Engagement with the downstream sugar industry on possibilities and challenges to sugar beneficiation (Food and Beverages Sectors), with Deputy Minister

Meeting report

Opening Remarks
The Chairperson indicated that the meeting was intended to examine possibilities and challenges to sugar beneficiation. The dtic had developed the first phase of the Sugar Master Plan, which included ways of utilising sugar downstream and in more innovative ways. While the Committee appreciated the need to consider industry requests, the day’s meeting was designed to engage with stakeholders who worked upstream in the sugar beneficiation industry. The Committee also wished to listen to challenges that might impede uptake.

The Chairperson welcomed the Deputy Minister of Trade, Industry, and Competition, Nomalungelo Gina.

Introduction by the Deputy Minister
Deputy Minister Gina stated that the Ministry was there to continue the discussions on the Master Plans. She was pleased to be having a discussion with role players and the Committee, as the Portfolio Committee always had much to contribute to the development of the Master Plans. The Ministry was aware of the challenges that the industry faced, including issues such as the floods.

Since the signing of the Master Plan, various strides had been made, including a commitment to support small-scale growers and industry transformation. The industry had already spent more than R600 million on industry transformation from 2019/20 to 2021/22 as part of its commitment to invest R1bn in the industry’s transformation over 5 years. In January 2022, the industry paid R60m as an additional premium price to qualifying small–scale growers. Those funds were distributed against the backdrop of severe challenges that continued to plague the industry, including cheap foreign imports, the Health Promotion Levy (HPL or sugar tax), the unrest in July 2021, and the 2022 floods.

Deputy Minister Gina added that a transformation specialist had been appointed to develop a medium to long-term strategy; amendments to sugar regulations had started as transitional arrangements expired in March 2024, and SA Customs Unions (SACU) harmonisation was being dealt with by Task Team 1 of the Master Plan. Policy alignment between government departments was critical to the success of the industry, particularly the Health Promotion Levy (HPL). Diversification was key for the industry and sustainable aviation fuel might be an exciting opportunity.  Concerning climate change, millers and growers would continue to focus on sustainable practices and the industry would focus on the deliveries of small-scale growers to mills for crushing during the season, particularly when milling performance was compromised when millers were under pressure to crush the cane.

She noted that the sugar sector had encountered a number of problems in recent years which had
contributed to the downward trend in sugar production. Focusing on the last six years, the industry has faced droughts, and large-scale imports, and in 2018/19, the implementation of the Health Promotion Levy (HPL) by the Department of Finance. In addition, the unrest in July 2021, the 2022 floods, and higher than inflation wage increases add to the list of pressures simultaneously leading to low investor confidence and lack of much-needed capital investment for maintenance.

The Deputy Minister stated that the DDG for Trade and Investment South Africa, Ms Lerato Mataboge, was leading the delegation from the DTIC, but the presentation would be made by Ms Ncumisa Mcata-Mhlauli, Chief Director in Agro-Processing in the Industrial Competitiveness and Growth Division, dtic.

Presentation by the Department of dtic
Ms Ncumisa Mcata-Mhlauli highlighted the key challenges for the Sugar Confectionery Industry:
-Pricing of input sugar- even though notional price increases have been kept on or below the CPI, local confectionery producers are finding it difficult to compete with finished imports of confectionery products.
-Access to markets/routes to market - certain markets in sugar confectionery (i.e. lollipops) are oversaturated locally through wholesalers and informal channels. But opportunities exist in others, such as marshmallows and jellies, and retailers are a key route to market for these.
-Developing capabilities and capacity - smaller producers and producers in countries outside South Africa have limited capability and capacity to sustainably supply all stores in a chain. Given the importance of maintaining availability and consistency across stores, as well as the reputation of the chain, this is a valid concern.
-Rising imports of chocolate -it is necessary to protect our domestic market against EU imports using the appropriate remedies.
-The South African market faces challenges in terms of investment to support growth. Significant growth is being generated through the increase of imported products.
-One of the biggest areas of concern is the amount of sugar used in confectionery, in response to concerns about the link between sugar and obesity, as well as the growing trend for healthier diets.

(See presentation)

Presentation by SA Sugar Millers’ Association (SASMA)
Ms Michaela Cutts, Director, SASMA, stated that the sugar industry believes domestic sugar value adders should be protected via appropriate tariffs based on the sugar content of imported sugar-containing products, and continues to support value adders who export sugar-containing products through rebates (both canners and manufacturers). The Industry has proposed a further rebate scheme to government for small, vulnerable industrial producers across all value add sectors.

