The shrinking of the sugar industry is inevitable. File Photo: IOL

CAPE TOWN – The shrinking of the sugar industry is inevitable, according to the vice chairperson of the SA Sugar Association (Sasa), Hans Hackmann.

Hackmann said in next three years, even if one assumed a significant improvement in world sugar market prices, a weak exchange rate – which protects the local market from imports and inflating the rand value of exports – and a highly efficient industry with costs increasing at only 5 percent per annum, a shrinking of the industry was inevitable. 

Sasa said it would engage with International Trade and Administration Commission (Itac) and other relevant stakeholders to look at the long-term sustainability of the industry. 

The chief director for agro-processing at the Department of Trade and Industry (dti), Ncumisa Mcata-Mhlauli said on Thursday that the recently endorsed Itac recommendation by Minister Rob Davies to adjust the sugar and increase import duty of $680 (R10 400) a ton would provide the immediate relief required by the industry and protection against the surge of imports. 

Mcata-Mhlauli together with Itac representatives were briefing the portfolio committee on Trade and Industry on the sugar industry tariffs in Parliament.

Tariffs

According to Mcata-Mhlauli, tariffs form part of a set of measures considered by the government in collaboration with industry in order to improve the sustainability of the industry and future prospects. 

She said holistic solutions were required to improve the sustainability of the sugar industry overall. 

“In the long-term the industry will have to diversify and expand into new industries. At the moment, the industry is currently protected by dollar-based reference price which according to Sasa is not responsive enough to protect the local industry,” said Mcata-Mhlauli.

Hackmann said as the industry they continued find themselves on the wrong side of the scale even with the current sugar tariff. 

“We have done some work on the outcome of the $680 tariff and we concluded that it is not sufficient to sustain our industry at this current level and within the next twelve months we probably can sustain the operation of the fourteen sugar mills only, I think our producers will earn negative margins and will be unprofitable,” said Hackmann.

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- BUSINESS REPORT