South Africa’s primary sugarcane value chain can only rely and pin its hopes on the South African government to hopefully negotiate favourable amendments to US president Donald Trump’s proposed 30% import tariffs on South African products, including sugar.
By Lloyd Phillips
The comparatively small but still valuable and appreciated benefits derived from South Africa’s preferentially priced sugar exports to the US, will be nullified if President Trump’s proposed 30% import tariffs become effective from 1 August.
South Africa, which produces a surplus of sugar, has long exported a portion of this production to the US. In recent years, this has amounted to 24 744 tons annually under a US tariff rate quota and under the US African Growth and Opportunity Act.
“These sugar exports to the US provide our industry with a market that generates a far greater return when compared to other world market export destinations for our sugar,” says Sifiso Mhlaba, executive director of the South African Sugar Association (SASA).
SASA is the umbrella organisation for South Africa’s primary sugarcane value chain. Among its mandated responsibilities is managing exports of the country’s excess sugar.
South Africa produces, on average, close to 2 million tonnes of sugar annually. Reportedly average annual domestic sugar consumption is approximately 1,7 million tonnes. Sugar imported into South Africa contributes to an increased excess of South African sugar that must then be exported.
Mhlaba continues: “As a surplus sugar producing country, South Africa has exposure to a highly volatile world sugar market. The world sugar market is a ‘dumped market’ because major sugar producing countries can export sugar at below their actual cost of production.”
Unfair International Competition
The costs of South Africa’s sugarcane and sugar production are not subsidised by the state. According to Mhlaba, this makes it exceptionally difficult for South African sugar to compete realistically and fairly on world markets with the likes of Brazil’s and India’s sugarcane growers and millers who receive financial incentives from their respective governments.
“The implementation of the 30% import tariff would impact the export revenue generated by SASA for our sugar industry. It will be felt by both the growing and milling sectors. The 30% tariff would even drastically reduce the commercial feasibility of exporting any of our sugar to the US under the tariff rate quota.”
SASA’s head explains the sugar industry has submitted its formal responses on the proposed US import tariffs to the relevant South African state departments tasked with negotiating with their US counterparts.
“We trust our government is urgently attending to this exigent matter. Negotiations are critical to ensure our growers and millers, and the rural livelihoods that depend on our sugar industry, do not suffer the consequences of these tariffs seeing the light of day.
“We hope sanity will prevail in the end.”
Diversification Opportunities
Meanwhile, South Africa’s primary sugarcane value chain continues its research and feasibility studies into diversification opportunities away from the historical reliance on income from primarily sugar and molasses.
Mhlaba says: “However, as observed in other countries that have successfully undergone a similar transition, an enabling policy framework is critical to facilitate our own transition. The Sugarcane Value Chain Master Plan to 2030 is a critical platform to work towards this journey.”
