Report shows tax shrunk the sugar industry, says association

3rd June 2021 By: Schalk Burger - Creamer Media Senior Contributing Editor

A report, commissioned by the National Economic Development and Labour Council (Nedlac) at the request of the Portfolio Committee on Trade and Industry, showed that, by 2019, the sugar tax had resulted in the sugar sector losing 9 154 jobs – almost 10% of its workforce.

Further, the tax resulted in a R1.19-billion decline in the industry's gross value-added contribution to the economy, industry body the South African Canegrowers Association (SA Canegrowers) says.

The 'Economic Impact of the Health Promotion Levy on the Sugar Market Industry' report shows that 16 621 jobs were lost overall owing to the Health Promotion Levy, or sugar tax, which came into effect on April 1, 2018.

Further, the tax also led to a R653-million decline in investment in the industry and related economy.

As a result of these losses, the sugar industry’s total contribution to South Africa’s gross domestic product declined by a cumulative R2.05-billion in 2019.

Prior to the implementation of the sugar tax, sugarcane growers supported 94 621 direct, indirect and induced jobs in 2017, which accounted for 11.2% of all South African agricultural workers.

Further, while sugarcane farming contributed R10.5-billion to the national gross domestic product in 2017, this figure fell by an estimated R214.7-million a year after the sugar tax was introduced, and a cumulative R414.2-million after the second year.

"However, it is important to highlight that these findings only cover the first year of the implementation of the sugar tax and, therefore, these figures are no doubt far higher as a result of the tax still being in place three years later," the association says.

"The sugar tax was also implemented at a time when the sugar industry had already been battered by other considerable headwinds including droughts, increasing production costs and cheap sugar imports. It is clear from the report that the tax was the final nail in the coffin for the businesses of many rural canegrowers and farm jobs."

There is no evidence that the tax has achieved its stated objective to reduce national obesity levels. This means the sugar industry bore the brunt of a health intervention unsupported by evidence, it adds.

Nedlac has referred the report to the Portfolio Committee on Trade and Industry and SA Canegrowers says it looks forward to engaging with committee members on the findings.

The association was pleased that the release of the report coincided with the recent establishment of the Sugarcane Value Chain Masterplan Task Team on Product Tax Policy, which has been tasked with reviewing the impact of the sugar tax on rural communities and economies in sugarcane growing areas, as well as the financial sustainability of the industry.

"We are hopeful that the report will result in government finally responding to the sugar industry’s calls to scrap the sugar tax. This is critical for the success of the Sugarcane Value Chain Masterplan and, ultimately, the recovery of the sector.

"SA Canegrowers will continue to engage with the government and other industry stakeholders on key challenges facing the sector, including the sugar tax. We trust that, working together, we can unshackle the country from this tax, which has already cost our industry, its workers and the national economy too much," the association says.