South Africa’s primary sugarcane value chain is ecstatic at being granted exemptions from aspects of competition law. Albeit strictly controlled, it allows for sharing of information intended to drive and support Phase 2 of the sugar industry’s master plan.
By Lloyd Phillips, senior journalist at African Farming and Landbouweekblad
The long struggling South African sugarcane value chain has received a much-needed boost by being granted a block exemption from various provisions of the Competition Act (Act 89 of 1998). Subject to stringent conditions and monitoring, for at least the next five years sugarcane growers and sugar producers, and the downstream purchasers and users of their products, will be able to collaborate and negotiate on a range of aspects.
Parks Tau, Minister of Trade, Industry and Competition, gazetted (Gazette no. 53153) the block exemption on 13 August after first considering public comment and after consulting with the Competition Commission.
The gazetted notice explains that the exemptions intended to facilitate implementation of Phase 2 of the South African Sugarcane Value Chain Master Plan to 2030 (master plan), allow for:
- Collaboration between sugarcane producers, sugar producers and downstream customers on the identification of diversification opportunities.
- The collective determination by sugarcane producers, sugar producers and downstream sugar users of (i) producer price restraints, including coordination on the pricing methodology to be adopted in determining price increases of sugar products and the timing of such price increase, and of (ii) local volume commitments, establishment of offtake targets and the mechanisms by which to monitor such commitments and targets.
‘Big Brother’ will be watching
In collaboration with the sugarcane value chain, the department of trade, industry and competition will appoint an independent facilitator tasked with facilitating “the sharing of competitively sensitive information amongst firms in the sugar value chain to ensure this information is strictly necessary for the purposes of the implementation of Phase 2 of the sugar master plan”.
The block exemption precludes:
- The fixing of the selling prices of goods and services sold to end consumers.
- Market allocation of goods and services sold to end consumers.
- Collusive tendering for goods and services intended for sale to end consumers.
- Resale price maintenance of goods and services to end consumers.
Other requirements of the block exemption include that businesses owned by historically disadvantaged persons and small, medium and micro enterprises must be afforded opportunity to opt into agreements and/or practices enabled by the block exemption.
All entities intending to take advantage of the block exemption’s benefits must first achieve relevant permissions from the Competition Commission.
The South African Sugar Association (SASA) umbrella body says the primary sugarcane value chain is “extremely grateful and pleased” for the block exemption. This value chain comprises 25 653 smaller-scale and 1087 larger-scale growers, 12 sugar mills, four sugar refineries, and six milling companies. The sugar industry supports 65 000 direct and 270 000 indirect jobs, and the livelihoods of “at least one million people”.
Sifiso Mhlaba, executive director of SASA, says: “One of the apex priorities of the master plan is the optimisation of the local market within the Southern African Customs Union (SACU). This block exemption will enable the social compact’s partners to finalise and implement the next phase of anchoring the industry on a journey towards product diversification, transformation and sustainability.”
Prioritise proudly South African
Higgins Mdluli, chairperson of the South African Canegrowers Association (SA Canegrowers), explains the block exemption allows for discussions aimed at achieving commitments from local commercial sugar users and from sugar retailers “to use and stock mainly locally produced sugar”.
He points out that South Africa’s imports of “cheap”, often subsidised, often dumped sugar are increasing again. These displace South Africa’s on sugar production onto typically loss-making world sugar markets.
SA Canegrowers is also urging the South African government to prioritise negotiations with the American government to “finalise a mutually beneficial trade deal” for South African sugar exports to the USA. The viability of these exports is in jeopardy following the USA’s 30% import tariff on all South African goods.
Dr Siyabonga Madlala, executive chairperson of the South African Farmers Development Association (SAFDA), says the country’s primary sugarcane value chain has faced numerous challenges since 2018. These include high sugar imports, the health promotion levy (sugar tax), a decline in sales and revenue, floods, the Covid-19 pandemic “and other disruptions”.
“These have placed immense pressure on vulnerable small-scale sugarcane producers and on various components of the sugar industry.
“This block exemption is a critical step towards stabilising our industry and ensuring its long-term sustainability, underpinned by diversification initiatives like sustainable aviation fuels that will open new market opportunities and improve resilience”.
