The South African sugar industry is facing an existential crisis as sales have plummeted 20% this season, according to SA Canegrowers, the industry association. Despite sufficient locally produced sugar to meet domestic demand, sales have dropped to 433,380 tonnes compared to 626,417 tonnes in 2023/24. The industry has long complained about the threat posed by cheap imports, which have been exacerbated by weak local tariff protections.
SA Canegrowers has accused retailers and food and beverage manufacturers of not honouring a government-brokered sugar masterplan that requires them to source 95% of their sugar from local producers. The masterplan, which was signed in 2020, aims to protect the local sugar industry and ensure its sustainability. However, industry players have been sourcing sugar from neighbouring countries, including Eswatini, as well as countries further afield such as India, Brazil, and Thailand.
The industry's troubles have been compounded by the recent struggles of industry giant Tongaat Hulett, which narrowly averted liquidation after going into business rescue in 2022. The company's struggles have highlighted the challenges faced by the industry, including the impact of cheap imports on local livelihoods and jobs. SA Canegrowers chair Higgins Mdluli has called on retailers to honour their commitment to supporting South African sugar and jobs.
Mdluli argued that sourcing sugar from neighbouring countries does not support local livelihoods and jobs, as the money still leaves South Africa. He emphasized that the local communities who depend on the industry do not experience the difference, and that the industry's struggles have a direct impact on their lives. The industry has been calling for stronger tariff protections to prevent cheap imports.
Deputy trade, industry, and competition minister Zuko Godlimpi recently met with sugarcane growers in KwaZulu-Natal, where they discussed the challenges faced by the industry, including the rising cost of fertiliser, petrol, and diesel. Godlimpi pledged continued government support, including tariffs, to protect the industry. However, SA Canegrowers has called for more urgent action to address the industry's struggles.
The South African Sugar Association (Sasa) has welcomed the second phase of the sugar masterplan, which was signed in April. The plan aims to diversify the sector from being purely agricultural to save jobs. Sasa executive director Sifiso Mhlaba has described the plan as a "major development towards ensuring the long-term sustainability of the country's sugar industry".
The International Trade Administration Commission (Itac) has launched a formal review to evaluate appropriate tariff protections for the industry. The review follows two competing applications regarding the dollar-based reference price (DBRP) through which it manages the country's variable sugar import tariff. Itac has increased the reference price to $785/tonne to balance the need to support the domestic sugar industry with the need to preserve the competitiveness of downstream industries.
Key points
- South African sugar sales have dropped 20% due to cheap imports.
- The industry is calling for stronger tariff protections to prevent cheap imports.
- The government has pledged continued support for the industry, including tariffs.
