As leaders of the Brics nations convened in Brazil in early July, issues of global trade instability and industrial policy co-ordination dominated the agenda. For SA the summit presented an opportunity to reflect on the precarious position of its domestic sugar sector, exposed to international market distortions and under increasing strain from heavily subsidised imports.
It was also a moment to draw lessons from Brazil and India, the world’s two largest sugar producers and Brics counterparts, both of which have implemented integrated policy frameworks that not only protect their sugar sectors but also enable structural transformation through diversification. SA would do well to follow suit by not merely defending the sugar industry in its current form but repositioning it as a future-facing driver of green industrial development.
The domestic sugar industry has long contended with volatile prices, climate shocks and rising input costs. These challenges have been worsened by the unregulated influx of underpriced imports, which result in a revenue loss of about R6,000 per displaced ton of local sugar. Imports are often cheaper than the local cost of production due to unfair subsidies provided by certain exporting countries, enabling them to offload sugar into foreign markets. This erosion of market share has already led to mill closures and job losses, particularly in rural provinces such as KwaZulu-Natal and Mpumalanga, where sugar cane farming remains a rare source of formal employment.
The dollar-based reference price currently used by the International Trade Administration Commission (Itac) has not been updated since 2018 and is now outdated. The per-tonne reference price was set by Itac based on average global sugar prices, local production costs and exchange rates. An increase is needed to keep up with changed economic realities and enable higher duty, which would allow more of the unfairly subsidised, underpriced imports to be taxed, thus creating a more level playing field for locally produced sugar.
A revision is urgently required to prevent further disruption to the domestic industry. However, trade defence instruments are not a panacea. Without structural change, protectionism simply postpones the inevitable.
Brazil’s sugar cane sector is the most competitive in the world not only because of its climate advantages, but also due to decades of coherent industrial policy. Through a combination of low-interest loans, fuel blending mandates and long-term investment in ethanol production, Brazil has established sugar cane as a strategic commodity, serving both food and energy markets.
Brazil’s sugar cane sector is the most competitive in the world not only because of its climate advantages, but also due to decades of coherent industrial policy.
India has pursued a similar approach and both countries have recognised that the key to long-term viability lies in diversifying end-use markets, particularly towards biofuels and sustainable aviation fuels (SAFs).
SA’s Sugarcane Value Chain Master Plan to 2030 was conceived as a compact between government and industry to stabilise and reform the sector. However, its full potential will only be realised if it goes beyond a plan and into action. To do so the sugar industry needs a commitment from commercial end users to buy local sugar and a policy environment from government that enables sugar cane diversification strategies.
The Sugarcane Value Chain Master Plan rightly identifies biofuels and SAFs as promising growth areas. These are not speculative opportunities. The global shift towards low-emission fuels is accelerating, and countries that can supply sustainable feedstocks — such as sugar cane — are well positioned to benefit. SA already possesses the agricultural base and technical expertise to develop such value chains. What it lacks is regulatory coherence and investor certainty.
In this context the department of trade, industry & competition’s recent publication of a draft exemption from certain provisions of the Competition Act is a critical development. The exemption would permit co-ordination among growers, millers, manufacturers and retailers about local procurement and investment, without violating competition law.
It expressly excludes price-fixing and market collusion, which then legally gives retailers and manufacturers the confidence to commit to buying local sugar, while the industry promises fair pricing.
If signed into law the exemption will also allow the industry to work together towards diversification efforts. This legal certainty is essential if the industry is to channel capital towards the construction of ethanol production facilities and the repurposing of existing mills for multipurpose output. It also signals to investors that government is willing to adapt the regulatory framework in support of industrial transformation.
The industry has already paid over R1.2bn towards rural developmental support for small-scale growers over the past four years. But unless diversification unlocks new revenue streams, these efforts and growers will remain vulnerable to the same market pressures that have hollowed out the sector to date. Transformation without growth is unsustainable. Conversely, growth without transformation will fail to achieve the inclusive outcomes SA requires.
A reformed and diversified sugar industry can serve dual goals: driving rural transformation while contributing to the country’s just transition objectives. Sugar cane is not merely a food commodity; it is a strategic input for green fuels, a potential export growth driver, and a job multiplier in precisely the regions where formal employment is most scarce.
SA has the potential to stand alongside powerhouses like Brazil and India. The sugar master plan isn’t just there to protect the industry but also to drive growth. But for it to succeed, we require stronger protections against unfair imports, quicker regulatory decisions, and a united push to diversify the industry’s future.
• Dr Funke is CEO of SA Canegrowers.
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