The SA Chamber of Baking said on Friday that it did not support the 30 percent tariff increase on wheat imports as this could lead to consumers paying more for a loaf of bread. This would put a strain on an already struggling consumer.

Geoff Penny, the executive director of the SA Chamber of Baking, said the chamber’s calculations had shown that the price of bread could go up by as much as 20 cents a loaf if the tariffs were implemented. She said the pending increase would hit the poorest of the poor most.

“Bread is a staple food and this will hit the lower Living Standards Measure (LSM) group. It might not be too much for the upper LSM consumers, but for those who can’t afford, a 20c increase will be a bit too much,” Penny said.

“We are more concerned about these marginal costs increases and as a chamber we don’t support the tariffs. However, it would be up to the retailers and bakers to determine how much the price of bread will go up by. Because this is a free market, the store promotions on bread and depending where one buys the bread can soften the price increase.”

Urged to publish

Last week, GrainSA won a ruling in the North Gauteng High Court in Pretoria, urging the government to publish the new wheat import tariff.

The court ordered the government to bring into force the expected 30 percent tariff increase on wheat imports after delays held up trading in the market.

It said the government should publish the new levy of R1 591.40 a ton in its official gazette needed before the rate could be formally applied.

Wandile Sihlobo, a senior agricultural economist at Agricultural Business Chamber, said that the tariff increase would in all likelihood lead to an increase in the price of bread.

Sihlobo, however, said although the tariff increase was 30 percent, this would not mean that the price of bread would go up by 30 percent as well.

“The bakers will pay more for their wheat and they might be tempted to pass the costs to the consumer,” he said.

“But this will be determined by the activity between the buyer and the seller. It is too early to tell now whether this will lead to price increases or not in the future. We can only monitor and see once the tariffs are implement what effect they will have on the price of bread.”

Protecting farmers

Sihlobo said the tariffs were protecting the local wheat farmers against unfair competition.

“From the producer perspective, domestic wheat farmers need to be protected from unfair competition from highly subsidised foreign imports,” he said.

JSE-listed companies RCL Foods and Pioneer Foods, who are among the country’s biggest players in the bread industry, elected to leave the industry to determine whether the price of bread should go up, because of the expected wheat tariffs.

“RCL Foods feel that as the wheat pricing is an industry-wide issue, it would be best to approach the SA Chamber of Baking for comment,” said the company.

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Grain SA Wins Wheat Tariff Court Case

The Court ruled in favour of Grain SA in Pretoria on 18 August 2016 in an urgent application urging the Government to publish the new wheat import tariff. The new tariff of R1 591.40 per ton triggered on 24 May 2016 and Government dragged their feet in the publishing thereof until the Court made a ruling today. The Court instructed SARS to publish the new tariff in the Government Gazette no later than Wednesday 24 August 2016.

“It is a sad day that we need to manage Government through the Courts, but at least this worked for us,” said Jannie de Villiers, CEO of Grain SA. It already took the Government Departments involved 60 working days without a commitment as to when it will be published. Grain SA also lodged an urgent case in April 2016 for exactly the same reasons, but SARS published the tariff on the day of the Court case – 84 working days later.

Trading in the South African wheat market almost came to a halt given all the uncertainties and delays. We need certainty. It is unfortunate that the consumers did not benefit from this delay as the cheaper international prices of wheat were not passed on to the battling consumers by decreasing bread prices.

Grain SA believes that this ruling will assist the whole value chain to bring certainty to the market and give some indication as to some reasonableness in administering these tariffs.