South Africa's Treasury Approves Wheat-Import Tariff Increaseby
Wheat-import duty raised by 34% to the highest on record
Finance Ministry concerned about duty's effect on bread prices
South Africa’s Finance Ministry approved an increase of wheat-import duties by 34 percent to the highest on record to protect local farmers, but asked the trade commission to review the formula because it’s concerned about the higher tariff’s effect on food prices.
The tariff on wheat imports is now 1,224.31 rand ($81) a metric ton, in line with the International Trade Administration Commission’s current formula, the Pretoria-based ministry said in an e-mailed statement Friday. The department has proposed to Trade and Industry Minister Rob Davies that he considers “an urgent and accelerated review” of the formula, and that this be followed by probes into calculations for sugar and corn duties.
“The Ministry of Finance is particularly concerned about the impact of the higher import duty on wheat on the price of bread and other staple food, but also mindful of the need to ensure policy certainty, food security and the financial health of the farming industry,” it said.
While South Africa is the sub-Saharan region’s biggest producer of the wheat after Ethiopia, it’s still a net importer of the grain, according to the U.S. Department of Agriculture data. The driest conditions since 1992 have damaged crops and livestock and sent local wheat prices to the highest on record, driving up food prices. The government has declared disaster areas in several provinces of the country, the continent’s biggest corn and sugar grower.
South African inflation accelerated to 7 percent in February, the fastest pace since June 2009, adding to the central bank’s policy dilemma of rising consumer prices and slowing economic growth.
“This came at a good time because the guys are about to start planting,” Wandile Sihlobo, an economist at Grain SA, a farmers’ lobby group, said by phone. “International wheat prices are at lower levels and are expected to stay lower because they had good output. This will encourage domestic production.”
Wheat in Chicago is trading near the lowest in 5 1/2 years, while South Africa futures for the grain surged to a record in January.