now being considered,” Minister Patel said.

The sugar industry also confirmed that beyond the 3 years, future sugar prices will be competitive and sustainable for consumers and will be delinked from tariff related import prices.

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