Major retailers warned about new tax on peanut butter in South Africa
The International Trade Administration Commission (ITAC) has recommended a 20% import tariff on peanut butter to support domestic producers.
However, it also warned local manufacturers and retailers not to artificially raise domestic prices simply because imported alternatives are now subject to higher duties.
It added that if producers or retailers attempt unjustified price hikes that do not reflect actual underlying production costs, ITAC will take action alongside the competition authorities.
In an interview with The Money Show, the Chief Commissioner, Ayabonga Cawe, explained that this move addresses a previous pricing anomaly where raw groundnuts faced higher duties than the finished product.
This imbalance in South Africa left local manufacturers at a disadvantage against large-scale international competitors.
Cawe explained that peanut butter had previously attracted a much lower duty than the raw groundnuts used to manufacture it locally, creating, in ITAC’s view, a tariff anomaly.
“Peanut butter was tariffed at 99 cents per kilogram prior to this decision. But the anomaly was that groundnuts, which are used to make peanut butter, were fetching a much higher duty—ostensibly to protect groundnut producers in the country.”
He added that South African manufacturers also face stiff competition from overseas producers that benefit from much larger production scales.
“There was also a considerable price disadvantage when comparing our producers to some in other parts of the world who have much better scale and, of course, are able to land products at much cheaper prices in South Africa.”
Cawe noted that ITAC did not grant the full tariff increase requested by poultry producer RCL Foods, which sought a 25% duty, settling instead on a lower rate after assessing the available evidence.
“On the balance of the evidence before us, we took the decision not to grant the 25% that RCL Foods, as the applicant, requested, but to provide a 20% duty in this case.”
The watchdog will be keeping an eye on local producers and retailers
Addressing concerns that the higher tariff could push up consumer prices, Cawe said ITAC hopes retailers and producers do not use the change as an excuse for excessive price increases.
He said ITAC carried out a consumer welfare analysis before making its recommendation to the Ministers of Trade and Finance, given peanut butter’s importance as a widely consumed source of protein.
However, Cawe argued that peanut butter prices had already risen sharply in recent years, even before the tariff adjustment.
“Certainly, since 2020, the per-kilogram price of peanut butter has been coming in much higher than the per-kilogram price of other comparable proteins.”
He said strengthening domestic production is important for South Africa’s long-term food security, warning that a heavy reliance on imports could leave the country vulnerable to export restrictions imposed by major producers.
“It’s important that we have a resilient groundnut and peanut butter production ecosystem. You can imagine that once you become totally import-reliant, any vagaries in key producer markets, like India, could throw the country out of balance.”
Cawe also said the tariff would be reviewed after three years, with ITAC closely monitoring both manufacturers and retailers to ensure the new duty is not used to justify unjustified price hikes.
“We’re not only reviewing the decision; we’re also reviewing pricing behaviour. We don’t want a situation where producers or retailers are pricing into the tariff.”
He issued a direct warning to the industry, saying that ITAC would work with competition authorities if it found excessive price increases unsupported by production costs.
“We wish to caution producers, including the applicant, as well as retailers selling the product, that if we see a considerable price increase that is not commensurate with underlying production costs, we will certainly interact with competition authorities and act accordingly.”
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