Government Intervention
To keep domestic prices high and to block foreign sugar from entering the country, South Africa levies a heavy duty—adjusted on a daily basis to reflect world prices—on sugar imports.
Under its WTO commitments, these "variable levies" on raw and refined sugar can go as high as 105%.
South Africa also limits the amount of sugar that can enter from other African sugar-producing countries.
The greatest aid to the industry comes in the form of an agreement by the South African government to allow surplus sugar to be sold through a marketing monopoly called the South Africa Sugar Association (SASA).
SASA keeps domestic prices roughly double world dump market prices by controlling the amount of sugar sold in South Africa and by ensuring surpluses are dumped on the world market.
The South African government has further aided its producers with generous dam construction, irrigation, and drought relief subsidies.
Production and Price
South Africa produces 2.5 million metric tons of sugar a year, much more than the domestic market can consume.
Each year, the country dumps nearly 1 million tons of surplus sugar onto the already distorted world dump market.
Like almost all sugar producers, South Africa cannot survive on dump market sugar prices, which are barely half the world average cost of production.
Wholesale sugar prices in South Africa were 16 cents per pound in 2004, 60% above the world dump market price.
Trade with America
South Africa is one of the 41 countries from which the United States imports sugar. The United States is forced to accept this sugar whether the market needs it or not.
The U.S. market is already oversupplied with subsidized foreign sugar, which drives down prices, forces sugar facilities to close, and threatens 146,000 U.S. jobs. Efficient U.S. sugar farmers cannot afford to trade away more of their market to South Africa .
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