The industry was committed to ensuring that the SACU market is well supplied with all grades of sugar as required by the market while protecting sales in Namibia and Botswana which are being eroded. Surplus sugar, not fit for human consumption, was exported at a loss. Value Chain Diversification was considering Sustainable aviation fuel (SAF), Ethanol and Polylactic acid (PLA).

(See presentation)

South African Fruit Juice Association (SAFJA)
Mr Rudi Richards, General Manager, SAFJA, provided an overview of value chain. Challenges related to policy and regulatory contradiction and misalignment; the HPL which directly impacts the primary objective of the Master Plan which includes sugar beneficiation; the sector was penalised for increased sugar procurement, use and beneficiation; the regulatory trajectory in support of increased sugar offtake and beneficiation was reaching its sunset; there was a direct correlation between extending the HPL on unsweetened 100% fruit and vegetable juice (including to other product categories beyond beverages) and a continued negative impact on the local sugar industry and beneficiation levels.

The above contributed to a decline in the industrialisation and manufacturing base in the food and beverage sectors with a knock-on effect on the upstream value chain, i.e. the local sugar industry.

(See presentation)

Briefing on the Impact of the Sugar Industry on Downstream Users - South African Processed Fruit and Vegetable Industry (SAFVCA & SAFVCEC)
Ms Jill Atwood-Palm, General Manager, SAFVCA, presented an overview of the industry, and the impact on sugar converting industries and made some recommendations. Fruit Juices were concentrated in Western Cape; vegetable, tomato and other juices were concentrated in the north of the country. Challenges emanated from the global impact of Covid and protectionist pricing. Key challenges were the high cost of production, cost of and access to capital; energy supply; water quality and supply; world pricing pressures, especially tinplate and sugar; regulatory pricing of energy and fuel. Infrastructure was an enormous challenge in the industry. Farmer confidence and climate change posed problems, as did changing consumer trends.

(See presentation)

Presentation by the South African Sugar Converters Association (SASCA)
Mr Alistair Gore, Chairperson, SASCA, made the presentation. The South Africa Sugar Converters Association, SASCA, was established in April 2021 and comprised over 20 members who manufacture confectionary products or “convert” sugar into added-value products. The Association believed it faced many challenges. SASCA believed it received inadequate support for its industry; sugar tariffs were exorbitantly high and the sole supplier of glucose had just raised its price by 30%. Electricity interruptions damaged infrastructure and caused instability.  The SASA lobby/industry representatives had failed to
negotiate or come to the table with SASCA, nor did it provide clarity regarding its role. SASA failed to meet undertakings and account for their failures to deliver, so currently, SASCA is in a dispute with them.

(See presentation)

The Chairperson noted that Committee Members had received five presentations, one on the Master Plan, and then one each from the four stakeholders. She opened the meeting for questions and comments from Members.

Discussion
Mr D Macpherson (DA) had a few concerns, which would really shape the discussion. He asked why the South African Sugar Association (SASA) was not part of the discussion. Were they not invited by the Committee but did they choose not to attend?

The Chairperson explained that SASA was not invited as the focus in that meeting was on the downstream food and beverage industry. If he remembered, in May, all of the other role players had been invited when the Committee had a presentation on the Sugar Master Plan

Mr Macpherson explained that SASA was very important in the discussion. And so, it was a half-baked discussion without key role players. SASCA had raised complaints about SASA but the Association was not on the platform to respond. He was puzzled as to why the Department of Health (DoH) and National Treasury were not there as they seemed to be central to the discussion about the Health Promotion Levy (HPL) and the Portfolio Committee had as yet received no discussion or presentation from them. There had been no discussion from dtic about their intervention in the downstream sector, except for banding about a few figures and the HPL as well. The discussion took place in the most unfortunate of settings because he did not think they were doing any service to themselves. He had been a part of many of the discussions over the last eight years and they seem to always be half-baked and sort of incomplete. And then they came back in a month, months, or even a year’s time and then they wrung their hands in disbelief as to why certain sectors were the way that they were. A constructive engagement was required with everyone being part of the discussion.

Mr Macpherson asked a policy question. What evidence existed between disease control and taxation? He asked the Deputy Minister or the dtic to respond to his question. There seemed to be a misnomer that the more you tax through the Health Promotion Levy (HPL), the more you can fight obesity or sugar-related diseases. But there was never any evidence on the table. It could not be called a disease mitigation tax if the money did not go to the DoH. Government should stop calling it a HPL when it was nothing other than taxation on industry. It had never been ring-fenced by government for the health department. It was a general revenue stream. So he thought people should stop calling it a health promotion levy; it was taxation.

