Trade, industry & competition minister Parks Tau has followed through on his commitment to aid SA’s embattled sugar industry, which has bled about 65,000 jobs over the past five years, by giving the sector leeway to collaborate on price increase percentages for sugar products.
Tau’s latest exemption is the capstone of a growing playbook that offers regulatory lifelines to plug urgent job leaks but risks turning propped-up sectors into protection addicts rather than productivity champions.
Business Day first reported on Tau’s intentions in May, when he launched a public consultation process over the bloc exemptions, which keeps the door ajar for industry players and retailers to negotiate prices in a move expected to provide an incentive for retailers to buy local and thereby boost job creation in the sector.
The regulations came into effect on Friday, at the conclusion of the public consultation process.
The exemption allows sugar cane producers, sugar producers and downstream sugar users to collectively determine producer price restraints, including co-ordination on the pricing methodology to be adopted in determining price increases of sugar products and the timing of such price increases.
It also opens the door for industry players to collaborate on local volume commitments, the establishment of offtake targets and the mechanisms by which to monitor such commitments and targets.
The exemption, now gazetted into law, would allow retailers and food producers to commit to buying local sugar and sourcing sugar from local suppliers. Before the exemption, retailers that wanted to collaborate to buy locally would be in breach of competition rules.
The regulations exclude the fixing of the selling prices of goods and services sold to end consumers, market allocation of goods and services, and collusive tendering for goods and services intended for sale to end consumers.
To ensure fairness to consumers, the department will appoint an independent facilitator to oversee the collective determination by sugar producers and downstream sugar users.
The independent facilitator is expected to facilitate the sharing of competitively sensitive information among firms in the sugar value chain to ensure that the information is strictly necessary for the purposes of the implementation of the second phase of the sugar master plan.
The master plan is in response to the crisis facing the industry, which has caused job losses.
The exemptions and voluntary commitments to buy sugar will be critical in safeguarding the industry from cheap sugar imports from countries that heavily subsidise their own sugar industries.
— Higgins Mdluli
SA Canegrowers chair
Tau’s department said in the few years before the sugar master plan was adopted, local demand for sugar had dropped from 1.65-million tonnes to 1.25-million tonnes a year, forcing the industry to increase exports to a global market where prices are below the local cost of production. It said these exports resulted in annual losses of about R2bn for the sugar industry.
The industry is now exploring identified product diversification opportunities such as sustainable aviation fuel, bioethanol for fuel blending, polylactic acid and co-generation, to remain sustainable.
SA Canegrowers chair Higgins Mdluli said the exemption from competition regulations would allow industrywide discussions without fear of falling foul of the Competition Act for five years.
“Such discussions include working towards commitments from local commercial users of sugar and retailers to use and stock mainly locally produced sugar,” Mdluli said.
He added that the exemptions would also allow talks on diversifying the industry into sectors such as sustainable aviation fuels to enable long-term growth.
“SA Canegrowers calls on food and beverage manufacturers and retailers to commit to buying mainly local sugar to support the industry on which 1-million livelihoods depend,” he said.
“The exemptions and voluntary commitments to buy sugar will be critical in safeguarding the industry from cheap sugar imports from countries that heavily subsidise their own sugar industries.”
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