The South African Canegrowers Association recently claimed that the sugar tax has cost the industry R925-million in the 2018/19 season, while the DA has claimed that over 1000 jobs had already been lost due to the tax.
But National Treasury’s Mpho Legote said that any current estimates are guesswork and “such an assessment” is being undertaken by government next month, which will mark a year after the tax’s implementation.
The tax – called the Health Promotion Levy (HPL) – was introduced to discourage people from drinking sugary drinks in an attempt to stem obesity-related illnesses, particularly type 2 diabetes and strokes.
Legote said there were massive costs related to treated sugar-related diseases: “The costs of treating and caring for people with non-communicable diseases are high and growing rapidly. The estimated losses to GDP arising from deaths (from 2010 onward) and from absenteeism and presenteeism from the prevalence of these diseases in the actual and potential workforce to be around 4.87 per cent by 2030,” he said.
Meanwhile, health activists claim that the sugar industry is using the tax as a scapegoat for its many unrelated problems.
“The sugar industry was already facing problems prior to the tax due to a number of issues including drought and low global sugar prices. In fact, the tax presents an opportunity for the industry to innovate and transform,” said Aviva Tugendhaft, from the Priceless think-tank at Wits University’s School of Public Health.
“Stakeholders can, for example, use sugarcane for energy in the form of ethanol and can consider diversifying to other more nutritious and environmentally-friendly crops,” she said.
SUGAR INDUSTRY CRISIS
Meanwhile, the Healthy Living Alliance (HEALA) says that “the sugar industry has been in crisis for more than a decade” caused by the halving of the world sugar price between 2009 and 2014 (from about US$600/ton to about US$300/ton), and a reduction in the European Community’s export quota for sugar “which many southern African sugar producers had access to under the Lomé Convention.
“Sugar production in South Africa has dropped by around 33% between 2002 and 2012. Illovo reduced its workforce by 25% between 2009 and 2014, and three successive droughts have had a significant impact on cane production,” according to HEALA.
“Today, Illovo and Tongaat Hulett both source more cane from other sub-Saharan countries than South Africa because labour costs are cheaper. Regional production of sugar cane totalled 36 million tons in 2012, and South Africa’s share of total regional production dropped from 60% in 1992 to 40% in 2012. This is driving local job losses not the HPL,” according to HEALA.
There is also a global trend towards producing food and drinks with less sugar as consumers are becoming more aware of the health risks of excessive sugar intake.
“It is clear that the sugar industry needs to diversify to survive, and this is where the support of government is important,” according to HEALA, which identified ethanol production and electricity generation as possible revenue sources.
Academics Alex Dubb, Ian Scoones and Philip Woodhouse have written about the possibility of electricity in their book, The Political Economy of Sugar in Southern Africa.
“Mills typically generate 90 per cent or more of their own electricity requirements by burning the cane residue following sugar extraction,” according to Dubb, Scoones and Woodhouse.
“Improving efficiency, and the possibility of retrieving more biomass by not burning the cane in the field before harvesting, raise opportunities for producing surplus electricity for sale. All three major sugar producers are increasingly using their sugar production as a feedstock for a biochemical industry with a diverse range of products.”
They also point out that “land is also a significant part of wider business portfolios” of sugar companies.
“Acquired in the past for sugar cane production, often with state support, areas are now being sold off as part of real estate deals,” say the academics.