In more detail
On 8 May 2025, the Minister of Trade, Industry, and Competition (DTIC), Mpho Parks Tau, published for public comment the draft block exemption for the implementation of Phase 2 of the Sugar Master Plan, 2025 ("Regulations"). The Regulations effectively relax the competition law rules that typically regulate companies' market conduct, occurring only in limited circumstances and when absolutely necessary. The aim of the block exemption is to facilitate the successful execution of the Sugar Master Plan by exempting specific stakeholders in the sugar industry from certain provisions under the Competition Act 89 of 1998 ("Competition Act"). This regulatory development represents a significant milestone for South Africa's sugar industry, primarily to enable collaboration among stakeholders, particularly in setting pricing methodologies that would otherwise be prohibited under the Competition Act.
The South African sugar industry, one of the world's leading cost-competitive producers of high-quality sugar, makes a substantial contribution to employment, particularly in rural areas, and supports sustainable development and the national economy. In November 2020, the Sugarcane Value Chain Master Plan was formally signed to combat serious challenges such as an influx of imports, insufficient tariff protections, the sugar tax, and declining revenue faced by the South African sugar industry. Phase 1 of the plan, which ran until March 2023, focused on restructuring and setting foundations for diversification. The objectives of Phase 2 include diversifying opportunities for sugar cane producers and sugar products, implementing price restraints for sugar cane and sugar producers, and setting local procurement commitments and offtake targets by downstream sugar users.
The Regulations introduce significant reforms aimed at the stabilisation and growth of South Africa's sugar industry. This regulatory measure allows specified stakeholders within the sugar value chain, including sugar cane producers, sugar producers, and downstream customers, to engage in collaborative efforts that would typically be restricted under the Competition Act. The Regulations permit colaboration on identifying diversification opportunities and securing local volume commitments as contemplated in the Sugar Master Plan, encompassing areas such as producer price restraints, coordinated pricing methodologies to be adopted in determining percentage of price increases of sugar products and the timing of price increases, and the establishment of local volume commitments and off-take targets.
The Regulations not only aim to mitigate the adverse effects of the sugar tax and reduced local demand but also seek to enhance resource allocation, market intelligence, and the overall responsiveness of the industry to market fluctuations. By enabling such coordinated activities, the exemption provides a legal safeguard for stakeholders, from prosecution for potential competition law contraventions while fostering an environment conducive to sustainable sectoral development.
The Regulations make provision for the appointment of an independent facilitator by the dtic that will coordinate the collective determination by sugar producers and downstream users. The independent facilitator shall oversee the sharing of competitively sensitive information among firms in the sugar value chain to ensure that the information shared is strictly necessary for the implementation of Phase 2 of the Sugar Master Plan.
Given that the Regulations do not exempt the practice of minimum resale price maintenance and cartel conduct, namely engagements that necessitate discussions between actual or potential competitors in relation to prices (including price components), customers, products, markets/territories as well as tenders/joint bidding should be approached with extreme caution to avoid falling foul of the cartel provisions in the Competition Act. Legal advice should be sought prior to embarking on such engagements.
In addition, it bears emphasis that the Regulations only apply to sugar cane producers, sugar producers and downstream producers and sugar users who are signatories to the Sugar Master Plan and other downstream customers that intend to participate in an exempted agreement or practice. Entities that wish to enter into agreements or engage in practices covered by the Regulations must first seek written confirmation from the Competition Commission to ascertain whether the agreement or practice falls within the scope of the Regulations. The Commission must revert within 30 business days of receiving the request for confirmation. The Regulations will come into effect on the date of publication in the Government Gazette and shall endure for a period of five years.
The block exemption differs from previous exemptions granted by the Competition Commission in that, unlike exemptions in other sectors, such as healthcare, which primarily focus on tariff determination and standardisation, the sugar industry exemption gears toward comprehensive industry restructuring and growth. It encompasses a broader range of collaborative activities, including pricing, market restoration, and diversification efforts. This holistic approach addresses the unique challenges and opportunities within the sugar industry, distinguishing it from other sector-specific exemptions.