He asked why sugar was singled out as a downstream beneficiation industry. There were actually so many other points they should be discussing. Why were they not talking about fuel and other industries? What was the fascination with sugar? The dtic said HPL had not increased because of the Sugar Master Plan but that was factually untrue: it had not increased because National Treasury had not raised the taxation. Now there was a proposal to tax 100% pure fruit juices. Why not tax non-fruit juices? Fruit juices were healthy choices, so what was the policy? Where had the policy been made? Was government going to tax people for making healthy choices, for buying apples and bananas?

Where were DoH and National Treasury? Mr Macpherson said that DTI seems to want to portray itself as not being in the same government, the same cabinet as the Department of Health, Will the Minister of Health and National Treasury He noted that it appeared the DGs of dtic, DoH and National Treasury never met. The dtic spoke continuously about engaging, but nothing was ever resolved.  On slide 22 of the presentation from the DTI, Ms Mcata-Mhlauli spoke about the timeline of a particular study. Could she please tell the Committee when that study would be completed, and when it would be published and made available? He had to say that the engagement was borderline fruitless as too many actors from the movie were missing. The dtic or Deputy Minister would not have the answers and the Committee would feel it was going in circles. Maybe someone could make a phone call and invite the relevant players to come and join the Committee and answer Members’ questions.

The Chairperson stated that the Committee could share the discussion by inviting people to a Committee meeting. She noted that SASA (the South African Sugar Association) was registered in the Zoom Chatbox.

Mr Macpherson pointed out that SASA should be allowed to present at the meeting.

Dr M Tshwaku (EFF) referred to a WHO study that he was interested in as he was trying to find out why the sugar tax had been introduced. Committee Members needed information to understand the purpose of the HPL. He noted a link between sugar intake and diseases such as obesity and type 2 diabetes but he was looking for a better article than the ones he had seen that might shed some light on the topic. The DoH had stated that non-communicable disease (NCD) cases increased with the intake of sugar. He agreed that the Department of Health should be invited to the Committee. As a Marxist, he believed in Science and if there was scientific evidence, the sugar tax should happen as he was interested in saving lives. Those who owned the means of production, the greedy capitalists thought only of making a profit at the expense of the workers’ livelihoods; he aimed to save lives. He saw all the moaning and groaning about jobs but wanted to know what they did regarding black upliftment. He saw that black players were suppressed as the industry was highly monopolised. He could even take it further to say that, in the entire presentation, there were no black players. Black people were being side-lined and it was a threat. His question was how many black players were in the industry and how were they being supported by dtic. He agreed with his colleague that the Department of Trade, Industry, and Competition should provide a scientific study.

Dr Tshwaku encouraged the players on the platform not to be stuck in the consumption of sugar. As Mr Macpherson had said, sugar could be converted into biofuels which could be an additive to fuel for cars. He knew that many cars did not want fuel with a biofuel additive as it invalidated the warranty from the manufacturer. So what had dtic done about that so that the industry could actually diversify and people did not cry about the sugar tax and people who were losing jobs and all of that? They should not be lazy thinkers; they must put money into innovation to ensure that they could diversify.

He recalled that the SA Millers Association had a problem with small-scale farmers. Had those farmers been assisted because the milling was focused on big operations? He wanted to know if the small-scale farmers had been given small milling machines. Why had dtic or the SA Millers Association not spoken to that?

He asked SASCA which rural areas they were working, where the factories were and how many black owners were there in SASCA. Were members of SASCA aware of farm workers and were they ensuring they were paid proper wages?

Dr Tshwaku told Mr Gore that he did not understand what he had been talking about. Could he explain in brief what SASCA did? What was the total membership of SASCA; what were the relevant statistics? Had SASCA signed the Master Plan? What was the level of transformation in the industry? And what were the cost drivers for the production of sweets and chocolates? Could comprehensive data be provided to support the allegations of job losses and all of that? Had SASCA formally signed the Master Plan? And what was the commitment, and what was the level of transformation in the confectionery sector?

Mr Z Burns-Ncamashe (ANC) asked about the business model on which the industry was predicated. It should be an inclusive economy so that, as the Committee dealt with issues of an inclusive economy, they also brought in fundamental policy shifts, especially from a consumption-based economy to a production-based economy where the ownership of the means of production was not concentrated in the hands of the few. How did one deconcentrate? How did one flatten the hierarchies that had been so institutionalised that they had always served as exclusionary barriers so that his people could only participate as labourers?

So, when they dealt with those issues in the Master Plan, they had to deal with them in a clear context so that they knew exactly what they wanted to achieve as fundamental transformational milestones. In that regard, he was interested to know how the Department would circumvent the challenges of investment and support, especially for small growers in the industry, with a specific focus on those who had been historically marginalised as part of the tragedy around the inclusive economy. How would the Department support small growers in the industry, specifically those who had been historically marginalised?

