South Africa’s sugar millers have welcomed the increase in the Dollar-Based Reference Price (DBRP) from $680 to $785 a tonne but they warn that further action may be needed if imports continue to displace locally produced sugar.
The decision to increase South Africa’s DBRP for sugar is an important and welcome acknowledgement of the extraordinary pressure facing the domestic sugar industry.
After eight years at US$680 a tonne, the government has acted. The South African Sugar Millers’ Association (SASMA) recognises the complexity of balancing the interests of producers, downstream users and consumers, and acknowledges the work undertaken by the International Trade Administration Commission of South Africa (ITAC) in reaching its determination.
But acknowledging a crisis and resolving it are two different things.
The real test of the new tariff will be whether it stops imported sugar from continuing to displace South African sugar in the domestic market.
ITAC’s investigation found that the domestic industry is operating in an increasingly difficult environment, characterised by rising import penetration, escalating production costs, weakening production volumes and capacity utilisation, declining domestic sales and deteriorating profitability. Imports, particularly from Brazil, increased during the latter part of ITAC’s review.
These findings should concern every South African interested in preserving domestic manufacturing capacity.
They also raise an important question about the argument that cheaper imported sugar is necessary to protect downstream industries and, ultimately, consumers.
ITAC found that both the sugar industry and downstream sugar users experienced rising costs. However, their economic trajectories were markedly different.
Cheap imported sugar is therefore not an abstract debate about competing interests in a value chain. Imports have real consequences upstream. When imported sugar replaces locally produced sugar on supermarket shelves and in industrial supply chains, demand for South African production falls with it.
The consequences extend far beyond the mill gates. Sugar milling is one of the foundations of rural industrialisation in KwaZulu-Natal and Mpumalanga. Mills are not simply purchasers of sugar cane. They are capital-intensive manufacturing operations, employers, logistics anchors, technical centres and industrial offtake points around which agricultural communities and local economies have developed.
ITAC has recognised the importance of the domestic sugar industry to employment, rural economic activity and livelihoods. This recognition is significant. It means there is broad agreement about what is at stake.
The question now is whether the protection afforded to the industry will be sufficient to preserve it.
South Africa cannot afford to wait several years to discover that it was not.
ITAC has indicated that the DBRP should ordinarily be reviewed three years after implementation, or at another time if the Commission determines that circumstances warrant it.
ITAC has also concluded that the DBRP formula remains an appropriate mechanism because it provides transparency, predictability and administrative consistency. Those are important qualities in any trade instrument.
However, predictability in the administration of a tariff cannot come at the expense of responsiveness to rapidly changing market conditions.
The previous DBRP remained unchanged at US$680 a tonne from 2018 until this decision in 2026. During that period, the economics of producing sugar changed substantially. So did the scale and nature of the import threat.
The industry cannot afford another prolonged period in which the level of protection becomes progressively disconnected from the conditions confronting domestic producers.
That is why the conversation about import protection cannot end with the announcement of the new tariff.
The new $785 reference price should be given the opportunity to work, but its impact must be measured urgently and transparently against clear outcomes: import volumes, local market sales, domestic production, mill utilisation, employment, and the financial sustainability of growers and millers.
If imports continue at levels that materially displace domestic production, South Africa must be prepared to act again.
That could require consideration of complementary and appropriately designed trade measures, including short-term safeguard protection, supported by the necessary evidence and consistent with South Africa’s international trade obligations.
This is not protection for protection’s sake.
It is about creating the breathing space necessary for an industry to make the transition that government, growers, millers and labour have already committed to under Phase Two of the Sugarcane Value Chain Master Plan to 2030.
The future of this industry cannot be sugar alone.
South Africa has an opportunity to turn sugar cane into a platform for a much broader rural bioeconomy, including bioethanol and sustainable fuels, cogenerated electricity, bioplastics, biogenic carbon dioxide, animal feed and other higher-value sugar-cane-derived products.
Mills are the industrial platform from which much of that diversification must happen.
But diversification requires capital. Capital requires confidence. And confidence requires a domestic market in which investors can reasonably expect South African productive capacity to have a future.
A milling company fighting to maintain its existing operations while its domestic market is being displaced by imports cannot simultaneously invest at the scale required to build new industries.
The bridge to diversification therefore runs through our existing mills. If that bridge is allowed to weaken, South Africa risks losing the industrial assets required to build the future-facing sugar-cane economy envisaged in the Master Plan.
This is why the debate about sugar imports is ultimately bigger than the DBRP. It is a question about what kind of industrial economy South Africa wants to build.
We cannot speak about localisation while allowing domestic production to be displaced by imports.
We cannot speak about rural industrialisation while the factories anchoring rural economies become progressively less viable. And we cannot ask an industry to invest in diversification while the market from which that investment must be funded is being eroded.
SASMA and its members are ready to be partners in the next phase of the industry.
We are not asking the government to do the work for us. We are asking for a fair and stable platform on which that work can be done.
The coming months must show whether the new tariff is stemming the flow of imports and restoring local sales. If it is not, we should not wait three years to respond.
Jenna Govender is the CEO of the South African Sugar Millers’ Association