Economy / 18 October 2013, 08:00am / Zandi Shabalala
Johannesburg - Food producers Tiger Brands and Premier Foods have warned that the imposition of an import tariff on sugar would lead to price increases on a range of foods, including bread, maize meal and snacks.
“We are concerned that an increase in the tariff price would increase input costs and is likely to result in higher consumer prices,” Tiger Brands corporate affairs executive Alex Mathole said this week.
The fast-moving consumer goods firm makes Albany bread, Halls fruit juice, Tastic rice, Ace maize meal, Fatti’s & Moni’s pasta and other lines.
He said the company was a large user of sugar and was thus “currently engaging with the International Trade Administration Commission (Itac) regarding the sugar industry’s application for a tariff increase on imported sugar”.
The SA Sugar Association (Sasa) has requested an import tariff increase of an effective 50 percent to protect the local industry, to avoid the potential loss of 40 000 jobs. The industry says it is currently haemorrhaging R50 million a month.
Premier Foods chief executive Tjaart Kruger said the company used only local sugar in production, such as from Tongaat Hulett and TSB’s Selati and others.
“We will definitely try to absorb as much of the cost increases as possible, but if it’s a major increase at the end of the day we are going to have to pass it on to consumers. We can only absorb so much,” he said.
Premier Foods manufactures foods such as Blue Ribbon bread, Snowflake flour and Iwisa maize meal.
Baker’s biscuits and Freshpak tea manufacturer AVI declined to comment.
Sugar association chairman Trix Trikam said this week that the local sugar industry was likely to raise sugar prices below consumer inflation rate levels. He said the industry had shown “responsible pricing” despite soaring world sugar prices two years ago.
The association said the dollar-based reference price, which is used to determine the world price of sugar for the purposes of applying import tariffs below a certain threshold, presented a distorted price, which was below the cost of local production. This meant producers were forced to sell their sugar at a loss.
Illovo has said this would result in it cutting local sugar cane supply as the business was no longer profitable.
The Association of Southern African Sugar Importers (Asasi) said the increase in the import tariff would add R6 billion across consumers’ shopping bills and raise the cost of production for the food, beverage and confectionery industry.
It also said the tariff would result in “an immediate increase” of 44 percent for imported sugar crushing the local sugar industry’s competition.
“For consumers, a 2.5kg bag of sugar will increase from R25 to R32,” Asasi said.
The public comment period for the sugar association’s tariff application closed yesterday.
Asasi said it had filed “an urgent petition” to stop the tariff increase, as it “would crush competition and give sugar conglomerates full control of local pricing”.
The Food and Allied Workers Union said it anticipated a reasonable increase in prices, but added that should price hikes exceed 15 percent it would ask for a review of the tariff.
The Cosatu-affiliated union represents about 3 000 sugar refinery workers and about 800 sugarcane planting workers.
The union said it “will be making submission to Itac on why the tariff hike on sugar and related products is necessary to protect our sugar industry”. - Business Report