Grain SA and the South African Cereal and Oilseed Trade Association (SACOTA) brought the application for the increase in the Dollar-based Reference Price (DBRP) on wheat, classifiable under tariff subheading 1101.00.10. In their application, the applicants propose increasing the dollar-based reference price for wheat from US$279/ton to US$289/ton and call for the implementation of an automatic trigger mechanism. Raising the reference price will effectively give higher duties on wheat more often. The automatic trigger mechanism will make the changes considerably more predictable. A similar reference price duty applies to sugar and maize. It would be good if these too could be triggered automatically.
According to the application, local wheat production is under threat due to the current tariff structure, increased input costs, and competition from subsidised imports. South Africa’s historical wheat self-sufficiency has declined from 93% to just 55%, raising concerns over domestic food security. The applicants argue that the current import tariff favours foreign suppliers and does not sufficiently support local producers.
If the proposed adjustment is approved, the DBRP increase and trigger mechanism aim to enable South Africa to achieve up to 85% self-sufficiency in wheat. The tariff would be reviewed every two years to maintain appropriate protection levels. While the application focuses on protecting domestic producers, the Commission may also review other aspects of the tariff-setting methodology given the complexity of the existing formula. The urgency of this intervention stems from the sustained challenges faced by South African wheat farmers and the critical role of wheat in national food security.
But the gazette only covers one tariff code (for brown wheat flour) and leaves out the tariff codes for wheat. The duties on flour are a derivative of the duties on wheat (150% of the wheat duties), so investigating flour without wheat makes no sense. We await clarity from ITAC.
Over 80% of South Africa’s brown wheat flour is imported from Lesotho. The other four SACU states are allowed to import a certain quota of wheat each year, without paying duty, convert that product into something (flour in the case of Lesotho and pasta in the case of Nambia) and then send it into South Africa duty free. This creates a very interesting dynamic, where as the duties rise, so does the competitiveness of the other four SACU states for products made from wheat.