Organisations outraged about sugar tax hike

24th February 2022

By: Marleny Arnoldi

Deputy Editor Online

     

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While Agri SA welcomes Finance Minister Enoch Godongwana’s prudent approach to the 2022 Budget for the most part, the industry body is concerned about a number of announcements that it believes will adversely affect the agricultural sector and its ability to create jobs.

For example, the above-inflation increases in excise taxes will impact on the wine, tobacco and sugar industries’ ability to recover from what have been turbulent times the last two years.

Agri SA says this dilutes the positive impact of the employment tax incentive that was announced in the Budget. The incentive will be expanded through a 50% increase in the maximum monthly value to R1 500.

Agri SA adds that it also wanted the Minister to deal with the public sector wage bill more resolutely, given that it is a major burden on the fiscus, but the bargaining process is, instead, still undergoing.

The industry body also warns that careful monitoring of the more than R3-trillion social wage is necessary to ensure its fiscal sustainability.

Agri SA commends Godongwana on providing more funding for road maintenance and water infrastructure, not raising the general fuel levy and approaching carbon tax in a more gradual manner, to provide temporary reprieve for many sectors.

“We are cautiously optimistic, being mindful that the success of this budget will depend on proper implementation. We will continue to engage with government to ensure that the agricultural sector can recover and thrive in the years ahead, creating more opportunities and building a more sustainable and inclusive sector.”

The Agricultural Business Chamber (Agbiz) also considers the budget to be a “pragmatic approach in a crucial time of economic reconstruction”.

The industry body welcomes government’s continued commitment to fiscal consolidation and efforts to curb corruption, as well as the Minister’s tough-love approach to the fiscal dependence of State-owned entities.

Agri SA and Agbiz agree that the R5-billion contingency reserves for the Lank Bank is a positive move, since it is a vital institution in South Africa’s economy.

While Agbiz also believes that increases in excise duties could strain alcohol and tobacco companies, it welcomes the fact that it was a “moderate” increase of between 4.5% and 6.5% across products.

SUGAR WOES

On the other hand, the Consumer Goods Council of South Africa (CGCSA) has criticised the decision by government to increase the sugar levy by 2.31c/g.

The council is certain that it will result in unintended job losses and further contribute to many sustainable farmers losing their livelihoods.

The CGCSA says there was no consultation prior to the decision to increase the levy, nor was there sufficient consultation when government introduced the Health Promotion Levy (HPL) on sugary beverages in the first place.

The council says the sugar levy increase contradicts the growth that government wants to achieve by implementing the Sugar Master Plan.

“With the sugar tax expected to result in higher sugar prices, consumption will decline, and this will affect sugar farmers, who are already facing viability problems, mainly due to competition from imported sugar and rising input costs. 

“The decline in sugar consumption will place increased pressure on the small producers.  It appears as if government has not considered the policy implications across the various government departments,” the CGCSA states.

The South African Farmers Development Association echoes this sentiment, expressing disappointment about the sugar tax increase, particularly owing to its implications for small-scale farmers and its undermining commitments in the Sugar Master Plan, including for government to put a moratorium on product tax policy changes.

The association sees this act by the National Treasury as a breach of the social compact by all participants and stakeholders in the sugar value chain who support the master plan. Manufacturers will have to decrease the quantity of sugar in their products, which will lead to a decline in local demand and a loss of revenue, it states.

The South African Cane Growers Association (SA Canegrowers) agrees, saying the increase in sugar tax from 2.21 c/g to 2.31 c/g will threaten thousands of rural jobs in the sector and hamstring the efforts to grow the industry.

The association intends to meet with the Minister to discuss the reasons for increasing the HPL.

Modelling done by SA Canegrowers shows that maintaining the sugar tax at the new level can lead to at least 16 000 job losses and a decline of 46 000 ha of cane plantations within the next decade.

The sugar tax had already cost South Africa more than 16 000 jobs the first time round, says SA Canegrowers, deeming it inconceivable that government would move ahead with increased taxes.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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