Mr Burns-Ncamashe said the Committee could not talk about the downstream, without fundamentally referring to the upstream to the extent that it talked to, for instance, the sugar cane farmers, those who were producers, those who operated at the mills, and so on, so that Members did not only focus on the extent to which jobs were created. It was good to create jobs, but it was necessary to go further than creating jobs. He wanted to see black people, in particular, taking ownership as part of their true transformation because currently, there were conglomerates. It was good to create jobs but it was important to ensure transformation and create ownership.

Mr Burns-Ncamashe asked about the challenges facing small-scale growers who were historically black and had been marginalised. It was also important to talk about land ownership because as long as there was land tenure, his people would be exploited as labourers, not producers or owners, because sugar was not grown in the air but on the land, so it was important to address fundamental issues. If prices of commodities affected the producers, it was important to be on the side of his people. There had to be a de-concentration to create an inclusive economy. At a strategic level, what corrective measures were the dtic working on together with the Department of Agriculture, Land Reform and Rural Development (DALRRD) in ensuring that access to land was actually accelerated and secure tenure was equally accelerated? What was being done to ensure that the scale on that front was really becoming meaningful? Anything less than that would not be helpful to the agenda of an inclusive economy.

Mr S Mbuyane (ANC) had learned of a transformative fund with a lot of money but he had not seen any transformation. The presentations talked about challenges. What was NEDLAC doing about the Health Promotion Levy? What was the Task Team saying about the HPL? Could the stakeholders or partners unpack HPL? He wanted clarification.  What was NEDLAC saying? He was told that NEDLAC task teams were dealing with tax policy. Could the Committee also get the report? It was important to peg the HPL because seemingly, it was the one thing everyone said was killing the industry. Transformation in the sector was impossible because the presentation talked to HPL, which was killing the industry, and there were a lot of job losses in the process.

He had seen the primary agriculture and the agro-processing plans and the beneficiation did not talk to transformation. There were no small play players there. Could he check, in terms of numbers, how many small-scale growers there were in primary agriculture, how many small players in agro-processing, and how many were beneficiaries of the process because he could see from the market and branding that the big companies and conglomerates were the beneficiaries of the process? There was a misalignment in the policies and the regulation; the misalignment was in the Sugar Act of 1978 and it had to be reviewed because there was no space for small-scale producers, so there were no small black players. How many were there in the process and how many black people were owners? Mr Mbuyane believed that all role players had to be part of the discussion or it would not result in any contribution to transformation. The departments involved include the Department of Health, National Treasury, and DALRRD.

Mr Mbuyane also noted that the beverage companies were replacing sugar with other substances, but were those substances healthy? Had those sweeteners been evaluated in terms of how healthy they were? He reiterated the need to review, check, and correct the HPL and put a moratorium on it to assist the industry going forward. Lastly, he noted that he had not yet seen any presentation talking about the unions and the labour perspective. It was not correct to talk of a Master Plan without labour unions. They had to put labour into the process. Why were they talking about job creation without labour? Labour had to be part of the plan so that they moved forward.

Mr W Thring (ACDP) said that the elephant in the room was HPL and its impact on the sugar industry and the policy of beneficiation. But what he had heard from most of the presenters was the harmful impact of HPL on the sugar industry, including the downstream users. And in one of the graphs that were presented, one could actually see the correlation in the sense that when the HPL was introduced, one saw a sharp decline in the production of sugar, and that sharp decline in the production of sugar essentially led to job losses. It spoke of hundreds, if not thousands, of jobs lost due to the introduction of HPL. So there was clearly a correlation between HPL and the decline in demand. When one also looked at the introduction of the Master Plan and the moratorium placed on HPL, one could see an increase in demand and supply.  

The Committee needed to interrogate the actual benefits of HPL to the sugar industry. The industry had moved to the use of artificial sweeteners as a replacement for sugar. According to his research and reading that he had done, Mr Thring found that some of the sweeteners used were actually more harmful than the use of sugar itself. And so if that was the case, particularly within the beverage industry and other industries that were also using artificial sweeteners, it made the HPL redundant as an intervention to reduce the impact of sugar diabetes and obesity, and other health factors the consumption of sugar might influence. Mr Thring stressed that he was not necessarily saying that the huge intake of sugar had no impact on health. It did. But perhaps the better intervention would be to address how people used sugar. Those were discussions that the Committee needed to have.

He asked if there had been a health and economic or a health risk-benefit study or assessment done to gauge the impact of HPL. He was concerned about the health of citizens, and perhaps what was needed was a good look at the consequent use of artificial sweeteners and its health or economic risk to South Africans.

