Competition Act, 1998 (Act No. 89 of 1998)

Notices

Guidelines on collaboration in the implementation of the South African Value Chain Sugarcane Master Plan to 2030

3. Introduction
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3.1. According to the Sugar Master Plan, the sugar industry is presently in a crisis and is facing a “perfect storm” driving accelerated decline in the industry over the last few years as a result of a number of factors that have combined to reduce local demand in the Southern African Customs Union (“SACU”) for sugar from 1.65 million to 1.25 million tonnes per annum, forcing increased exports into a global market where prices are below the local cost of production. Increased exports now mean the sugar industry has to absorb losses of approximately 2 billion rand per year.

 

3.2. Due to the nature of the immediate crisis facing the sugar industry, which threatens significant job losses in some of the most vulnerable areas of the country, and may result in the exit from the market of a significant number of players in the industry including small scale growers and independent millers, the Sugar Master Plan was required to deliver a social compact aimed at, among other things, securing agreement amongst all stakeholders on a intervention plan to pull the industry back from the precipice of collapse.

 

3.3. The Sugar Master Plan has four main strategic objectives:
3.3.1. to stem the industry decline to preserve 2019 job numbers, an estimated 65 000 jobs, and over the long run to grow jobs again in a diversified industry based on sugarcane;
3.3.2. to restructure and rebalance industry capacity to reduce inefficiencies, reduce costs and restore competitiveness, reduce reliance on tariff protection and to set the foundations for diversification;
3.3.4. transformation through inclusive and broad-based participation in the value chain for workers, black and women farmers and black industrialists; and
3.3.5. to invest in globally competitive and sustainable diversified sugarcane-based value-chains.

 

3.4. The designation granted by the Minister in terms of section 10(3)(b)(iv) of the Act and the subsequent exemption granted by the Commission, is aimed at creating an enabling framework for the sugar industry to implement the objectives of the Sugar Master Plan. Although the designation granted by the Minister relates to the sugar industry broadly, only SASA, representing the interests of producers and millers, applied to the Commission for an exemption. As a result, the exemption granted by the Commission only applies to sugar producers and millers.

 

3.5. However, the Sugar Master Plan accords an important role to downstream players in the sugar industry in the initiative to turn-around the possible collapse of the South African sugar industry. In terms of Action Commitment 1: restore the local market and off-take commitments, retail, wholesale and industrial sugar customers, in support of the goals of stabilising and restructuring the sugar industry, committed to increased sourcing of locally produced sugar for a period of three years as follows:
3.5.1. In year 1, the goal is to restore back to the local market at least 150,000 tonnes of sugar demand to the local industry in support of which, users commit to sourcing at least 80% of all sugar requirements from the local sugar industry;
3.5.2.increased procurement of locally produced sugar will rise through years 2 and 3 such that by year 3, the goal is that at least 300,000 tonnes of sugar demand will have been restored to the local sugar industry, in support of which users commit to sourcing at least 95% of all sugar requirements from the local sugar industry; and
3.5.3. increased procurement of local sugar by users beyond year 1 is subject to fulfilment of the Sugar Master Plan commitments by the other social partners, and is further subject to (1) the threshold exemption level, (2) the rate, and (3) the scope of application of the Health Promotion Levy remaining unchanged from the status quo as at 28 February 2020.

 

3.6. The Sugar Master Plan details and sets out specific stakeholder commitments by retailers; wholesalers; industrial sugar users; the sugar industry; and government to achieve the objective of increasing local sugar procurement.

 

3.7. The achievement of commitments to increase the procurement of locally produced sugar as contemplated in the Sugar Master Plan may require industry collaboration.