Cheap imports sour SA’s sweet silver lining
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JOHANNESBURG - WHEN PRESIDENT Cyril Ramaphosa, presenting the government's Economic Reconstruction and Recovery Plan to Parliament recently, reflected that “even the darkest clouds have a silver lining”, South African sugar cane farmers could immediately identify with the practical realities of this proverb.
Earlier this year, when the Covid-19 pandemic triggered stringent economic lockdowns, South African cane growing, as part of the agricultural sector, was declared an essential industry. We were, therefore, able to continue proudly contributing to the nation's food security, gross domestic product (GDP), and job creation while responsibly flattening the curve.
Despite this silver lining, the local sugar industry has continued to face a number of challenges that threaten the sustainability of our sector and the thousands of jobs and livelihoods – predominantly in rural areas – that we support. These threats have included persistent droughts, the application of an unjustifiable health promotion levy or “sugar tax”, plunging world sugar prices and weak protection against cheap imports from other sugar-producing nations.
It’s particularly the latter point of weak trade protection that has recently soured the outlook for local sugar and the million livelihoods that the industry supports. We have experienced a major increase in cheap sugar imports from deep-water countries such as Brazil and the United Arab Emirates, as well as countries in the Southern African Customs Union (Sacu). This has had an unavoidable impact on the competitiveness of the South African sugar industry, with a massive reduction in sales of local sugarover the past few years.
It should come as no surprise that the problem of cheap imports threatens the sustainability of the local sugar cane industry: the futures of 21 000 small-scale growers, 65 000 farmworkers as well as the 270 000 indirect jobs, and the 1 million livelihoods that the industry supports are at very real risk of dissolving.
We estimate that for every ton of imported sugar that flows into the country, the South African industry loses R4 000. With an estimated 563 005 tons of imported sugar flowing into the country in 2019/20, this comes at a staggering cost to the local industry of just more than R2 billion.
During the 2020/21 season, we expect importers to be ready to purchase record levels of cheap sugar that could pour into South Africa from other countries.
Eswatini alone is expected to produce about 715 000 tons of sugar, of which about 450 000 tons could find its way on to the South Africa market, free of any import tariffs because of free-trade agreements within Sacu.
On our home turf, these cheap imports have dramatically reduced the market share of locally grown sugar, resulting in South Africa's sugar cane growing industry forced to export domestic surplus on to a “dumped” or over-supplied world market at a significant loss.
SA Canegrowers therefore welcomes Ramaphosa’s announcement that a key focus of the Economic Reconstruction and Recovery Plan will be improving localisation and supporting local producers. The president elaborated that this will include support by business and labour of localisation targets for goods in areas including agro-processing and basic consumer goods. Government entities will also publicly disclose the value of their procurement from local producers.
Notably, the president also announced that social partners in the National Economic Development and Labour Council have agreed to support a massive “buy local” campaign for this festive season, with a particularcall to support women-owned enterprises, small businesses and township enterprises.
It is, therefore, imperative that consumers are encouraged to buy local sugar products in order to support the many thousands of rural jobs and the 1 million livelihoods the industry supports. This is an essential building block to sweeten the prospects of achieving a transformed and sustainable local industry. And as Minister Ebrahim Patel reiterated in the Portfolio Committee of Trade and Industry last week (27 October 27), every rand spent on buying local sugar products is a rand added to the country's GDP and the creation of local jobs.
As part of the first phase of the Sugar Industry Masterplan that Patel gazetted in June, we are preparing to play our role in highlighting the huge contributions that our industry makes and supporting the government’s localisation drive. In fact, one of the Masterplan’s focus areas is re-establishing the local sugar market over the next three years by restoring an initial 150 000 tons of sugar demand to the local sugar industry in the first two years, increasing this to 300 000 tons in year three.
In order to achieve this, the government, the sugar industry, retailers and wholesalers have committed to a number of actions. These include retailers and wholesalers ensuring at least 80 percent of the sugar they procure is locally produced sugar, rising to 95 percent in year three; the government promoting the use of local sugar to all government departments and state-owned entities; and the sugar industry actively promote local sugar to consumers and customers.
From our perspective, the immediate first steps to grow local sugar sales must include educating consumers about the impact of sugar exports on the local industry, the benefits of buying local sugar products, and encouraging South Africans to look for labelling that confirms they are buying locally produced sugar before adding these to their trollies.
The devastating economic impact of the Covid-19 pandemic has jeopardised the implementation of the Masterplan and the ability of some stakeholders to meet their commitments. It is therefore extremely encouraging that the Economic Reconstruction and Recovery Plan will help ensure that the ground-breaking work achieved by sugar industry stakeholders, the government and social partners when developing the Masterplan is not undone by the pandemic.
SA Canegrowers looks forward to playing its part in supporting both the Economic Reconstruction and Recovery Plan, as well as fulfilling its commitments under the Masterplan. We are determined to create a thriving, inclusive, transformed and sustainable local sugar industry that supports all our growers, and the one million livelihoods that depend on us
Rex Talmage is the chairperson of the SA Canegrowers Association