The diversification of the sugar industry was crucial. It was important to move to the production of biofuels. The Committee has had those discussions for many years now. There was a need to move from biofuels and biogas and not just talk about it. Some mills had created biogases that they were using in their production methods in the mills. The ACDP believed that transformation could not lead to the destruction of the economy. It could not be about deploying cadres but such transformation had to benefit the masses.

Ms N Motaung (ANC) was interested in the long-term sustainability of the industry. How many small-scale growers have been assisted since the signing of the Master Plan? And what has been the impact of the R600 million spent in the industry from 2019 to 2022 on employment creation? What was being done to protect small-scale growers from imports? What was being done to mitigate imports?

Ms R Moatshe (ANC) asked how many black small-scale growers had been assisted and what had been spent on employment creation.

The Chairperson handed over to Deputy Minister Gina for responses.

The Deputy Minister said that it was good that all stakeholders could agree that there was a need for a day’s engagement with all role players as those who were not present could have impacted the discussion. She agreed that the engagement that day had been a little piecemeal. DoH, DALRRD, and National Treasury needed to be there. She stated that the ministry talked to National Treasury and the relevant departments. That would be a very constructive discussion as they moved forward to try and resolve matters to reach the objectives they wished to reach regarding the sugar industry issue. The discussion should be opened, and everyone needs to come back to it and have a thorough discussion. She also assured the Committee Members that, indeed, the ministry was having those discussions. Aspects of the presentation came from information provided by the Treasury and other government departments.

The Deputy Minister could not recall claiming that the Master Plan had increased the HPL being suspended. It was, indeed, Treasury that made those decisions. The Department of Health has said as much. However, the Master Plan required commitments that prices relating to the industry cannot increase more than the CPI, but that has not happened. Regarding policy issues, government needed to ensure that there was certainty for the investors. They must know exactly where government stands. As a country, those are the things that must be discussed and finalised so that investors and players can know exactly where the government is and what it is that they can expect in the near future. Again, the issue of other departments needs to be addressed as much depends on the issue of land ownership.  Did the Department have any say when it came to the issue of land tenure and the issue of land ownership? Yes, the ministry was part of those discussions. There is an Inter-ministerial Committee (IMC) that is led by the Deputy President and includes departments that are affected by the question of land tenure. The previous month, the IMC held a land summit with traditional leaders.

Mr Macpherson raised a point of order regarding visitors utilising the Zoom Chatroom reserved for Members.

The Deputy Minister stated that it was important to bring the land to the people that could use it. Concerning the issue of all of the land ownership, she thought things were moving in a good direction when it came to that. But again, those were the discussions that the ministry must open up to the Members of the Portfolio Committee because it always valued the Committee’s contributions, but it was something that the ministry was taking care of.

She explained that the presentation had only focused on sugar in terms of food and beverages as per the instruction that the Department got from the Portfolio Committee. But when it comes to other issues, like the issue of biofuels, those would be addressed when the Portfolio Committee called the Department to account for that but it went back to the question of not doing things in a piecemeal fashion. There was a need to touch on almost everything that the Department and ministry were doing when they spoke about the issue of the sugar industry so that those questions could be resolved. The Department was not only focusing on the downstream players when it came to the utilisation of sugar, but when it talked to the issues of diversification, one had to look at all the task teams that were involved in the Sugar Master Plan. It was one Master Plan and the role players played a very meaningful role. She was happy that Mr Harald Harvey, the facilitator of the Sugar Master Plan, could respond to questions.

Ms Mcata-Mhlauli agreed DoH was best to respond to questions on the HPL and the issues around obesity and diabetes. Concerning the Master Plan, the sugar industry Task Team Six dealt with downstream diversification. Pre-feasibility studies were underway and funding had come from IDC to examine diversification. There were several options in respect of fuels and she would share the results of the study when it was completed. Also, as noted, sugar mills were already using biogas.

She added that the dtic was engaging with labour as an important role player and had recently engaged in discussions with the Bargaining Council. Labour wanted to join Task Team two. Task Team four dealt with transformation – Deloitte had commenced a study and would share the information when complete. To date, R600 million has been spent on transformation by assisting with transport, etc. R60 million had been set aside for the premium payment to small-scale farmers and to circumvent their challenges. Task Team 3 was dealing with a plan for small-scale farmers and its study was almost complete and that would guide assistance to small-scale farmers, de-concentration and ownership. Concerning the number of small-scale growers, 12,867 small-scale sugarcane growers had milled their sugar.

