The South African sugar industry is pushing for the introduction of import tariffs aimed at reducing the amount of sugar imported into the country, as well as for trade agreements to be extended to European markets to increase its sugar exports, which would hopefully add R1 billion to the industry’s inconsistent and struggling revenue growth.
SA Sugar Association executive director Trix Trikam said in Mpumalanga last week that both these steps were pressing as the industry faced a tough trading environment both locally and globally.
He outlined other challenges facing the industry, including a lack of mandates for access to fuel and electricity markets and disruption of global markets by developed countries through production and export subsidies.
Trikam said the sugar industry faced similar challenges to the poultry industry relating to the dumping of products.
In the poultry industry, imports from global markets have topped 140 000 tons a year.
Sugar imports come from the world’s major producers, such as Brazil and India, among others.
Trikam said South Africa received an average of 20 000 tons of sugar a month, which was equivalent to the production of two sugar mills.
The only way to minimise these imports was to get a viable tariff, he explained. “We have a dollar base reference price at the moment but that price is well below the world price and because of that the tariff is zero. But if we had a dollar reference price much higher, then it would provide for a tariff and by doing that we would minimise the imports and increase revenue.”
The tons of sugar that were being imported, he said, could be produced by local sugar companies.
Also, the industry could benefit hugely from gaining access to European markets. All countries belonging to the East Africa Community, which includes Burundi, Kenya, Rwanda and Tanzania, have duty-free access to Europe.
Trikam hoped that South Africa’s sugar industry would also be part of the latest trade talks between the EU and African, Caribbean and Pacific states that are part of a single economic partnership agreement (EPA). South Africa, which is part of the Southern EPA, is the only major sugar-producing country that does not export to the EU.
“We believe it is not fair that we do not have access to these markets because there is a shortage of sugar in the EU.
“And we believe we can fill some of that shortage,” Trikam pointed out.
The local sugar industry had asked for an average quota of 320 000 tons a year to be sent to Europe. It had also been in talks with the government, the Department of Trade and Industry and the Department of Agriculture, which had been very supportive.
The sugar industry expects to receive a positive response from the EPA talks between June and July. The 320 000 tons a year export quota would earn an additional R600 million.
Should imports be reduced to about 150 000 tons a year, this would add about R300 million to the industry’s revenue.
The association believes that sugar remains one of the most distorted international commodity markets, especially in the absence of multilateral reform and liberalisation.
The profitability of its exports to the world market at present is severely affected by subsidy-induced oversupply compared with global demand.
The local industry exports about 25 percent of its sugar production to the world market at prices that are normally substantially below the domestic sugar price. The industry generates about R12bn annually, of which R2.5bn comes from export earnings.