We have seen 4 duty increases on wheat in the last year, with duties having now increased by 480% on the wheat products noted below. That is an astonishingly large duty increase for a product that is used in basic food stuffs.
| Tariff subheading | Description | 10 Oct 2014 | 31 Mar 2015 | 19 June 2015 | 25 Sept 2015 |
|---|---|---|---|---|---|
| 1001.91 | Wheat and meslin: Seed | 15,7 c/kg | 46,1 c/kg | 80,01 c/kg | 91,12 c/kg |
| 1001.99 | Wheat and meslin: Other | 15,7 c/kg | 46,1 c/kg | 80,01 c/kg | 91,12 c/kg |
| 1101.00.10 | Wheat or meslin flour: Brown wheaten meal produced by the milling of whole grains | 23,5 c/kg | 69,2 c/kg | 120,02 c/kg | 136,68 c/kg |
| 1101.00.90 | Wheat or meslin flour: Other | 23,5 c/kg | 69,2 c/kg | 120,02 c/kg | 136,68 c/kg |
The duty on wheat is calculated by looking at a global dollar reference price. The idea behind dollar-based reference prices is that the duty will automatically increase if the global price of the commodity drops below a certain level, and will reduce when the global price increases. In theory this should not seriously affect the consumer as the duty should serve only to maintain a steady price, except that SA imports around 50% of its wheat requirements because we simply don’t grow enough wheat. This is a problem. The duty is now massively inflationary on the 50% of the wheat we import that cannot be produced locally and it’s not as if the duty increases are incentivising farmers to plant wheat. According to discussions we have had with grain experts, we are actually planting less wheat each year.
The duty calculation
The wheat duty calculation is complicated and many companies that work with wheat don’t understand exactly how the duty works, which means that duty changes such as this one, arrive as a suprise. A very large and unpleasant suprise. To give context to the impact of this change, we imported 2m tons (R5.86bn) of wheat grain in the period July 2014 to June 2015 and 41 000 tons (R225m) of wheat flour in the same period. If the same volume is imported over the next 12 months, the cost of the duty increase on this import volume is R272m.
How effective has the duty been?
You might think, the duty would cause the import volumes to drop, but I think that would be a wrong assumption (we will re-visit the conversation a year from now and see what has happened). Here are the import volumes for the period July 2012 to June 2015 and you can see that import volumes have actually increased over the period, even though the duties increased markedly in that same period. 
Duties can be effective but imposing duties on basic foodstuffs when we don’t produce enough is a problem. It’s perhaps a manageable problem if we are addressing the shortfall in production, but if it is true that we are planting less wheat each year, then we are simply penalising the consumer for our pattern of planting.
But that’s not all….
We also don’t plant all of the varieties of wheat that are consumed in SACU and so not only end up with a duty that is penalising the imports that arguable could be substituted locally if the volume was planted, we now also impose a duty on wheat varieties not even grown locally.