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June 13, 2019

South African Sugarcane Industry Hit By Competition, World Glut and New Soft Drinks Sugar Tax

In the wake of the appointment of a new South African cabinet, newly elected SA Canegrowers Chairman, Rex Talmage... saids the change in leadership offered the hope of a rescue plan for an "industry on its knees".

In the year under review, demand for refined sugar in the Southern African Customs Union countries was at its lowest in 35 seasons due mainly to the introduction of the Health Promotion levy (HPL) or sugar tax on soft drinks by the South African government in 2018.

Industry experts estimate that over 400 000 tons were displaced as a direct result of the levy over the 2018/19 season resulting in at least 600 000 tons being exported at record low prices on an over-supplied world market.

The quality of the South African crop during the 2018/19 season was the third highest in 19 seasons while the area harvested decreased from 252 049ha to 247 385ha.

Despite intense lobbying with the Department of Trade and Industry and the International Trade Administration Commission in 2018 for an increase in the Dollar-Based Reference Price (DBRP) import tariff from $566 to $856 per ton of sugar, the industry was granted a tariff of just $680 per ton. The new tariff has proven ineffective in stemming the tide of cheap imported sugar into the country.

The year under review also saw a deluge of sugar dumped on the South African market from neighbouring Eswatini. Eswatini is expected to produce about 743 000 tons of sugar in the 2019/20 season of which most will make its way onto the South African market free of any import tariff in line with the free trade agreements in the Southern African Customs Union (SACU) region.

While commercial growers have been hard hit, the worst affected are the over 20 000 small-scale growers who rely solely on the crop for their livelihoods.

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