SACSMA

1

• SACSMA
• South African Chocolate Sweets Manufacturers
  Association
• Presentation of Sugar Industry Issues
• to
• DTI and DFA Parliamentary Portfolio Committees
• 8 September 2004

2
AGENDA
Introduction
Page 3
Our Approach
Page 5
Interested Affected Parties
Page 6
Objectives
Page 7
Sugar Confectionary Imports
Page 8 - 10
Compliance Enforcement
Page 11
The Facts
Page 12
Current SACSMA Initiatives
Page 13
Page 13
Conclusion
Page 14
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INTRODUCTION

• SACSMA is proud to make this presentation through
  the chairpersons of the Portfolio Committees on
  Foreign Affairs, and Trade and Industry.
• On behalf of stakeholders within the sugar
  industry of South Africa, SACSMA wishes to
  highlight the state of the local industry and
  initiatives underway with a view to these making
  a substantive impact on certain bilateral and
  multilateral Free Trade Agreements.
• Guidance and constructive input is welcome and we
  wish to reaffirm our commitment toward the
  principles of our democracy and to uphold the
  Constitution of South Africa.

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INTRODUCTION TO SACSMA

• SACSMA is a voluntary organisation that engages
  in projects and / or issues that impact on the
  industry
• It is a special interest group that falls under
  the umbrella body, The Consumer Goods Council of
  SA (CGSA)
• SACSMA represents over 90 of the productive
  confectionery capacity in SA

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OUR APPROACH

• SACSMA
• Offers its full support to Government to create
  and enforce legislation
• Will work with relevate regulatory authorities to
  enable an efficient and effective mechanism to
  effect compliance enforcement
• Is appealing to Government to address the current
  plight of the SA confectionery Industry wherein
  jobs and state revenue are being lost

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INTERESTED AFFECTED PARTIES

• SACSMA IS CHAMPIONING OTHER INTERESTED AND
  AFFECTED SUGAR INDUSTRY PARTIES
• Sa Cane Growers Association
• SA Sugar Millers Association
• SA Sugar Association
• SA Glucose Manufacturers
• SA Packaging Manufacturers
• SA Labour
• SA Revenue Service

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OBJECTIVES

• Raise awareness of the issues facing the sugar
  industry as a whole and the confectionery
  industry specifically
• Current initiatives on Free Trade Agreements
  should be seen within this context

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SUGAR CONFECTIONARY IMPORTS
Tariff Heading 1704.90

• The volume of imported sugar confectionery has
  surged significantly in the calendar year 2003
  and year to date 2004.
• A total of 27 000 tons was imported in 2003 which
  represents 30 of the local market. This is up
  from 7 in 2002.
• Jan to Aug 04 imports are already at 25 400 tons.
  At this run rate, 2004 will see 38 000 tons
  imported. This is a growth of 355 vs 2002.

Annual Volumes
355
Source SARS (Customs Declarations)
2004 YTD Ave Monthly x 12
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SUGAR CONFECTIONARY IMPORTS

• SACSMA estimates a 28 reduction in jobs since
  2002. It is estimated that 9 500 people are
  employed in the SA Confectionery industry.
• In 2003
• SASA report a -17 reduction in sugar sales to
  confectionery manufacturers
• Packaging suppliers report declines up to -12 to
  confectionery manufacturers
• Glucose sales to the confectionery industry
  decline by -15

Tariff Heading 1704.90
Monthly Volumes
Source SARS (Customs Declarations)
10

SUGAR CONFECTIONARY IMPORTS
by Country of Origin From Jan 2003 to Jun 2004
(Tariff Code 1704.90)

• Sugar Price per ton
• Brazil US 160
• SA US 480
• Sugar is 42 of the total raw material cost of
  sweets production.
• Sugar price in Brazil is subsidised.
• Sugar pricing in SA is governed by legislation
  viz. the Sugar Act and the Sugar Tariff.

Brazil 72 Columbia 9
Source SARS (Customs Declarations)
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SA has a poor track record of compliance
enforcement

• Imported sugar confectionery into SACU attracts a
  25 ad valorem duty.
• The average declared FOB value is lower than the
  true value of confectionery imported from Brazil.
  
• True value has been confirmed by the local
  industry importing themselves, as well as
  multi-nationals (eg. Mars) based in SA who have
  operations in Brazil.
• This practice of duties evasion, has led to
  imports being significantly cheaper than local
  producers, resulting in material injury to the
  local industry.

FOB Value of Sugar Confectionery Imports from
Brazil in 2003 (Rand/kg)
True Value
Declared Value

• International Trade Centre
• Brazil SA Trade in 1704.90 (2002)
• Brazil Export SA Import
• Volume 8 602 8 644
• US/Ton 759 376

ITC a joint subsidiary body of the United
Nations and the World Trade Organization
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THE FACTS

• The local confectionery industry is worth
  R7-billion
• The local sugar industry is worth R6-billion
• Direct employment in the sugar industry totals
  130 000 jobs. Direct Indirect jobs 240 000
• Sugar makes up 42 percent of sweets raw material
  cost
• Brazil, the EU, Australia, Thailand the
  Caribean effectively supply 70 of the worlds
  free market sugar

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CURRENT SACSMA INITIATIVES

• Joint working commision with SARS
• Preparing a dual tariff application for ITAC
• Preparing an anti-dumping application for ITAC
• Broad industry awareness campaign
• Representation to Dept of Agriculture as input
  into proposed FTAs (US Mercosur)
• Inputs into review of sugar legislation
• Persuance of strict food safety legislation
  enforcement with Dept of Health

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CONCLUSION

• SACSMA offers its full support to Government to
  create and enforce legislation
• Current initiatives on Free Trade Agreements
  should be seen in light of
• Current plight of SA confectionery industry
• Loss of jobs
• Loss to the Fiscus
• Compliance enforcement
• Evasion of duties
• Rules of Origin
• Uneven playing fields
• Subsidised input costs in Brazil
• Protection of local sugar industry

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ADDITIONAL INFO

• For information, previous Chairmen have been
• 1979 1998 Arnold Zulman (Beacon)
• 1998 2001 Cobus Roussouw (Cadburys)
• 2001 2002 Wayne England (Nestlé)
• 2003 present Neil Brimacombe (Tiger Brands)
• SACSMA Contact details
• P O Box 41417
• Craighall
• 2024
• Tel [phone]
• Fax [phone]
• Chairman Neil Brimacombe
• Tel [phone]
• Cell 082 561 9433

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THANK YOU

• We look forward to any opportunity to work
  closely with government to find workable
  solutions to address the challenges of the local
  sugar industry together