Mr Harald Harvey explained that he had been brought on board by dtic to act as the Sugar Master Plan facilitator. He explained that the critical thing was to remember that the Master Plan in its first phase had a very specific purpose. The first phase was to revive the sugar industry and just bring it back to life as it was going off a cliff, it was in the Intensive Care Unit. They had to give it oxygen and create the basis on which the industry could chart a way forward without destroying the foundations of the house. As people knew it, the South African sugar industry had been over for decades. The supply of sugar crystal to the industry was in trouble because people were eating and drinking less sugar. But, it was an industry that employed significant numbers of people and delivered significant livelihood support in places in the country where there was no alternative, principally for black South Africans in rural areas. The major problem was that the industry operated in deep rural areas where the people could only grow sugar or cattle and cattle did not give a fraction of the income that sugar provided. Ultimately the industry would be diversified, but diversification could not happen overnight and the downstream market was not going to shift overnight. It was like shifting from fossil fuels to green energy. The challenge was that the food and beverage industry was in a vice that was getting tighter. The price for sugar was above the selling price globally because sugar was simply off the fuel and the sugar industry in India was highly subsidised. The ultimate aim was to support small-scale growers in deep rural areas.

Mr Harvey stated that the future of sugarcane growing in the country would exist only if the sugar was used to produce something other than a product that humans are going to be eating in the main and so the foundations that the Department was trying to lay were not only about beneficiation of sugar for human consumption. It was actually about biofuels, bioplastics and the bio-economy. The point was that diversification did not happen overnight. And so an industry that was in decline was struggling to survive and did not attract investment, because there was such uncertainty in it. There had been systemic underinvestment in capacity both at the farming level and the milling level, which was driving inefficiencies, making the industry less and less profitable, and that industry had to fix itself. But it's in a world where the downstream market was not going to shift to bioplastics, biofuels, and all the holy grails overnight. And so there was a very difficult period in which some very tough decisions had to be made. It was very similar to the just transition debate the country was having about energy. As the country moved from a fossil fuel-based energy system to one that was based on renewables, a sugarcane-based value chain had to shift from putting more sugar into the diets of human beings into one that supported a bio-based economy.  And so the challenge for the food and beverages sector was that the sugar industry was in a vice that was getting tighter and tighter until downstream diversification could take place because there were going to be pressures about less and less sugar in human diets.

The dilemma with the sugar-based confectionery space, for example, is that they were being asked to buy sugar at a price that was way above the price they could get if they went and bought it on the open market in the world. Mr Harvey explained that the global price for sugar was a function of social policies in the major sugar-supplying countries. So the sugar price was driven by what the Brazilian sold it at and the Brazilian selling price in the global market was a function of the energy policy because, for them, biofuels were very much part of the energy security strategy. And the other major driver of the global price was India's exports, which were highly subsidised as it was a function of driving the rural livelihoods. And so the market would not solve things. Tariffs had been put up to protect our industry, and it was done for social purposes because fundamentally, the Master Plan was not about protecting just the sugar industry in broad brushstrokes. What was currently being done, very specifically, was about the need to preserve and grow the foundational role of the small-scale grower, 99.9% of whom were black, and in the deepest rural areas where they had no alternative. So that was the choice that had been made. How then did the industry accommodate and deal with the issues of the downstream markets? There had been discussion in the meeting and the debate around the HPL so he would not traverse that issue. Again, there was a whole set of questions around what could be done to support the downstream beneficiate, to protect them from the dynamics around the EU trade policy and the EU trade agreement. Everyone had to acknowledge that it had been a difficult journey.

Mr Harvey stated that Task Team 10 of the Sugar Master Plan was talking about price support that could be provided to the SASCA members or the class of downstream service manufacturers whom SASCA represents. It had been difficult to assess that sector, although the task team had tabled a proposal for some kind of price support in the form of a rebate for small producers or small manufacturers, who were classified as SMEs. The challenge was that SASCA's members were not SMEs. They were bigger than that, although not huge. They were not in the categories of Cadbury and Nestle, but their annual turnovers are bigger than would fit the definition of an SME. And so it had been a challenging process, although everybody supported some kind of trade measures to potentially protect the local industry. What he did want to flag, though, in a context where we are in a structural decline in consumption of sugar, as our economy grows and develops, the challenge for the sugar converters is that the growth was not going to come in the domestic market, it was going to come from the export market. So for example, the African Continental Free Trade Area (AfCFTA) created a significant opportunity, particularly for packaged foods on a continent where refrigeration and cold chains were not yet where they needed to be. The packaged food industry is still on a growth curve. The rest of Africa still offers significant opportunities, but what support do the manufacturers need? Sugar is a major ingredient in some of these products and it can be procured in Africa at prices much closer to the global market price, and well below the SA price. So difficult decisions had to be made. There were no silver bullets. It was essential to focus on the tough questions about maximising employment and growth; transformation and transformation has to be based on growth, not on a shrinking pie. Where was the growing pie going to come from? Was that going to come from downstream foods that were sugar-containing or sugar-based? Could it come from other parts of the value chain? He left those questions with the Members.

