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On 19 October 2020, the Competition Commission granted the South African Sugar Association (“SASA”) and its members, hereinafter jointly referred to as the applicants, a conditional exemption until 31 June 2021. The exemption has been granted subject to conditions to ensure that the information SASA and its members share is limited to that which is necessary to give effect to the purposes of the South African Sugarcane Value Chain Master Plan to 2030 (“Sugar Master Plan”), without compromising competition in the long run.

Although the Sugar Master Plan covers the entire sugar value chain, the exemption is, in the main, limited to coordination between millers, growers and refiners but excludes any envisaged coordination between retailers.  However, as part of the Sugar Master Plan, retailers and industrial users of sugar have individually committed to minimum levels of offtake from South African millers, growers and/or refiners, which commitments do not need coordination amongst the retailers as well as industrial users. 

The applicants filed an application for an exemption in terms of section 10(3)(b)(iv) of the Competition Act No 89 of 1998, as amended, for a period of one year. In the exemption application, the applicants relied on section 10(3)(b)(iv) of the Competition Act which allows an exemption of agreements and/or practices that contribute to the economic stability of any industry designated by the Minister of Trade, Industry and Competition after consulting the Minister responsible for that industry.

The exemption application was therefore filed subsequent to a decision by the Minister of Trade, Industry and Competition to designate the sugar industry in terms of section 10(3)(b)(iv) of the Competition Act for a period of 12 months, commencing on 1 July 2020. The sugar industry was designated after consultation with the Minister of Agriculture, Land Reform and Rural Development, to offer support of the economic development, growth, transformation and stability of the sugar industry in line with the objectives of the Sugar Master Plan.

The applicants filed the application for exemption on 17 August 2020 to be permitted to enter into agreements or engage in practices in the industry that may contravene the Competition Act, for the applicants to:

1.                   restrain producer price increases of sugar in terms of timing, notice and manner of implementing such price increases;

2.         share competitively sensitive information and in light of that information, engage 

regarding various options for interventions that could be implemented to support small-scale growers and ensure that they become a sustainable part of the sugar supply chain, in line with the objectives of the Sugar Master Plan;

2.                   share competitively sensitive information of the various sugar industry participants, including growers, millers and refiners and in light of that information engage on the various means by which the industry could implement a restructuring of the nature contemplated in the Sugar Master Plan; and 

4.         share competitively sensitive information with the Eswatini Sugar Association (including in relation to production volumes, local and export sales volumes, notional pricing, and identification of diversification opportunities) and in light of this information engage with the Eswatini Sugar Association to achieve policy harmonisation to the mutual benefit of each country's sugar producers.

The Commission’s investigation revealed that the agreements and/or practices which the applicants sought to be exempted from, would likely contravene sections 4(1)(a) and 4(1)(b)(i) and 4(1)(b)(ii) of the Competition Act, as the agreements and/or practices relate to information exchange and coordination between competitors. However, the Commission found that if granted, the exemption is likely to contribute to the economic stability of the sugar industry and can be used as an instrument for transformation and the opening up of the sugar industry to previously disadvantaged individuals, particularly small-scale sugarcane growers.

The Commission has therefore granted the exemption for the period until 31 June 2021, as applied for by the applicants, with the following conditions:

Price Restraint 

1.         There will be no co-ordination or information exchange between Millers regarding actual prices charged to wholesalers, retailers and industrial sugar users. Millers must still make independent decisions on actual prices and/or increases to be implemented in line with the commitments in the Exemption Application.

Small-scale grower retention and support 

2.         The information shared is limited specifically to costs of production and volume outputs.

3.         All information shared in this regard must be done so anonymously. 

4.         The shared information should be aggregated per region.

Managed Industry Restructuring 

5.         A DTIC facilitator must be present at all meetings where information is to be shared. 

6.         All information shared must not be unjustifiably disaggregated, in relation to the objectives set out in the Master Plan.

7.         No information is to be retained or distributed to individuals outside the structures/committees created by SASA. 

8.         All necessary information to be shared must be submitted individually to SASA for collation.

9.         All information shared must be pre-approved by the DTIC facilitator.

SACU Harmonization

10.       A DTIC facilitator must be present at all meetings where information is to be shared for the purposes of SACU Harmonization. 

11.       All necessary information to be shared must be submitted individually to SASA for collation.

12.       All information shared must be pre-approved by the DTIC facilitator.

The Commission is satisfied that these conditions will limit the sharing of competitively sensitive information but simultaneously permit SASA and its members to share information necessary to achieve the stability of the sector and its eventual recovery.   These conditions have monitoring mechanisms attached to ensure that the objectives set out in the exemption application are met by SASA and its members and that the applicants remain within the scope of the exemption. 

Issued by Competition Commission South Africa