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South Africa’s variable wheat import tariff has been triggered and subsequently wheat will now cost importers R856,34/tonne to import rather than R549,50/tonne. This is according to calculations by the South African Grain Information Service (SAGIS).
The variable wheat tariff formula is based on a three-week moving average of the free on board (FOB) US Hard Red Winter wheat price. This figure is then adjusted for local circumstances and converted to rands.
Dr André van der Vyver, executive director of the South African Cereals and Oilseeds Trade Association (SACOTA), said the current variable wheat tariff arrangement dates back to 2016 when industry and the International Trade Administration Commission of South Africa (ITAC) agreed on the formula to protect South African producers against international subsidies and to maintain a certain quality standard of local wheat production based on the request of millers.
“This latest trigger follows an average decline in international wheat prices during the past three weeks,” Dr van der Vyver said.
SAGIS acts as the independent industry body that calculates the prices and the tariff adjustment. SAGIS publishes the official prices on a Thursday, but the formula is known to industry. If a higher tariff adjustment is required, Grain SA would usually apply for the adjustment with ITAC. If the adjustment is downward, the National Chamber of Milling (NCM) would usually submit an application.
“The wheat tariff is an important policy tool to protect the local industry, but also to ensure food security,” Dr van der Vyver said. “South Africa imports approximately 50% of local demand of approximately 3,5 million tonnes.”
Minimal impact on bread price expected
Imports have gradually increased over the years. Converted to a percentage, the current tariff (R549.50) comprises about 8,5% of the July traded price on the JSE of approximately R6 500/tonne. Despite an upward adjustment, it may have little impact on the price of bread. “In 2006 a study done by Jooste et al found that a 30% increase in domestic support (e.g. import tariff) would only result in a 1,43% increase in the bread price. Unfortunately, to our knowledge, no additional studies were since conducted,” Dr van der Vyver said.
Increase not immediate
Despite the tariff being ‘triggered’, implementation is often delayed due to governmental administrative processes. It first has to be approved by ITAC, followed by the sign-off of both the minister of trade, industry, and competition and the National Treasury, and then finally published in the Government Gazette. The past two tariff adjustments – from R422 to R183,50/tonne took approximately six months to be gazetted, while the last upward adjustment to the current tariff level of R549,50/tonne took four and a half months.
“From a trading perspective you could argue that a higher or lower tariff does not matter, but this is incorrect,” Dr van der Vyver said. “Although in most cases traders would attempt to offset the volume purchased for imports with futures hedged or physical sales on the local market, this is not always possible. Sometimes the tonnes loaded on the vessel also do not exactly match the intended purchase order due to various factors related to the vessel nominated or the loading process.” In these cases, traders are then exposed to unintended price risks. Delays in the tariff implementation process results in more risks for the trader which can only be offset by charging higher fees.
Industry calls for reform
To address these delays, SACOTA and Grain SA have made a joint submission to ITAC proposing a revised implementation system. Their proposal advocates for a monthly automated review and publication, similar to how the fuel levy system operates. Under this proposed methodology, any new tariff would be calculated and published each month in the Government Gazette, either introducing a new rate or confirming the existing one. The application carries the support of the Wheat Forum.
Had the proposed system already been in place, the trigger on 27 May 2025 could have resulted in implementation by 31 July 2025, meaning a delay of just 24 working days. While this is at the higher end of the expected range (the new proposed implementation methodology would allow the publication to be published in 8–28 working days), it would still be significantly faster than the current system.
As the wheat sector will await the official publication of the new tariff of R856,34, the application for the new implementation methodology is being reviewed by ITAC for approval by the Minister of Trade, Industry and Competition. It is one of those unique situations where the minister of agriculture has little say in a key food security policy decision. However, we believe the much needed revision of the implementation policy will not go unnoticed in government circles. – Press release, SACOTA
For more information readers can contact Juan-Pierre Kotzé, SACOTA’s manager: Research & Projects at info@sacota.co.za or Dr André van der Vyver, executive director of SACOTA at andre.vandervyver@sacota.co.za