Ms Mcata-Mhlauli said the Master Plan study would be finalised towards the end of the financial year.

Concerning the technical dietary intake study, DoH had appointed a service provider, so that study had just started.

Ms Cutts stated that although the Association was affiliated with SASA, her Association could not respond on behalf of SASA. One sugar mill was black-owned. Regarding transformation, one of the six mills was black-owned; three mills were B-BBEE level 1, and three mills were between B-BBEE level 2 and level 4. The Millers were members of Task team 8. How many small-scale growers were being assisted? All that fit into the definition of a small-scale grower benefitted from the premium price and other benefits offered by the Association.

Mr Richards stated that there were no direct questions for his Association. He agreed that there should be wider and deeper discussions to solve the challenges.

Mr Martin Neethling, representing SAFJA, stated that the Association would welcome the opportunity to provide more scientific information to the Committee, such as it might be related to the HPL The Association had extensively researched the issue and related issues that directly affect its members. They were very happy to share the scientific basis of their views.

Ms Atwood-Palm had no questions to respond to but indicated that she would make some comments. She agreed with Mr Macpherson regarding an improvement in coordination and alignment. SASA was a central player and needed to be involved in the discussion She agreed that it would be advisable to look at the legislative framework as certain canned products were included in the Preferential Procurement Act. It would be good to expand that preferential status to other canned products. She informed Ms Motaung that import duties were imposed on raw sugar but perhaps government could look at products containing sugar that came into the country. It might be possible to look for policy space between current levels and what the World Trade Organisation permits regarding tariffs.

Mr Andries Cronje, representing SAPFVI, stated that the following products containing large amounts of sugar were coming into the country without a sugar tax: jams, beetroot, baked beans, and gherkins. Imports were set to increase in the next six months, so time was not on the side of the SA manufacturers.

Mr Braam Hanekom, representing SASCA, presented a list of people who owned factories that produced confectionary, sweets and the like.

Mr Nazir Osman, representing SASCA, stated that SASA controlled pricing and priced on behalf of huge, monopolistic corporations. So that was what SASCA was there to fight against. And that was the essence of what he had come to talk about. The HPL did not affect his industry at all; it only affected the beverages. So that was not on SASCA’s agenda, yet it had taken a lion's share of the discussion. SASCA had some rural members, but most of its members were urban. They employed mostly rural workers in their factories who went home at the end of the year, etc., but it was impossible to operate factories in rural areas as the proximity of resources was essential. His members wanted to help farm workers but there was no transparency about small-scale sugar growers who were helped by SASA but he knew that 90% of the profits were not focused on the small-scale farmers. Why did SASA employ 1 000 members? The real profit makers were the bigger conglomerates and owned everything from a basic sugar right to a finished product because that was how big they were. And those conglomerates were the ones his colleagues were up against at the moment, which was not easy.

There is no transparency about how the small-scale growers were actually helped. Mr Osman knew the Master Plan deals had the best intentions, but SASCA thought that, according to what they had been told, only a small percentage of sugar was manufactured by the small-scale growers anyway, 5% or 10%. But all the sugar was priced to support them. And 90% of the sugar profits did not go to them, so that had to be looked at. And SASCA was not focused on sugar only, although sugar was one of the key ingredients. But actually there were other issues as well. When it came to transformation, SASCA was the most transformed, or one of the most transformed industries and he agreed with some of the previous speakers about transformation. And while he supported it, SASCA’s industries were a shining example of how transformation was taking place and had taken place to some extent.

Regarding the imports, SASCA was also very concerned about the imports, not just of sugar, but also of confectionery, which meant finished goods. Because Brazilian or Indian or Turkish manufacturers (and he could name 20 countries where sugar was half the price) could actually manufacture products, and then they just export to Angola, at 30% cheaper, how could they compete against that? The imports into South Africa were killing his members. It was all fine to raise import duties, etc. The problem was that importer duties were easily evaded. People circumvented the duties using many different methods, including the unfortunate corruption at ports and other entry points.

