Sugar duty

SA sugar producers laud duty

Consumers are in for more food-beverage price hikes, this time in sugar-based products, after the recommendation by the International Trade Administration Commission of SA (Itac) that the domestic dollar-based reference price for sugar be increased.

The increase from $358 (about R3 735) a ton to $566 a ton will, according to Itac, yield an import duty for the first time in four years. The duty will amount to R1.32 for each kilogram of sugar.

In addition to the prospect of higher prices for sugar-based products such as juice, beer, ice cream and sweets, the Association of SA Sugar Importers (Asasi) has raised the possibility of job losses.

Asasi, which represents about 16 sugar importers, has expressed its disappointment at the decision, saying some member businesses had no choice but to close.

“This development will take all the importers out of business. They will not be able to compete in the South African market at all,” Asasi chairman Chris Engelbrecht has said.

He points out that from paying only the import price of about R6 500 a ton of sugar, the importers would now have to pay an additional R1 320 a ton.

Locally produced sugar could cost R7 400 on average.

On average, imports constituted about 7.6 percent of the total Southern Africa Customs Union (Sacu) market from 2009 to 2012. However, provisional data indicate that imports have since increased to 18.6 percent of the Sacu market.

Engelbrecht added the import duty would have to be added to the price of the sugar that importers sold to food and beverages manufacturers of the likes of cereals, ice cream, sauces, biscuits, juice and beer.

Itac said the R1.32 a kilogram import duty would not have a considerable price-raising effect, but would remove the price disadvantage experienced by the domestic industry and would lead to increased production levels and profitability.

Engelbrecht said importers had been importing a lot of sugar in the past few months, which could last some of them about six months. His fear was that most of the small food producing businesses that depended largely on imported sugar would have to close down or incur higher input costs.

“We will be affected, but soon we will start seeing the small makers of sauce, juice or biscuits closing down because of high sugar prices,” he said.

Engelbrecht said the only option left was for the association to ask for a revision, which might take about year.

However, the SA Sugar Association (Sasa) celebrated the news, saying that although the increase in the reference price was lower than the industry had applied for, it was a step in the right direction.

Sasa had requested an increase to $764.34 a ton.

The association’s executive director, Trix Trikam, said the higher price would afford some protection to the industry.

“Although the level of $566 will provide a measure of protection for the sugar industry at current levels of world sugar prices and exchange rates, it is unlikely to be sustainable in the medium term, and there is a possibility that the tariff may not curb imports,” Trikam said.

Source: Business Report