SA’s embattled sugar industry has received a reprieve from trade, industry & competition minister Parks Tau, who is rapidly reshaping a competition regime often accused of stifling investments.
The minister has acceded to the block competition exemption requested by the sugar industry for it to implement phase two of the sector’s master plan.
The process will see the industry collaborate over the next five years to determine the price increase percentages for sugar products and the timing of such increases.
The exemptions are said to open the door for industry players and retailers to come to the table and negotiate prices in a move expected to provide an incentive for retailers to buy local and thereby boost job creation in the sector.
Before the exemption, retailers who wanted to collaborate to buy locally would be in breach of competition rules.
To ensure fairness to consumers, the department of trade, industry & competition will appoint an independent facilitator to oversee the collective determination by sugar producers and downstream sugar users.
“The reasonable cost of the independent facilitator appointed by the dtic shall be borne equally by all firms that are participants in the exempted agreement or practice in question,” the department said in a government notice.
“The independent facilitator shall facilitate the sharing of competitively sensitive information among firms in the sugar value chain to ensure the competitively sensitive information shared is strictly necessary for the purposes of the implementation of phase two of the sugar master plan.”
The master plan was jointly developed between the government and industry stakeholders in response to the crisis facing industry which has seen the sector bleed jobs.
The 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.
“Due to the nature of the crisis facing the sugar industry, which threatened significant job losses in some of the most vulnerable areas of the country and may have resulted in the exit from the market of a significant number of players, including small scale growers and independent millers, the sugar master plan was developed,” it said.
“This plan provides a social compact aimed at uniting stakeholders around a comprehensive intervention strategy to prevent the sugar industry from collapsing.
“The sugar master plan assigns an important role to downstream players in the sugar industry in the initiative to turnaround the possible collapse of the industry.”
This is an inflection point for the industry as we intensify — through the master plan — our efforts aimed at transitioning from a sugar-based to a sugarcane-based industry.
— Sifiso Mhlaba, SA Sugar Association CEO
The exemption by Tau allows for collaboration between sugar cane producers, sugar producers and downstream customers on the “identification of diversification opportunities”.
The exemption also makes room for producer price restraints, including co-ordination on the pricing methodology to be adopted in determining price increases of sugar products and the establishment of offtake targets.
The department said these regulations excluded the fixing of the selling prices of goods and services sold to end consumers.
SA Canegrowers, which represents 24,000 small-scale and 1,200 large-scale sugarcane growers, said the local sugar industry supported over a million livelihoods and is a large employer in rural areas of KwaZulu-Natal and Mpumalanga.
“Commercial users and retailers are vital markets for local sugarcane growers. An exemption, if gazetted into law, would allow retailers and food producers to commit to buying local sugar and sourcing sugar from local suppliers,” said SA Canegrowers chair Higgins Mdluli.
“This will in turn support local jobs. Furthermore, such an exemption would prevent the industry from facing any legal concerns about breaching competition laws stemming from broad job-saving collaboration within the industry.”
The SA Sugar Association (SASA) said the exemption by Tau was the lift the industry needed. Sifiso Mhlaba, CEO at SASA, said it would go a long way in helping the industry to diversify.
“We are exploring identified product diversification opportunities such as sustainable aviation fuel, bioethanol for fuel blending, polylactic acid and cogeneration. So far, the scoping and pre-feasibility stages of research are being finalised,” he said.
“This is an inflection point for the industry as we intensify — through the master plan — our efforts aimed at transitioning from a sugar-based to a sugarcane-based industry.
“The industry is also facing increased pressure from deep sea imports from the residual markets, which can also have a destabilising impact on it. ”
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