The dtic played an important role in facilitating SASCA’s issues for which the members were very grateful to be included but there was a lot of discussion about biofuels, etc. SASCA might not be the be-all and end-all, but the members created many jobs relative to the size of their business. If one went higher upstream, one found that for the volume of turnover, proportionately big businesses did not create as many jobs as SASCA members did. About two years ago, SASCA had asked for a short-term solution and although it was discussed at length, they were still trying to come to some conclusion. And in the meantime, two SASCA manufacturers had shut down and left the country. One left for Zambia and the other sweet plant had been moved to Nigeria mainly because it was profitable there. In 2016 everyone was profitable, employing more people and buying more machines; they were expanding their plants, doing B-BBEE projects and whatever. In 2017, they “got gobsmacked” by a 22% increase in sugar. And then the following year, there was a 20-something percent increase. Which industry could sustain itself with such increases? So that's when SASCA had started talking to the dtic and so on, eventually culminating into the day’s meeting, which he hoped was going to be a turning point for the industry and transformation. SASCA’s intention was not to fight with SASA; the intention was to find out how SASA operated.  

The Chairperson informed Mr Osman that SASCA’s time was up. In addition, SASA was not there to respond to his allegations.

Dr Tshwaku stated some questions were not answered. Firstly, the issue of bioethanol had not been responded to. Had dtic spoken to the auto industry to accept bioethanol in the vehicles? Also, the question about small-scale milling was unanswered. What was the industry doing because the small-scale farmers had to wait for tonnage to be able to take their produce to the millers?

The Chairperson advised that the meeting of 23 August 2022 had been set aside for biofuels but had been replaced owing to an engagement with the Minister. In the meeting on 23 August, where initially biofuels were central to the downstream discussion, the Minister then requested time to interact with the Department of Mineral Resources and Energy. So that was definitely on the programme going forward.

Mr Mbuyane wanted information on the study by NEDLAC on HPL and the participation of labour. How possible was it to get labour involved? He proposed a joint meeting with all departments because that was the only industry that was not transformed and the Committee needed to discuss that with SASA. It was also necessary to review the 1978 Sugar Act.

Ms Cutts said that the question referred to small-scale growers. Processes had been agreed to resolve the matter of tonnage and small-scale growers were being assisted but it was an ongoing process that needed to follow its course.

Mr Mpo Thotela (sp), a member of Task Team Seven, informed the Committee that the NEDLAC study had been finalised the previous year and he had been given an assurance that it had been circulated to Portfolio Committee Members but he would forward a copy. The study was a social economic assessment of the health promotion levy. The study has been made available for consultation and comments. Just to give one quick, salient feature of that study which was meant to zoom into the first year of the sugar tax implementation. It showed 16 621 jobs lost but he knew that the figure currently stood at 25 000 jobs lost. The study called for further studies in terms of health to ascertain if there were any health benefits emanating from the Health Promotion Levy. As things stood, no study confirmed if there were any other health benefits derived from the implementation of the enactment of the sugar tax. The study could not show any health benefits but the task team was looking to extend the NEDLAC study to determine that.

Mr Macpherson agreed with Mr Mbuyane. There was general agreement and he proposed a full-day engagement with DoH, National Treasury and dtic including Ministers, HoDs, studies, timelines, etc and an indication of what was expected from each role player.

With due respect to Mr Harvey, Mr Macpherson had been told for the past eight years that the study on biofuel would be presented and that had not been done. He agreed it was very complex. Everyone had to be in the same room so no one could hide behind an absence. And if someone said something wrong, the Committee could ask for a commitment or a discussion on the matter to get to the bottom of where that was headed. Then at least Parliament would have played its role and perhaps done what Ministers and officials could or would not do.

The Chairperson thanked Mr Macpherson but proposed a two-day colloquium as she thought the matter was too complex and there were too many role players for the matters to be addressed in a single day.

Mr Burns-Ncamashe thought Mr Macpherson might find it pleasant that there was a convergence on the matter. He suggested that the Department of Mineral Resources and Energy, DALRRD, the Department of Cooperative Governance and Traditional Affairs, and traditional leaders be part of the engagement. Land was administered under customary law in rural KwaZulu-Natal so every potential role player would be under one roof. There had to be clear commitments.

Dr Tshwaku asked if the colloquium would be physical or virtual. Everyone, especially the DoH must come prepared so there had to be terms of reference as to what the role players had to bring.

The Chairperson recapped that such a colloquium would be held.

Mr Macpherson recommended provincial governments in production and manufacturing provinces be invited.

Dr Tshwaku referred to the rate of insurance companies and asked if the Competition Commission could appraise the Committee on the article on the price collusion by the food stores where prices were higher than Woolworths. Perhaps the Committee could get a briefing.

The Chairperson encouraged all Members to put similar requests for topics to be discussed at meetings to the Committee Secretary in writing so that the suggestions could be managed in the Manco meeting.

Closing Remarks

The Committee Secretary informed Members that the following meeting would be on Tuesday 6 September 2022: a briefing by the DTIC on the initiative to reduce red tape and roll out of One Stop Shops in all provinces.

The meeting was adjourned.