Local peanut butter manufacturers could soon gain stronger protection against cheaper imported products after the International Trade Administration Commission of South Africa (ITAC) recommended increasing the customs duty on imported peanut butter from 0.99 cents per kilogram to 20% ad valorem.
The proposed tariff increase is aimed at creating a fairer trading environment for domestic manufacturers, many of whom have struggled to compete with lower-priced imports while facing rising production costs, including higher raw material, labour and operating expenses.
If approved, the measure could strengthen the country’s food manufacturing sector, support local value addition and create new opportunities for businesses across the agricultural supply chain.
The recommendation follows an application by RCL Group, which had requested a 25% tariff. After investigating the matter, ITAC settled on a lower 20% rate, saying it strikes a balance between protecting local manufacturers, encouraging investment in domestic production and keeping peanut butter affordable for consumers.
What it means for SMEs
The proposed tariff could create a more level playing field for small and medium-sized enterprises operating in food processing, agriculture and manufacturing, by reducing competition from lower-priced imports and encouraging retailers to source more locally produced peanut butter.
ITAC noted that peanut butter remains an important staple food and one of the country’s most affordable sources of protein, particularly for lower-income households. It said the decision sought to balance support for local industry with consumer affordability.
“Its inclusion in the household food basket surveys and the industry’s push for zero-rated VAT status underscore its importance for low-income consumers,” the commission said.
If approved, the higher import duty and the proposed rebate on imported groundnuts could strengthen the local peanut butter value chain by encouraging investment in domestic manufacturing, supporting local farmers and creating growth opportunities for SMEs involved in processing, packaging and distribution.
Local manufacturers under pressure
ITAC’s investigation found that domestic peanut butter manufacturers have experienced declining production, lower sales volumes and reduced factory capacity utilisation as imports continued to gain market share. The commission said local manufacturers have also faced rising production costs, driven by increases in raw material prices, labour expenses and other operating costs.
According to ITAC, India remains the largest source of imported peanut butter, with imported products consistently sold at prices that local manufacturers struggle to match.
“ITAC recommended that the general rate of customs duty on peanut butter be increased from 0.99c/kg to 20% ad valorem, to provide a more appropriate balance between supporting domestic manufacturing, encouraging value addition, and maintaining consumer affordability,” the commission said.
The recommendation follows an updated application submitted by RCL Group in December 2024 after an earlier request during the 2020/21 period did not result in a tariff increase. ITAC said it considered submissions from interested parties together with industry data before reaching its decision.
Supporting the peanut butter value chain
In addition to recommending a higher tariff, ITAC announced that it will launch a self-initiated investigation into introducing a temporary rebate on imported raw groundnuts used by local peanut butter manufacturers.
The commission said the current tariff structure disadvantages domestic processors because imported raw groundnuts attract a 10% customs duty, while imported peanut butter is subject to a much lower duty of only 0.99 cents per kilogram.
According to ITAC, this imbalance discourages local value addition and weakens the competitiveness of domestic processors.
“The investigation will assess the feasibility of establishing a rebate mechanism to improve the competitiveness of domestic peanut butter manufacturers through lower input costs,” ITAC said.
The commission added that domestic groundnut production is improving, with the 2024/25 crop estimated to be 11.6% higher than the five-year average of 56,004 tonnes, while long-term annual production averages around 62,000 tonnes. Increased local production could create opportunities for farmers, food processors, transport businesses and packaging companies if more peanut butter is manufactured locally.
