Wheat import duty drops to zero

Import duties on wheat and wheaten flour dropped to zero with effect from 10 March 2021. The downward trend has continued since November 2020.

On 12 February 2021, the duty dropped considerably from 54.42c per kg to 10.27c per kg and flour from 81.63c per kg to 15.41c per kg.

It remains to be seen if the duties will remain free for long. This is good news for wheat importers. Stockpiling will likely occur as importers take advantage of the import duty relief. This is probably not good news for local wheat and wheaten flour producers.

Why wheat duties constantly change

The duties constantly change because of global price movements. Wheat duties in South Africa are calculated using a variable tariff formula. This ensures that import duties are triggered when international prices are low. The duty is only active when international prices drop below a certain price level known as the reference price. The reference price is currently $279 per ton.

Free Trade Agreements wheat quotas

When import duties are in place, wheat quotas under different trade agreements are sought after by importers. Wheat can be imported duty-free or at preferential duties (up to certain volumes) under the WTO Minimum Market Access systemEU – SADC EPA, and the SACUM – UK EPA.

SACU wheat rebate

In addition to the above, Botswana, Lesotho, Namibia, and eSwatini (BLNE) have a special wheat rebate provision that allows wheat to be imported duty-free. Each country can import specific maximum volumes in terms of this arrangement. South Africa is not a beneficiary of the special rebate.

Rebate permits issued in each of the countries come with various conditions and one of the important conditions is that wheat and wheaten flour imported in terms of the rebate item into any of the BLNE countries shall not be removed from the importing country. This condition does not apply to products manufactured from the imported wheat and wheaten flour.

Good use of the special wheat rebate

In times when there is a duty on wheat and wheaten flour, other SACU countries likely have a competitive advantage on some manufactured products. A good example is pasta. Pasta manufacturing is largely influenced by the cost of wheat flour because it is one of the key ingredients. Namibian pasta manufacturers import the wheat flour under rebate, manufacture pasta, and sell it in South Africa. This is good for Namibian manufacturers and not so good for South African manufacturers.

Want to know more? Contact us at infor@tradesolutions.co.za