Low tariff on sugar imports a big threat
ONE MIGHT assume that the biggest threat to the domestic sugar industry is the so called sugar tax recently enacted by Parliament. But it’s another branch of government that poses a more ominous threat to the 85 000 jobs and the more than one million livelihoods that depend on the sugar industry.
Two long droughts in the past decade have severely affected harvesting and production, and the introduction of the sugar tax earlier this year has reduced the demand for sugar. We recently learned that imported sugar was allowed to flow into the country without any tariffs for several weeks. Misinformation about how transformation is succeeding compounds the challenges facing the local sugar industry. Growers are struggling.
The biggest challenge is the government’s failure to declare a dollar-based reference price and establish the level of protection required through an import tariff against the impact of low-cost imported sugar on the local market, primarily from Thailand, Brazil and Swaziland. Its absence means that local growers are paid a “lower than cost of production” price, which places immense economic pressure on growers and processors. The businesses of all growers, particularly small-scale growers and beneficiaries of the myriad transformation and land reform projects run by the SA Cane Growers’ Association (the Cane Growers) are under serious threat.
Many farmers have consequently been unable to repay the debt accumulated during the drought years and are not realising a return on their investments. Many growers are considering diversifying their farming operations and reducing their dependency on cane growing in favour of crops that are less labour intensive.
With a market-related tariff on imported sugar in place the sugar-growing and milling industry could refocus its attention on the opportunities to contribute towards job creation, land reform and sustainable transformation for small-scale farmers.
Membership
The Cane Growers represent almost 24 000 independent sugar-cane growers. The membership comprises more than half of all emerging small-scale black farmers and all commercial cane farmers. It is mandated to advance the ability of all cane growers to participate effectively, meaningfully and fairly in our economy.
Over the past six years, the Grower Development Account Fund has supported funding the agronomy and financial training of about 5 000 black cane growers. The industry has invested R135 million in the fund. Of this, R86.4m – more than two-thirds – was contributed by the Cane Growers, and was used exclusively to train and develop black small-scale growers. In the past financial year alone, R4.95m was spent on training black small-scale growers and farm workers, with the Cane Growers contributing about R3.168m.
The Cane Growers also provided business and agronomic skills development and further education to 705 small-scale growers. The courses included applied business management, disease and variety identification, tractor mechanics, arc welding, cane husbandry and firefighting.
It is clear that South Africa’s sugar-growing industry has much to offer our country, but without the necessary support from the government, the potential of the 24 000 independent farmers will be limited and the 85 000 jobs are likely to be destroyed. This will be a disaster for KwaZulu-Natal’s agrarian economy, because the sugar-cane industry is the backbone of small-scale farming in the region.
Growers from across the sugar-cane regions of Mpumalanga and KwaZuluNatal last month marched to the Pretoria headquarters of the Department of Trade and Industry. As part of the South African Sugar Association, we handed over a memorandum in support of an import tariff application to the International Trade Administration Commission (Itac) motivating for an increase in the dollar-based reference price on which the tariff on imported sugar is based from $566 (R7 609) a ton to $856 a ton.
The question is whether the Itac can afford to delay fixing the tariff crisis and whether it will provide the industry with the lifeline it needs to survive. In the meantime, the Cane Growers will continue our critical work with emerging small-scale growers for the benefit of the industry.