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If the decision last week by Trade and Industry Minister Rob Davies to raise the import duty on sugar, by $114 a ton to $680, was intended to placate all levels of the industry, it failed dismally. Producers and much of the labour movement see it as a classic case of too little, too late.
According to the SA Sugar Association, it will not stop what Davies admits is the “surge of sugar imports”. This into a country that, for the most part, very efficiently produces a surplus of sugar.
Ironically, some cheaper imports come from eSwatini (Swaziland), where one of the major mills also supplies 30MW of electricity to the Swazi grid. The biomass produced from cane provides the fuel for power production. Similar deals have apparently been offered to the South African government, but have been turned down.
Unions have also pointed out that fuel costs in eSwatini are substantially lower, with South Africans who live close to the border regularly crossing over to “fill up” their vehicles.
But the cost of sugar production in eSwatini is unlikely to be lower than locally, and importers, such as the beverage industry, tend to justify sugar imports on the basis of price.
This only seems to make sense in the case of eSwatini – if sugar of a lower grade than that demanded from domestic producers is being imported.
Some producers allege that this is what happens and is a deliberate ploy to maintain the flow of cut-price, and often heavily subsidised, sugar imports. These arguments about sugar, along with the dumping of chicken from countries such as Brazil, came to the fore last Tuesday at a protest march on the Treasury offices in Pretoria.
Organised by the Food and Allied Workers’ Union (Fawu) and supported by human rights groups, the main demand was for action to be taken against the illicit tobacco trade in which, according to Fawu general secretary Katishi Masemola, “billions of rands are lost”.
He noted, at the same time, that the panel considering VAT had not included chicken.
“For us the first prize would be to stop the dumping of chicken. Second prize would be to make what is the main protein source for working people VAT free,” he says.
But he has his doubts that either prize will be achieved because of what Melanie Shaw of campaigning group FairPlay notes is “the political spin on everything” because of the 2019 elections.
The fear is that the government, facing a budgetary crisis, may be reluctant to lose the extra 1% of VAT on what is the “largest grocery item”.
At the same time, with elections looming, the government and the ANC may fear an adverse reaction among the electorate should cheaper, dumped chicken no longer be available.
“But continuing to allow the dumping of chicken will lose still more jobs – and saving and creating jobs must be the priority,” says Masemola. He adds that the increase in the tax, despite the recommended additional VAT-free items, will cause still more suffering.
In this he seems to be correct.
While the VAT panel calculated that its recommendations will save the poorest 70% of South African households R2.8 billion, the 1% increase is estimated to bring in more than R3 billion. And, as a regressive tax, it will continue to mean that the poor will continue to carry a greater burden than the rich.
These facts, against a background of the government’s expressed intention to cut up to 30 000 public sector jobs over the next three years, seem likely to make for a turbulent time ahead.
* Terry Bell is a labour and political columnist. Views expressed are his own.
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