South African sugar industry at risk as US maintains 10% import tariffs.
Image: Carla Gottgens/Bloomberg
IN A CRITICAL moment for the South African sugar industry, Dr Thomas Funke, CEO of SA Canegrowers, is sounding the alarm about the negative economic implications of potential increases in US tariffs on sugar imports.
A 30% punitive export tariff on South African sugar has been suspended for 90 days by the US government; however, a 10% blanket tariff remains, posing significant challenges for local growers.
Funke stated that even this reduced tariff can damage South African sugarcane producers and the rural economies that depend on them.
"The US market is vital for our sugar exports, and any increase in tariffs — be it the existing 10% or a potential return to 30% — could jeopardise the livelihoods of many in our communities. The economic stability of our growers, both large and small, hinges on our ability to compete fairly in international markets," said Funke.
According to Funke, the United States does not produce enough sugar to meet its domestic demand, making it reliant on imports to fill the gap. Historically, the US has utilised a quota system to manage sugar imports from various countries, including South Africa.
This system has allowed South African exporters to ship approximately 24,000 tonnes of sugar annually, maximising the current quota and ensuring a steady supply to the US market.
However, the introduction of tariffs complicates this arrangement. "Increased tariffs raise production and transportation costs, reducing our competitiveness against closer countries like Brazil and Mexico," Funke explained.
With the sugar industry already facing pressures from rising input costs, the sugar tax, and the impacts of climate change, any additional financial burden could threaten the viability of many operations.
South Africa's sugar industry is not just a significant agricultural sector; it supports approximately one million livelihoods, primarily in rural regions like KwaZulu-Natal and Mpumalanga.
The industry's role in providing stable employment and fostering economic inclusion cannot be overstated. Funke highlighted that any increases in US tariffs threaten to undo years of progress in rural development.
"Both large-scale and small-scale growers are vulnerable to the price volatility in the export market. The potential for tariff hikes could lead to job losses and increased economic instability in communities that rely on sugarcane production."
In light of these challenges, SA Canegrowers urged the South African government to prioritise negotiations with US officials.
Funke called for a review of any further damaging tariffs and emphasised the need for a collaborative approach to ensure the industry's resilience against global market volatility.
"The South African sugar industry is a key employer and deserves a fair opportunity to compete on the international stage. We must work collectively to safeguard our future and the livelihoods of those who depend on this vital sector."
As the negotiations unfold, the future of South Africa’s sugarcane growers hangs in the balance, underscoring the interconnectedness of global trade and local economies. The outcome could redefine the landscape of the sugar industry and the rural communities that depend on it for their survival.