Sugar Dumping

STOP SUGAR DUMPING
BY FRANCOIS BAIRD

 


Background
The South African sugar industry is under threat. A vital, strategic and labour-intensive South African industry that should be expanding and creating more jobs is instead shrinking and putting people out of work.

The world sugar market
The world sugar market is distorted and in oversupply, and is likely to remain so. The principal reason is huge subsidies to sugar farmers, notably in Brazil, which exports massive amounts of subsidised sugar. The result is a world sugar price which is below the cost of production of most of the 120 sugar-producing countries, and barriers are being put up around the world to prevent cheap imports destroying local industries.

The dollar based reference price
The local industry needs protection against subsidised imports, and in theory this is in place. Unfortunately, the mechanism is inefficient, leaving the industry at risk. The mechanism is a dollar-based reference price (DBRP) in terms of which tariffs apply to sugar imported at prices below the reference price.

A vital part of the South African economy
The sugar industry is a significant contributor to the South African economy and is a major employer in sugar-growing areas like KwaZulu-Natal and Mpumalanga.

Diversification and biofuels
Sugar could also become an important contributor to South Africa’s fuel security. Diversification into biofuels – particularly the production of ethanol to blend into petrol – could result in increased sugar production, significant investment in ethanol plants and the creation of thousands of jobs.

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